You may not know this, but at one time you always had to have 20% down or more in order to purchase a home. The only exception was with some type of government insured loan like FHA or VA.
Private mortgage insurance was developed in 1957, right here in Wisconsin, to address this issue. The advent of Private Mortgage Insurance, or PMI makes it possible buyers to purchase a home with as little as a 5% down payment, because it reduces the lender’s risk in case of a mortgage default.
Mortgage insurance has sometimes been portrayed in a negative way. The reality is that it serves a purpose for those buyers, who don’t want wait until they have saved up a big down payment.
For example, with rates and home prices being at historic lows at this time, it may make sense to purchase a home right now, instead of waiting, just to have a bigger down payment.
Your A+ Mortgage Loan Officer can assist you to determine if now is a good time to buy a home with PMI versus waiting until you have 20% saved for a down payment.
Also, we can suggest the type of mortgage insurance best suited to your needs – monthly, lend paid or split premium.
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