Deciding to purchase a home is a major decision and potentially a great risk. In the event that you have any problems you could end up ruining your credit rating or worse yet you may have to file for bankruptcy and loose your home all together.
Fortunately there is an insurance policy that will protect you if you ever find yourself either out of work or unable to work.
Private mortgage insurance is a type of insurance policy that helps protect the Mortgage Company against losses due to foreclosure. This protection is provided by private mortgage insurance companies and allows mortgage companies to accept lower down payments than would normally be allowed.
This is very important for low and middle-income people. Normally you need to have a down payment of 20% of the value of the home in order to obtain a mortgage. With private mortgage insurance you may need as little as a 3% down payment to obtain a mortgage. With the help of private mortgage insurance you will qualify for normal mortgage as the banks investment in you is secured by the insurance policy. Private mortgage insurance may be also required when buying a second home or refinancing an existing mortgage with cash out.
Low down payment mortgages are becoming more and more popular. Mortgage insurance allows borrowers to purchase a more expensive home than they might otherwise be able to afford. With lower down payment you retain more for home furnishings, or buying a car or other investments.
Typically, a portion of the mortgage insurance premium is paid up front at closing, and the rest is paid as part of the monthly mortgage payment. Under an annual plan, a borrower pays the first-year premium at closing. A monthly plan allows homebuyers to only pay 1 or 2 month's mortgage insurance premium at closing. With single premium plan a borrower need to pay a one-time single premium.
Some mortgage insurance plans allow you to add the amount of the mortgage insurance premium to the loan amount. In that case borrowers make no mortgage insurance payment at closing and the first insurance payment is made with the first mortgage principal and interest payment.
