(BPT) — It’s a common misconception that a 20 percent down payment is required to buy a home. Let’s face it, a 20 percent down payment is a lot of money, and often the largest obstacle for homeownership, especially for first-time buyers. You can qualify for a conventional mortgage with as little as 3 percent down.
Conventional mortgages originated with a low down payment, defined as less than 20 percent, require private mortgage insurance (MI) until approximately 20 percent equity is established through either monthly payments or home price appreciation.
When mortgage insurance cancels, your monthly mortgage bill is reduced. It is important to know that not all forms of MI are created equal — private mortgage insurance is temporary and cancelable but the overwhelming majority of mortgages backed by the government’s Federal Housing Administration (FHA) contain insurance that cannot be canceled.
Check out www.lowdownpaymentfacts.org to learn more.