Mortgage Insurance 101

When purchasing a new home at the Lake of the Ozarks, there are lots of things to consider. While buying may make more sense than renting in your situation, sometimes it is difficult to come up with a 20 percent down payment. This is where mortgage insurance can help you out! You can secure a Lake of the Ozarks mortgage loan with less than 20 percent down if you purchase mortgage insurance.

What is Mortgage Insurance? 

Mortgage insurance, also known as mortgage guarantee or home loan insurance, is an insurance policy that compensates lenders or investors for losses due to the default of a mortgage loan. If a borrower stops payment on  a mortgage, the insurance company ensures that the lender will still get paid in full. With mortgage insurance, the borrower pays the premiums, but the lender is the beneficiary.

Mortgage Insurance FAQs 

1. Who is required to have mortgage insurance? 

Typically, if the down payment is less than 20 percent of the value of your home, you are required to carry mortgage insurance. You usually pay those insurance premiums until your loan-to-value ratio (LTV) hits 80 percent. The LTV is simply the amount of money you borrowed divided by the value of the property you bought. Once you have that 20 percent of home equity built up, you can usually cancel your mortgage insurance policy.

2. Are there different types of mortgage insurance? 

In general, there are two types of mortgage insurance: public and private. Public mortgage insurance is bought from the government, designed for those with FHA or VA loans. For conventional loans, the insurance is bought from the private sector and is called Private Mortgage Insurance (PMI). The type of mortgage insurance required will depend on the type of home loan at the Lake of the Ozarks you are getting.

3. How much does mortgage insurance cost? 

Insurance premiums for conventional loans can vary. Typically, the lower your down payment and/or the lower your credit score, the higher your premium will be. Premiums can range anywhere from $30-$70 per month for every $100,000 borrowed. On FHA loans, there is an upfront MIP (mortgage insurance premium), as well as an annual premium that is collected monthly. On VA loans, you have an upfront fee (funding fee) and no annual or monthly premiums. Your Lake of the Ozarks mortgage lender will be able to provide you with insurance costs for your specific situation.

4. Is there a way to avoid paying for mortgage insurance? 

If you make a down payment of 20 percent or more when you buy a home, you can typically avoid paying mortgage insurance on a conventional loan. Even if you are required to purchase mortgage insurance when you first get your loan, you can often request to cancel it after a certain period of time. As mentioned above, once you've built up a certain amount of equity in your home (usually 20 percent), you can most likely stop paying for the mortgage insurance.

If you're thinking about purchasing a new home and don't have enough for a 20 percent down payment, contact the best mortgage lender at Lake of the Ozarks at 573-746-7211 to discuss your options. When it comes to your financing needs, I'm committed to working with you every step of the way!

For Lake area news, resources and tips on financial services, please 

LIKE my Facebook Page, Follow me on Twitter or Connect on LinkedIn

Michael Lasson

Sr. Residential Mortgage Lender

NMLS #: 493712

2265 Bagnell Dam Blvd, Suite B

PO Box 1449

Lake Ozark, MO 65049

Direct:  (573) 746-7211

Cell: (573) 216-7258

Fax:(573) 693-9141

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.