Even if you’re new to the real estate market, you’ve probably heard of mortgage insurance. It sounds like something to avoid, doesn’t it? After all, homes are a massive investment. Who wants to add mortgage insurance to a steep monthly loan payment?
So, who is on the hook for mortgage insurance? Is there a way to get out of it? If these questions are burning in your brain, join us for a quick chat about this sometimes-complicated part of buying a home.
Does Everyone Need To Pay Mortgage Insurance?
Not every homebuyer is responsible for a mortgage insurance payment. It depends on several factors, including:
- How much money you contribute to a down payment
- The type of loan you are trying to get
- Your current amount of home equity, if you’re refinancing
The Best Way To Beat Mortgage Insurance
To avoid mortgage insurance entirely, you’ll need a loan-to-value (LTV) ratio of 80% or lower. If you need a quick refresher on LTV, here’s the deal:
- LTV is a risk measurement used by lenders.
- The formula divides your mortgage amount by the appraised home value.
- A high LTV means that little equity is built up in the home, and lenders believe that the risk of default is higher in this situation.
Fannie Mae and Freddie Mac loans don’t require borrowers with an LTV of 80% or lower to pay mortgage insurance.
Can I Avoid Mortgage Insurance Without a 20% Down Payment?
Technically, it’s possible. Programs are available that advertise no mortgage insurance with low down payments. The downside is that these programs usually come with a higher interest rate. In other words, whether they call it mortgage insurance or not, you’ll still pay.
Contact MortgageDepot Today!
With all the low- and no-down-payment options available, it’s important to work with a mortgage broker who will crunch the numbers for you. If mortgage insurance is causing confusion, contact MortgageDepot today to find a loan program that meets your needs!
Connect with one of our loan consultants for more information.
