You don’t need a perfect financial situation to buy a house. At Peoples Choice Mortgage we firmly believe everyone deserves to buy a homeowner. That is why whenever we meet with someone who wants to buy a house we do everything possible to find something that will work. There are lots of programs out there for people who would like to be homeowners, but who do not have perfect credit or a 20 percent down payment. Many people are closer to being homeowners than they realize because of programs like these. While these programs make it possible for some to be homeowners when they otherwise wouldn’t qualify for a mortgage, there are sometimes strings. In many of these situations, the homeowner is required to have mortgage insurance as a condition of the home loan. However, there's a new program where you might be able to say goodbye to mortgage insurance.  

Understanding Mortgage Insurance and Home Loans

When a lender gives a homeowner a home loan, they are accepting some level of risk that they will be paid back. That is why they are looking for high credit scores. High credit scores indicate that the mortgagee has a history of making payments and making them on time. Twenty percent down payments indicate to the lender that the homeowner has significant skin in the game and would not like to lose their down payment in case of default. When a homeowner does not have a down payment of 20 percent, then lenders require mortgage insurance. 

Mortgage insurance is unlike other types of insurance, such as mortgage life insurance. That is a life insurance policy that pays off the mortgage in case the mortgagee passes away. This allows the beneficiaries of the policy to get the money they need to pay off the mortgage. Mortgage insurance is for the lender and not for the homeowner. In the event the mortgagee does not make their mortgage payments and they default on the home loan, lenders get paid a portion of the principal. Unfortunately, this does not mean that the mortgagee is off the hook for the home loan. If the mortgagee falls too behind on the mortgage then the house can be foreclosed on. 

What Mortgage Programs Require Mortgage Insurance?

Mortgage insurance is required in a lot of instances. If a homeowner has a traditional mortgage, but does not make a 20 percent down payment, then mortgage insurance is often required. While this applies to traditional mortgages that do not have a 20 percent down payment, it applies to other government backed mortgages. There are several government programs designed to open up opportunities for homeownership to those who don’t qualify for traditional home loans. First time home buyers might be eligible for a FHA loan which allows people with lower credit scores and smaller down payments. Eligible members of the armed services and their spouses might be able to qualify for a VA loan. This gives them access to home loans for little to no down payment. Homeowners looking to buy rural properties might be eligible for USDA loans, which also provide opportunities for low to no down payment. 

All of these government programs are incredible and increase the number of people who can become a homeowner. These programs provide opportunities for individuals who do not meet traditional credit requirements and down payment requirements. Because most individuals who take advantage of these government backed mortgages do not put down 20 percent, they require mortgage insurance. 

New Program Says Goodbye to Mortgage Insurance

A new program that was just announced by one of our leading lenders might allow you to kiss mortgage insurance goodbye. This program is unique because it does not require you to pay for mortgage insurance if you put down a ten percent down payment. Not having to carry mortgage insurance for a ten percent down payment is nearly unheard for a traditional mortgage. Not having to carry mortgage insurance is a major savings. There is no standard rate for mortgage insurance. Your rate varies based on your credit score and the size of your down payment. Depending on your rate, avoiding mortgage insurance could save you a few hundred dollars a month. That is a significant savings and well worth taking advantage of. 

Final Thoughts

The bottom line is that there are more ways to become a homeowner than you would imagine. You do not need a perfect credit score and you do not need some monstrous down payment. There are lots of lenders with a wide array of mortgage programs that can help you stop renting and start being a homeowner. Do not disqualify yourself from buying a home before you speak with a professional mortgage broker. The team at Peoples Choice Mortgage is here to meet you where you are financially and help you find a program that is right for you. Again, we feel that everyone deserves to be a homeowner, so if you have that desire, contact us and let’s see what we can do to make it happen.