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Understanding the Basics of Mortgage Insurance

Understanding Mortgage Insurance | Clarendon Hills IL Realtor

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If you are buying a new home, it is ideal to put down twenty percent of the total price of the home. The reality is that most home buyers cannot afford this. This doesn’t mean that you won’t be able to buy a house, however. In the case that the amount you can put down is less than that twenty percent, lenders will often require that you get mortgage insurance. This will lower the risk on their end and enable you to qualify for a loan. So, how does mortgage insurance work? Let professional Clarendon Hills IL real estate agent Paul Froiland fill you in.

How It Works

When you seek approval for a loan, you will be required to determine the amount of your down payment on the house. If this is less than twenty percent, you will most likely need mortgage insurance. This will certainly increase the amount of your loan. The monthly mortgage insurance payment will be included in your monthly payment to your lender. It might also be included in closing costs in some cases. As a Clarendon Hills IL Realtor, helping acquire financing is one significant way to serve first-time buyers.

Who Mortgage Insurance Protects

The purpose of mortgage insurance is to protect the lender in the event that you are unable to pay your mortgage. They are looking for confidence in your ability to come through on the great financial commitment that comes with purchasing a home. In the event that you cannot make your payments, your credit score will decrease and you can even lose your home. Working as a Clarendon IL real estate agent involves helping buyers understand every step of the buying process.

Types of Loans

With a conventional loan, your mortgage insurance will come from a private mortgage provider. The amount that you are able to put down and your credit score will be the two main factors that will determine your monthly mortgage payment amount. In this event, you won’t likely be required to pay much in mortgage insurance at closing.

Another source of mortgage insurance is a Federal Housing Administration loan. In this case, you will be paying the FHA all monthly payments. If your loan is from the FHA, then your mortgage insurance will be as well. Keep in mind that you will have to pay some at closing, as well as, monthly premiums. For more information about mortgage insurance, or for help buying your next home in the Chicago Suburbs, contact Clarendon Hills IL Realtor Paul Froiland