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Mortgage insurance and down payments

Potential homeowners in Delaware often believe that they must have 20 percent of the total sale price available for a down payment in order to purchase a property. Given the prices of real estate, this figure can seem to put homeownership well out of the reach of many individuals, couples and families. However, it does not actually take one-fifth of the total purchase price in cash in order to be able to buy a home. The difference between the cash down payment and this amount is guaranteed by mortgage insurance.

Mortgage insurance gives coverage to mortgage lenders and institutions like Fannie Mae for the risk of lending to borrowers without a 20 percent down payment. The insurance is paid for by the borrower and the premium is generally included as part of the monthly mortgage payment. Mortgage insurers conducted a study to highlight the importance of the insurance in making residential real estate purchases viable for many average families. The report from the industry may have been produced in response to announced plans by the Federal Housing Administration (FHA) to cut its own mortgage insurance premiums.

While not all borrowers are eligible for an FHA loan and the Trump administration has not indicated that it plans to move forward with the premium reduction program, private mortgage insurance rates are relatively competitive against FHA-backed loans. There have been multiple premium reductions among mortgage insurance providers, which can be very helpful as the insurance is vital for most purchasers to be able to own a home of their own.

When planning for a home purchase, there are a number of financial and legal factors to consider. An attorney can represent a client at a real estate closing and ensure that the transaction is legitimate.

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