100% Mortgage Financing
December 10, 2011 by admin
Filed under Property Insurance
100% Mortgage Financing : Ideally, traditional mortgage lenders want new homebuyers to have a 20% down payment when purchasing a new home. Thus, if purchasing a $200,000 home, you should be prepared to have $40,000 as a down payment.
Unfortunately, many people do not have this kind of money lying around. For this matter, private 100% Mortgage Financing insurance (PMI) was created as a way for mortgage companies to recoup their money if a homeowner defaults on the loan. There are various loans available to assist people with down payments. In some instances, homeowners can obtain 100% financing, and avoid PMI
What is Private 100% Mortgage Financing Insurance?
Because Americans are earning less money, and home prices are steadily increasing, the majority of the population is unable to save the recommended down payment of 20%. In order to make owning a home possible, 100% Mortgage Financing companies created a particular mortgage insurance, (PMI), for people with less than 20% to put down on a home. This insurance protects the lender if you default on the mortgage.
How to Avoid Paying Private 100% Mortgage Financing Insurance
On average, PMI may increase your mortgage payment by $100 – sometimes less, sometimes more. However, there are ways to avoid paying this additional insurance. The obvious involves having at least 20% as a down payment. If this is not an option, homeowner may agree to a higher interest rate. Another tactic entails getting approved for 100% financing.
How Does 100% Mortgage Financing Work?
100% mortgage financing makes it possible to buy a home with no money down. Also referred to as a piggyback loan or 80/20 mortgage loan, 100% mortgage financing involves obtaining a first mortgage for 80% of the home cost, and a second mortgage, or home equity loan, for 20% of the home cost. Together, the first and second mortgage allows a home purchase with no money down, and no private 100% Mortgage Financing insurance.