When You Cant Put 20 Percent Down on Your Home Mortgage

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by: marciafreeman
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Word Count: 398
Date: Sat, 22 Nov 2008 Time: 2:29 PM
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Most people hope one day to own a home of their own. But for some, gathering the "required" 20 percent down payment to qualify for a home mortgage can be daunting. Fortunately, there are some options out there for those home buyers who struggle to gather together the full 20 percent. Just as with any aspect of a home mortgage, however, there are upsides and downsides to each of these options. And depending on the health of the credit markets at the time you are looking for a loan, lenders may be more or less willing to be flexible with the terms of the mortgage.
PMI (Private Mortgage Insurance)
Lenders usually like home buyers to put down at least 20 percent of the purchase price in order to qualify for a home mortgage with the most favorable terms. If you are unable to pull together that large of a down payment, you may be required to purchase Private Mortgage Insurance (PMI). If you find yourself unable to pay your mortgage, PMI protects the lender from losing money.
Private Mortgage Insurance generally costs 0.5 percent of the purchase price of the property you are buying. If obligated to purchase PMI, the final costs of your home mortgage will be higher than they would otherwise. Fortunately, when you have gained equity in your home (youll need 20 to 22 percent) you can request that the PMI be cancelled.
Similar to this arrangement is an FHA loan, which is a loan insured by the government. If you get an FHA loan, it is possible to qualify for a home mortgage even if you have only three percent or more for a down payment. Because FHA loans are insured by the government there are specific criteria for qualification that can vary by county. Check with your loan officer or mortgage broker to see if you are eligible.
80, 10, 10 Home Mortgages
For those want to avoid the expense of PMI, there is another option. This is called an 80/10/10 home mortgage. With this option, you will use a second home mortgage to finance part of the down payment. 80/10/10 works more or less like this: your first, larger mortgage will cover 80 percent of the cost of your home. You will take out a second mortgage to pay a down payment of 10 percent. Then you will provide the remaining 10 percent of the down payment out of pocket.

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