(BPT) - Owning your own home comes with many advantages, including escaping rising rents and the personal and financial stability associated with homeownership. Fortunately, millions of Americans, with less than 20 percent down, have been able to buy a home sooner thanks to mortgage insurance (MI). If you don't put down 20 percent of the mortgage cost, you will likely be required to purchase MI, which enables low-down-payment borrowers to qualify for home financing from lenders.
While homeownership has many benefits and continues to be part of the American Dream, it is not without costs. Several surveys have found that the majority of first-time homebuyers - over 80 percent according to one study - put less than 20 percent down. For these borrowers, there is usually the added expense of MI, which may give some of these borrowers pause.
But there is good news: the monthly private mortgage insurance premiums do not last forever on most conventional loans. And when private MI (PMI) cancels, homeowners will have more cash in their pockets each month - money that is available for home improvements or other goals. It is important to understand, however, that not all MI is the same, and not all MI can be canceled.
There are numerous low-down-payment mortgage options available that include MI. The two most common are: (1) home loans backed 100 percent by the government through the Federal Housing Administration (FHA) that include both an upfront and annual mortgage insurance premium (MIP); and (2) conventional loans, which are typically backed at least in part by private sources of capital, such as private MI. The key difference is that one form can be canceled (PMI) while the other (FHA) typically cannot be canceled.
Bill Gardner is one of the TOP Real Estate Broker in Miami Florida. He now supports over 500+ agents and manages millions of dollars of transactions. He is a successful Real Estate Investor and a master sales trainer and motivator. Join Global Luxury Realty Today!