What is mortgage insurance and how does it work?

Answer:

Mortgage insurance lowers the risk to the lender of making a loan to you when you buy a Boston high rise condo with less than 20% down, so you can qualify for a loan that you might not otherwise be able to get.

Typically, borrowers making a down payment of less than 20 percent of the purchase price of the Boston condominium will need to pay for mortgage insurance. Mortgage insurance also is typically required on FHA and USDA loans. Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it increases the cost of your loan. If you are required to pay mortgage insurance, it will be included in your total monthly payment that you make to your lender, your costs at closing, or both.

Conventional loan for a Boston condo

If you get a conventional loan, your lender may arrange for mortgage insurance with a private company. Private mortgage insurance (PMI) rates vary by down payment amount and credit score but are generally cheaper than FHA rates for borrowers with good credit. Most private mortgage insurance is paid monthly, with little or no initial payment required at closing. Under certain circumstances, you can cancel your PMI.

FHA loan for a Boston condo

If you get a Federal Housing Administration (FHA) loan, your mortgage insurance premiums are paid to the Federal Housing Administration (FHA). FHA mortgage insurance is required for all FHA loans. It costs the same no matter your credit score, with only a slight increase in price for down payments less than five percent. FHA mortgage insurance includes both an upfront cost, paid as part of your closing costs, and a monthly cost, included in your monthly payment.

If you don’t have enough cash on hand to pay the upfront fee, you are allowed to roll the fee into your mortgage instead of paying it out of pocket.  If you do this, your loan amount and the overall cost of your loan will increase.

CONCLUSION

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