Mr. Crunchy and I are going to be buying a home here in Minnesota in the next year, and understanding mortgage insurance is something that is really important to us. Since I have a background in finance I know what it is, and how it works, so I forget from time to time that hubby has no clue what it is.
Back in decades past, home lenders required prospective home owners to be able to put a 20% down payment in order to buy a home. With houses a lot more expensive today, that can prevent a lot of people from being able to buy a house. For a $200,000 home, you would have to save $40,000 to put down. YIKES!
Down payments are usually required because lenders feel if you are invested in your home, you are less likely to default on your payments. While this may be true, hefty down payments can still keep a lot of home buyers out of the market.
That’s where mortgage insurance comes in. Mortgage insurance is an insurance that protects the lenders and investors that lend you money to buy your home. It’s usually required if you put less than a 20% down payment on your home. In other words it still lets you buy your house even though you can plop down a heft chunk of change.
One thing a lot of people don’t realize about mortgage insurance is that once you have 20% equity in your home it’s cancellable, and that you can also shop around for mortgage insurance. That’s why I would definitely take a look at the information Genworth Financial has about the topic!
Unlike life insurance, mortgage insurance doesn’t insurance as the homeowner directly, but it’s still provided a lot of benefit to families trying to get into a home without having to break the bank with a down payment! Without mortgage insurance, would you be able to buy a home?