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When a lender provides a loan on a home that exceeds 80% of that home’s value, that loan will generally come with a monthly mortgage insurance premium. But that is not always the case…..
Most FHA loans (which are generally used to acquire a property with very little down payment) come with a heavy monthly mortgage insurance premium. For several years FHA loans were the best option for borrowers with less than 20% down.
However, there are now conventional financing options where the lender pays the mortgage insurance premium on behalf of the borrower in exchange for a slightly higher than market interest rate. These conventional loans can be obtained with as little as 3% home equity. With today’s rates being near all-time lows, and home values rising in many areas of the country…this could be a great financing option.
I just helped a client refinance out of his existing FHA loan from a 5.25% to 4.25%. Not only is his interest rate 1% lower, he also got out of the $165 monthly mortgage insurance premium. The refinance helped him save almost $500/month!!
Don’t hesitate to contact me if you have questions regarding these loans, or any other finance questions…I’m here to help!