By Carrie Reeder
Ideally, traditional mortgage lenders want new homebuyers to
have a 20% down payment when purchasing a new home. Thus, if
purchasing a $200,000 home, you should be prepared to have
$40,000 as a down payment.
Unfortunately, many people do not have this kind of money
around. For this matter, private mortgage insurance (PMI) was
created as a way for mortgage companies to recoup their money
if a homeowner defaults on the loan. There are various loans
available to assist people with down payments. In some
instances, homeowners can obtain 100% financing, and avoid PMI
What is Private Mortgage Insurance?
Because Americans are earning less money, and home prices are
steadily increasing, the majority of the population is unable
to save the recommended down payment of 20%. In order to make
owning a home possible, mortgage companies created a
mortgage insurance, (PMI), for people with less than 20% to
down on a home. This insurance protects the lender if you
default on the mortgage.
How to Avoid Paying Private Mortgage Insurance
On average, PMI may increase your mortgage payment by $100 –
sometimes less, sometimes more. However, there are ways to
avoid paying this additional insurance. The obvious involves
having at least 20% as a down payment. If this is not an
option, homeowner may agree to a higher interest rate. Another
tactic entails getting approved for 100% financing.
How Does 100% Mortgage Financing Work?
100% mortgage financing makes it possible to buy a home with
money down. Also referred to as a piggyback loan or 80/20
mortgage loan, 100% mortgage financing involves obtaining a
first mortgage for 80% of the home cost, and a second
or home equity loan, for 20% of the home cost. Together, the
first and second mortgage allows a home purchase with no money
down, and no private mortgage insurance.
About The Author: View our recommended 100 percent financing
mortgage company www.abcloanguide.com/zerodown.shtml