*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
"If you're buying a house, make sure that you have 20% down. You don't want to be paying mortgage insurance." "It's never good to have mortgage insurance. If you don't have the money up front, it's not worth it."
Have you heard these types of phrases before? Maybe from a grandparent or trusted family friend?
Guess what. In some instances, they're right. But they also might not seeing the whole picture.
With home prices skyrocketing, and rates climbing steadily, mortgage insurance can end up being a blessing in disguise.
A blessing? Seriously?
Yes! Seriously!
Without mortgage insurance, everyone would have to have at least a 20% down payment at the time of closing. 20% might not sound like a ton of money, but let me put it into perspective for you.
In the first quarter of 2022, the average single family home price in Salt Lake County was $604,495. Lets use that number for our example. If you wanted to buy a home for $604,495 you would need to fork out at least $120,899 at the time of closing. That's a LOT of money! Especially for first time homebuyers.
This is where Mortgage Insurance can be beneficial for both the borrower, and the lender.
Mortgage insurance will insure the lender in case of foreclosure. This also means that borrower's are able to put less than 20% down up front. Mortgage insurance will cancel automatically once the borrower reaches 78% LTV (22% of their purchase price).
On conventional loans* it is required that the borrower puts down at least 3% up front, while FHA loans* require 3.5%. So instead of needing to put down $120,899, a conventional borrower would need to put down at least $18,134.85. An FHA borrower would need to put down at least $21,157.33. Although those are still big price tags for a down payment, it's a fraction of what would be needed without the benefit of mortgage insurance.
There are also benefits to Utah Housing Loans*, VA Loans*, and USDA loans*. Each of these types of loans don't require a down payment. (This is where I need to emphasize my disclaimer very heavily. NOT ALL BORROWERS WILL BE ABLE TO QUALIFY FOR THESE LOAN TYPES/SCENARIOS, please contact me so that we can see which loan products you will qualify for.)
Mortgage insurance, although an added payment to the regularly scheduled mortgage payments, can help you and your family get into a house quicker than you could before. Mortgage lenders are also covered by mortgage insurance, so they can take a bigger risk when lending you money. Yes, if you can avoid mortgage insurance, it's a great benefit. But, if your desire is to get into a home and you don't have the money up-front, there are options available that can help you out.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Brayden Ramsay NMLS #1997195
Momentum Loans NMLS # 1606597
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