Owning your own home comes with many costs, and in many cases, purchasing private mortgage insurance may be necessary. Many conventional loans require private mortgage insurance because lenders want to know that their investment is protected. Government lenders have their own specific programs and requirements, and they allow insurance charges to be financed with the purchase of a home, and then charge a mortgage insurance premium for the cost. If you are looking into buying a home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and want to know more about the various types of mortgage insurance, Foundation Mortgage can help.
Types of Mortgage Insurance Programs
Private mortgage insurance, (also known as PMI), is used only by private lenders, and PMI will be required if the down payment on a home is under 20 percent. Government-insured loan programs such as FHA and VA mortgages have their own unique insurance requirements. Most lenders will require a borrower to continue to pay for mortgage insurance premiums until a specific amount of the loan balance has been paid off. In some cases, after a percentage of the loan has been paid off, a borrower can negotiate to change the premium amount, or remove it altogether.
Mortgage Insurance Premium Rates
You may need to pay an additional fee up front with your mortgage insurance in addition to the monthly costs you will already pay, and ongoing charges for that coverage can then be rolled into the monthly mortgage payment. Rates typically range from 0.5% to 1.5% of the original loan value per year, and there are many factors that impact your mortgage insurance premiums. These factors include: the type of loan financing, the size of the loan, the amount you pay for the down payment, the appraisal of the home, etc.
Eliminating or Changing Your Mortgage Insurance Premiums
As you build more equity in your home and continue to pay off the loan, you can change or even eliminate your mortgage insurance altogether. Many people are unable to afford a 20 percent down payment that allows a borrower to avoid paying mortgage insurance, however, you can begin to start paying down the loan and then apply to remove your mortgage insurance once you reach a 20 percent loan-to-value. If you want to remove or lower your mortgage insurance, when you first obtain the loan, review the MIP requirements of the lender and be sure to make your payments on time.
Get Answers to Your Mortgage Insurance Questions
If you are purchasing a new home and have questions about mortgage insurance or are a current homeowner interested in changing or removing your current plan in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage. Our loan specialists can work closely with you to help answer any questions you may have.