Many people think they need 20% down to buy a home. Others realize they can put down less than 20%, but want to avoid the mortgage insurance that accompanies those loans. If you own less than 20% of your home, lenders know you’re more likely to foreclose and they’re more likely to lose money. To minimize their risk, you’re required to pay mortgage insurance to offset the costs associated with foreclosures.
Now, while mortgage insurance might not be fun, in the last few years home prices have gone up faster than most people can save money for a 20% down payment. If you wanted to buy a $100,000 home and were saving up $20,000 for a down payment, but two years later, that home was worth $200,000, suddenly you’d need TWICE the down payment to avoid mortgage insurance. With home prices going up, this has been the case time and again.
So, what can you do?
If you buy a home with no money down as a first time buyer, once you have 20% equity in your home, you can refinance your loan and have the mortgage insurance removed!
There are many loan programs available and down payments can range from nothing to 3.5% to 5% to 10%, 15% and up. If you want to talk to a lender to see what loan programs would be best for your individual circumstances, feel free to contact me and I’ve got an amazing lender I trust implicitly that I can refer you to!