Many of our visitors believe that they should not apply for mortgage quotes because their down payment is insufficient to qualify for a loan. However, if you have a small down payment, you have several options that we will discuss here.
If you make a down payment of less than 20% on a home, you will have to take out private mortgage insurance (PMI). PMI enables you to purchase a home with a down payment of as little as 3%. PMI protects your lender in the event that you default on your loan. If you default, your PMI will make sure that the lender is repaid the outstanding balance of the loan. The cost of PMI will vary from lender to lender, but it usually is 0.5% of the mortgage amount per year. This would amount to about $1,000 on a $200,000 mortgage. Once you've achieved 20% equity in your home, most lenders will allow you to cancel your PMI to save on the expense. Similarly, if your home appreciates significantly in value and your equity exceeds 20%, you can also usually jettison your PMI. Keep in mind that the size of your down payment will affect your mortgage quotes. Generally, the larger the down payment, the more competitive your mortgage quotes will be.
If you have a small down payment, you might consider getting mortgage quotes on an FHA loan. These loans are designed for people with credit challenges and are insured by the Federal Housing Administration. With FHA loans, you can make a down payment as small as 3%. You will also have to take out FHA mortgage insurance with this type of loan, which costs 1.5% of the loan amount upon closing plus 0.5% per year. You might consider applying for mortgage quotes on an FHA loan if you have blemished credit or a down payment that is considerably less than the traditional 20%. Your down payment can even be a gift from a family member, a non-profit organization, or a government agency, so you have many options to supplement your down payment.
