What is Mortgage Insurance and Why Do We Pay It?
Taking a risk is something we are all familiar with in life. Whether you take a risk by accepting that new job offer or by going sky diving as a thrill seeker, it is a risk. Just as we take risks in our personal lives mortgage lenders also take risks when lending money to their customers. As a way to mitigate the risks that comes with lending such a large amount of money, lenders usually charge a fee, or mortgage insurance, when a lender puts less than 20% down on a home loan. There are some loans that start out with a mortgage insurance premium and then can be removed over time, some loans however require the mortgage insurance to be paid throughout the life of the loan. The cost of the mortgage insurance can vary depending on the type of loan that is acquired.
Why Do We Require Mortgage Insurance?
At one time it was common for people to have the 20% down payment that was needed to put down on a house loan. As the economy changed over the last 50 years, that became less feasible for many people looking to own a home therefore it discouraged many to pursue home ownership. With the creation of the Federal Housing Authority (FHA) came the option to borrow with less than 20% down. This also made lending mortgage loans with less than 20% down riskier to lenders. Because of this risk to the mortgage lenders, they began charging mortgage insurance to borrowers (which is usually about one percent of the loan amount per year). By charging mortgage insurance to the borrowers putting less than 20% down, it reduced the loss that the lenders […]
There has always been a pretty divided ground when it comes to people who favor owning a home versus people who favor renting a home. Maybe you have always dreamt about the house with the white picket fence as the epitome of your American dream. Over the years the financial benefits of owning vs. renting has changed. For example, from 2004 to 2006 it was more favorable to rent, but buying made a comeback from 2009 to 2011. If you find yourself sitting on the fence about which is better for you, let us show you four circumstances in which buying a home may be a better option.
In the world of finance there seem to be a lot of acronyms because, well, let’s face it, it would take much longer to go through paperwork if having to use the long versions! Just because we use the acronyms and understand what they all mean, doesn’t mean we expect you to as well! After all, you have enough stuff to remember in your personal life instead of wondering what TILA and RESPA mean. Thank goodness you are in good hands when you come to First Ohio. We fill you in on every detail and explain all of those acronyms to you and what they mean!
