You finally found the perfect home for your family, but unfortunately you don’t have the 20 percent down payment that your lender requires to finance your loan. Qualifying for a home loan can be difficult sometimes, especially if you have less than perfect credit or other risk factors that a lender might see. Don’t fret though, there is an option that can help you: mortgage insurance.
Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for mortgage insurance. Mortgage insurance also is typically required on FHA and USDA loans. Even though it will increase the cost of your loan, this extra money owed will be wrapped up in your monthly home loan payment.
While this option can help you get a loan, keep in mind that this option is intended to protect the lender. If you default on payments, your credit score will suffer and you risk the possibility of be foreclosed on.
There will be extra money involved in your home loan, but being able to get a loan for that dream house despite less than perfect lending factors is a huge help. Once you have paid down your loan a certain amount or refinanced your home, you can cancel your mortgage insurance. Then you’ll be back to paying on your regular loan all while enjoying your new home.
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