What is Mortgage Insurance?
 
Buying a house can have so many details and fees that they can sometimes blur together. Many extra costs can also be built into the purchase of the house or into the mortgage payment. Some of these costs are the principal of course, the interest, taxes, homeowners insurance and possibly mortgage insurance.
 
But what is Mortgage insurance?
 
If you buy a house with cash, obviously there are no monthly payments other than taxes and hazard or homeowners insurance but if you are like most buyers you will need a loan to obtain a piece of Abilene real estate.There are several types of loans options available and it will depend on your credit history and score, down payment and general finance situation to determine which loan fits your situation and lifestyle. A good mortgage lender or broker can help with this decision and has access to hundreds of programs and loan options.
 
If you have a reasonable amount of down payment you will probably sign onto a conventional loan. This is typically an 80% to loan value loan meaning you have about 20% to put down. Because you flat out owe 20% of the home right off the bat, the bank knows, if you default on the loan, you will be basically giving the bank the extra 20% you have already put down on the home. This lightens their load in case you do default, they don't have to actually loose money. This is the general idea of it anyway.
 
If you don't have this much to put down there are other options. You can go with a VA loan if you are a veteran and qualify or you can get an FHA or USDA loan. In these cases there are sometimes zero down or as little as 3% down. In this case, if you do default on the loan and the bank gets stuck with the house after you have been evicted, they will need to sell the home and most times for less than you may have paid for it. This is the reason for mortgage insurance.
 
Mortgage insurance is basically insurance in the instance that the buyer does not pay and defaults on the loan.  The bank will need some extra funds to cover costs such as lawyer or legal fees. This is typically not a large amount and is built into your monthly mortgage payment.
 
The trick is knowing when to call and cancel this monthly payment. When the property can hold an 80% loan to value ratio, you no longer need to be paying this insurance. This typically takes about 2 years to complete. Many times, the bank will not notify the homeowner of this change and keep charging them. It is up to you to be proactive on your finances and call the mortgage lender and have the insurance removed once they check into the value of the home.
 
Mortgage insurance is not a fun addition to any payment but does protect the banks in case of default. It's always a good idea to have as much in down payment as you can for your own equity and to save money in the long run. Please contact us anytime for more information on Huntsvillle homes and real estate or to get into a home of your own today.

Other Useful Resources:  Linda Michaud is your source for a complete Alamogordo homes site including current Alamogordo real estate listings, market analysis, buyer and seller information and all Alamogordo agent representation. For all homes in New Mexico and Holloman AFB housing contact Linda Michaud. Better Homes and Gardens real estate is your source for all Las Vegas homes for sale including Summerlin NV homes for sale, Henderson NV foreclosures and Las Vegas short sales. With access to all the current listings in Henderson NV homes for sale, BHG Desert Properties can help any buyer find their dream home. We offer agents specializing in Las Vegas foreclosures and all Summerlin NV short sales.