Shortly after being sworn in, the Trump administration suspended the mortgage insurance cut rate that had been initially announced by the outgoing Obama administration a week earlier. This means that if you looking to purchase a home and intend to use Federal Housing Authority- backed loan, you will be forced to the same premium rate that you would have paid in January 2015 for mortgage insurance. While this may come as a disappointment to a majority of first-time home buyers and those with fairly poor credit considering that they will have to pay an upfront insurance fee in addition to 0.85% of the principle amount for premiums annually, it is also vital to examine the other side of the coin which are the benefits that you, the buyer, may acquire from these mortgage insurances.
Benefits of Mortgage Insurances
With a direct impact on your ability to refinance or own a home, mortgage insurance is considered one of the best and cost effective solution for the typical American home buyer as it allows borrowers to have a flexible financing option, including affordable down payments. Hence, not only is mortgage insurance beneficial to the lender but also the home buyer. Some of the benefits home buyers can get from mortgage insurance include:
Flexible payment options
Mortgage insurance offers greater flexibility in terms of affordable premiums and significant lower down payments that makes it possible to own a home without necessarily having to save for the 20% requisite down payment. This means the lender can offer you equal competitive interest rates that are available to those with large down payments.
Favorable lending criteria
Most buyers who may not have met the standard lending criteria in most conventional mortgages such as those in commission based and self-employment can now qualify for mortgage insurance for the financing they need to own a home as long as they have good credit.
Own a cottage or vacation house
Some Mortgage insurance covers also cater for those looking to own a second home, cottage or vacation houses. Similarly, With mortgage insurance, you can transfer it from one home to another, anywhere in the US which in the long run may save you a substantial amount of premium.
Some mortgage insurers offer a discount upon purchasing of energy efficient homes or those looking to refinance and renovate their homes to make energy efficient. Hence, you can get a refund of up to 10% on your mortgage insurance premium.
Own while renting
With mortgage insurance, you can own the property as you continue making rental monthly payments thereby giving you the freedom of owning your own home that you can always add a personal touch to meet your needs.
Save for household purchases
When purchasing your first home, expenses are likely to add up drastically. As such, most mortgage insurance offers you the convenience of saving whether it’s on appliances, moving supplies, truck rentals just to mention a few.
Many home buyers are usually unwilling to take mortgage insurance simply because of the additional cost that comes with the already inflated budget. While it is true mortgage insurance is not suitable for everyone, they have proven to be a useful tool during financial instability as well as helping those who may not qualify for the traditional financing options.