Mortgage insurance protects your lender, not you, against default. As such, it doesn’t seem like something you would want or need to add to homeowners insurance in San Diego. However, there are some situations where you might be required to have mortgage insurance.
1. You Made a Low Down Payment
The most common reason you may need mortgage insurance is because you don’t have the amount of down payment required for a conventional mortgage. This is usually at least 20 percent of the purchase price, although it can vary by lender. If you do need to have mortgage insurance, you will usually just have the premiums added to your monthly mortgage payment.
2. You Have an FHA Loan
If you have a loan insured by the Federal Housing Administration, you will be required to carry mortgage insurance. With an FHA loan, which only requires a 3.5 percent down payment, you have to pay an upfront one-time mortgage insurance premium as well as an ongoing monthly premium.
3. You Have a Loan from the USDA
The U.S. Department of Agriculture offers no money down mortgages, mostly to rural homebuyers. If you have one of these loans, you will be required to carry mortgage insurance. Like FHA loans, these mortgages require an upfront mortgage insurance premium and an ongoing monthly premium that is added to your payment. USDA loans usually carry lower mortgage insurance rates than FHA loans.
4. You Have Low Equity During Refinancing
If you want to refinance your mortgage and have less than 20 percent equity in your home, you will likely be required to carry mortgage insurance. Mortgage insurance on a refinance generally works the same way it does on a purchase mortgage, in that you pay monthly premiums. If you have mortgage insurance, you can get rid of it once you reach 20 percent equity in your home.
Do you have other questions about purchasing home insurance and budgeting for additional costs that may arise? Reach out to American Tri-Star Insurance and one of our trusted representatives would be happy to assist you. Call us today at 619-272-2100 to learn more about affordable commercial, health, motorcycle, and car insurance in San Diego as well. We hope to hear from you soon.