New home buyers always have a lot of different things to consider, when considering the type of loan and lender to facilitate the financing. It's enough to confuse even those who have bought several properties in the past, but for first time home buyers it can be even more confounding.
One thing that is often overlooked until the moment you close on the home is the mortgage insurance.
Mortgage insurance is just what it sounds like - an insurance policy homebuyers usually have to have in place to protect their lender from the financial impact if you default on the loan.
In some cases those with a 20% or higher down payment won't have to pay mortgage insurance, but this is rare - and even rarer among first time home buyers who likely don't have the large cash down payments needed to meet that basic requirement.
One option worth looking into is the federal government. Federal Housing Administration loans - FHA loans for short - have been gaining in popularity over the last several years thanks to the fact that they are easier for first time home buyers to qualify for and that they require lower down payments while still offering good interest rates. But now, the FHA has reduced its mortgage insurance premiums to help make getting a home even more affordable for first time buyers.Here are some of the key points:
It's important to note that only new loans are eligible for FHA loans with the new lower insurance premiums. However, those with an existing FHA loan can move through the FHA refinancing process and get a better rate as well as a reduced MIP - and potentially even a lower monthly payment. The FHA will continue to be a major factor in the real estate and home buying world, and it's something that is well worth taking a look at if you're buying your first home - it has numerous advantages that help it stand out.