Are you a first time home buyer just starting to think of buying a home? Or maybe you already have a realtor and are shopping around for a lender and just aren’t sure where you want to start. No matter where you are in the process of buying a home, figuring out financing is a bit of a process, and we at First Financial Bank in Worthington, Ohio, are here to help you along the way. One of the finer details that many may not think about is mortgage insurance premiums, especially if you are brand new to the process.
What If I Don’t Have A Down Payment?
If you are like many people just getting starting on their search, you probably think you need to a large down payment in order to buy a home. If you don’t have the ability to pay the typical 20 percent down payment, that is where mortgage insurance comes into play. Mortgage insurance is used to prevent the lender from losing money if you were to ever default on a loan. Certain loans such as FHA loans require mortgage insurance on every loan.
What Is A Mortgage Insurance Premium?
Mortgage insurance premiums are used as a form of protection on loans when you have a down payment that is less than 20 percent or when buyers choose certain government-backed loan options. Premiums may be due at at closing, monthly as part of the mortgage payment, or both. The rate is dependent on the term of the loan and the percentage can vary depending on the home value.
The Finer Details
Mortgage insurance is unavoidable on loans such as an FHA loan and can never be cancelled. If you choose a conventional loan option, mortgage insurance can often be cancelled once a certain level of equity is reached in the home. Mortgage insurance premiums can be reduced but that is determined by the amount of the down payment and when the loan was initiated. These reductions are most often found when dealing with a private lender, so that might be a good option for you depending on your individual situation.
There are also other limitations that can affect deductions but those are details that can be discussed with a private lender as you figure out your other financial plans. For example, if you are purchasing a home and plan to rent it out, you would not be able to take off any deductions.
Call Us Today
We know that purchasing a home comes with many choices and lots of ups and downs but the process itself can be truly rewarding and very educational as well. We also know that figuring out the financial territory can be a little confusing, but we want to do whatever we can to help so reach out to Bill Lavelle of First Financial Bank in Worthington, Ohio today.