Northern NJ Buyers Have Options When the Budget is Stretched Thin

Northern NJ Buyers Have Options When the Budget is Stretched Thin

October 25, 2019

What is PMI? How will it help me buy a house?

When you want to buy a home, but a large down payment isn’t in the budget, are your dreams dashed?  Or are there options that will allow you to enjoy all the benefits that come with owning your own home.

Mortgage lending requirements include an option known as PMI. This special Private Mortgage Insurance allows many who, while they qualify for the monthly payments to purchase, just don’t have that initial down payment. They can still purchase a home by purchasing Private Mortgage Insurance.

What takes place in Underwriting?

This is where the most time is spent when a lender is considering offering a home loan to an applicant.  Careful assessment is made of every item on your loan application. Home mortgage applications must meet strict standards in order to gain approval. The underwriting specialists do much more than verify all of the information provided. They also calculate the risks of a default occurring while weighing the return on investment for selling the mortgage to a third party.

In order for an application to be considered complete, underwriting requirements will include adequate information on the borrower’s credit and employment history.

Unique situations, such as self-employed individuals, or unusual credit history may even require you to jump through a few additional hoops when dealing with mortgage insurance requirements.

What type of loan can I apply for?

Strict lending requirements and banking policy will dictate the loan type a lender makes available to you. Lenders will of course look at mortgage insurance as risk protection for themselves.  In general, Conventional mortgages and FHA both require private mortgage insurance whenever the down payment is less than 20% of the purchase price of a home.

FHA loans can be more flexible with the initial down payment requirements when a borrower has an adequate credit rating. VA and USDA loans do not usually require mortgage insurance if the borrower’s credit and employment history meet certain guidelines.

Even though a Conventional loan may start out with PMI included, in most cases, once the principle has been paid down so there is at least 20% equity in the home the PMI payment may be eligible to be dropped.

Your local marketing specialist is a great resource, and can supply a list of lender referrals for you to consider on your road to home ownership.

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