Friday, April 11, 2014

Got 20% down? If not, you can still buy


When buying a new house, the rule of thumb historically has been put down 20 percent upfront, then borrow and pay off the rest on a set timetable. Borrowing 80 percent or less of a home's value is the magic number most lenders use to determine your ability to borrow free of extra costs. If you cannot put down the full 20 percent, however, there are other alternatives at your disposal...for a premium, of course.

The Federal Housing Association offers the opportunity for borrowers to purchase new homes with as little as 3.5 percent of the total purchase price paid upfront. The "catch" is that an extra mortgage insurance premium is paid each month in addition to your base mortgage payment. Besides the FHA program, if you prefer to go another route with less than 20 percent down, you can obtain private mortgage insurance to make up the difference.

Sometimes utilizing mortgage insurance is the only tool available to qualify for a loan, depending on your circumstances. Want to learn more? Visit the FHA's website to get more information here.

On the other hand, if you qualified for your last mortgage through an FHA program or using private mortgage insurance and you have since paid off more than 20 percent of the home's value, congratulations! You can refinance to get rid of that extra insurance premium and only focus on paying the principal and interest on the mortgage itself.

Whether you are interested in purchasing a new home with less than 20 percent equity or you are ready to get rid of the PMI on your current mortgage, a Vertex loan officer would be more than happy to walk you through the different options available. Feel free to visit our website for more info on the process or call our office toll-free at 877-939-0339 to see what makes the most sense for you.

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