GWF Home Mortgage Loans
Avoid Mortgage Insurance with 80/10/10 Financing
If you purchase your home with less than 20% down, chances
are you will obtain a loan that is insured by ``Mortgage Insurance''
(MI). Private mortgage insurance or MI is a type of insurance
provided by a private mortgage insurance company to protect
a lender in the event of default on a loan. This type of insurance
is generally required when a borrower has less than 20% equity
in a home; i.e. the loan amount divided by the property value
is 80.01% or greater. As your home appreciates or your loan
balance decreases (or a combination of the two), and your
equity in the home exceeds 20%, you may petition the mortgage
holder to drop the MI. This process may be cumbersome or difficult.
One way to avoid paying MI is to purchase a home with a combination
first and second mortgage. The first mortgage would be limited
to 80% of the home's appraised value. The second mortgage,
which would close in conjunction with the first, would then
provide for the difference between the home's purchase price,
less the 80% first mortgage, less the down payment available
. In other words, if you have a 10% down payment available,
your first loan would provide for the 80% mortgage with a
second mortgage of 10%. This is commonly referred to as an
80 -10 -10 transaction.
Another way to avoid incurring MI payments is to find a lender
that offers self-insured programs. This type of loan would
have a higher interest rate in place of the private mortgage
insurance premium. While mortgage insurance premium payments
are not tax deductible, the interest associated with a self-insured
mortgage would be fully tax deductible.
The decision of whether to obtain a loan with mortgage insurance
versus the above two options should take into account the
combined total monthly payments of the various options, adjusted
for the tax benefits of interest deductions.
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Great Western Financial Home Mortgage Loans
is a mortgage loan company that specializes in offering loans
to people in California and nationwide. Our staff is completely
dedicated to helping you qualify for a loan. We have a 95% financing
success rate; we've found adequate financing for 9 out of 10
people that have contacted us. Let us show you what we can do
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