When buying a home with less than 20% down payment will likely leave you with some form of private mortgage insurance. However, don’t let that hold you back from buying. The housing market is booming and inventory levels remain low. More and more potential Dallas homeowners are looking to buy their dream home in Dallas but aren’t quite sure what it’s going to take. Even though the housing market may have greatly rebounded, that doesn’t mean that everyone’s bank account is fully recovered from recession-era hardships and prepared to put 20% down.
With this in mind, it makes sense that many borrowers are looking for ways to buy a home with less than 20% down payment. The great news is that even if a 20% down payment isn’t available, private mortgage insurance (PMI) is available to help insure loans that are greater than 80% loan to value.
FHA loans are usually the first to come up in a conversation about low down payment or PMI. Some of the lowest mortgage rates and down payment amounts are offered by the Federal Housing Administration (FHA), which insures and funds their own loans. With down payments starting as low as 3.5 percent and have flexible credit requirements, marking perfect sense why home buyers would be interested in this type of mortgage financing. One of the drawbacks for FHA is that their mortgage insurance is now required for the life of the loan. However, despite recent increases in costs for FHA loans, they remain to be a low-cost loan strategy that many Dallas homeowners are seeking. Learn more about FHA home loans
FHA is not the only option for a low down payment. Conventional loans also carry flexible down payment options by allowing PMI when less than a 20% down payment is made. The down payment is an important factor in determining the true cost of the mortgage insurance. Credit scores also play a high role in the pricing of mortgage insurance. One of the other important factors beyond down payment and credit score is the length of the mortgage term. The biggest bonus of PMI when compared to FHA is that the PMI can be dropped from the loan once your loan balance has reach 80%.
There are numerous ways that PMI can be incorporated into your loan strategy and help put less than 20% down on your home. While monthly mortgage insurance is the most common, it may not be your best option. Consider these other ways to avoid paying monthly mortgage insurance with 5% or 10% down payment.
If you’d like further consultation or have any other questions about Dallas-area mortgages, we are more than happy to help and would love to hear from you. Feel free to call us direclty, 972-499-0454 or send us your questions.
+Patrick Glaros empowers people to find their best home loan option. Through planning and education, and a goal-oriented approach, Patrick and the team at Dallas Mortgage Planners have one common goal: Help clients make an informed decision to choose the best home loan for their unique situation. Find other articles written by Patrick.
