Purchasing a home is an accomplishment – but it also means prepping yourself before you sign on the dotted line. There are a lot of things you need to learn and check off before being handed the keys, but that shouldn’t weigh you down in your homeownership future.
One of the real estate terms you might hear flying around: mortgage insurance. Not only that, but private mortgage insurance.
Home loans will require a down payment in order to qualify for a loan – the more you’re able to put down, the more money you’ll save in interest over the life of the loan.
To avoid paying for private mortgage insurance (PMI), you’ll need to put down 20% of the purchase price of a home. However, that isn’t always possible – and a 20% down purchase isn’t required to buy a home.
FHA loans require the smallest amount down – around 3.5%. Instead of paying $40,000 on a down payment for a $200,000 home, 3.5% down is a $7,000 down payment.
Quite the difference.
This does mean, however, that you’ll need to pay PMI. This helps protect the lender in case you were to default on your loan.
PMI premiums vary from loan to loan – a FHA loan, VA loan, Conventional loan, and a USDA loan will all have different premiums and an annual fee you’ll have to pay if you put less than 20% down.
Check out LendingTree’s full analysis of the comparison of loans here.
And for more real estate tips, stop by Alliance’s Blog.