What is mortgage insurance?
You thought the interest rate was the most important thing to consider when buying a home. You may want to take another look. One of the most costly expenses people incur when buying is the cost of mortgage insurance. Mortgage insurance is an insurance that protects the lender in case the home owner defaults on their loan. If the lender has to foreclose on the property, some of their losses will be covered by this insurance policy. Although the buyer pays for it, it only protects the lender. For this reason we recommend to avoid paying this if at all possible. There are several ways to avoid this and our preferred lenders can cover this with you in your initial consultation with them. The Mortgage insurance rates vary depending on the overall risk profile of the person obtaining the loan. Credit can play an important role in this.
For those who have less than perfect credit, an FHA loan may be a better option. FHA stands for the federal housing authority and is a loan offered by the department of Housing and Urban Development or HUD. The mortgage insurance on an FHA loan is called MIP or mortgage insurance premium and is paid in two ways; a one-time up-front fee and a monthly premium. FHA does not charge its Mortgage insurance based on credit so everyone gets the same pricing for the mortgage insurance. Our preferred lenders do a great job and can get you all the options so you can accurately compare the differences based on your situation.