private mortgage insurance

The Art of the Downpayment

There is an art to figuring out exactly how much of a down payment you should make on a house. But don’t let the basic concept of a down payment deter you from searching for your new home.


So, what is considered an appropriate down payment?

Well, typically putting down 20% of the cost of the home will help you to avoid paying private mortgage insurance. And typically 20% is viewed as a good “average” amount to put down on a house. There is a fair amount of people out there who will encourage you or even require you to make a 20% down payment (if not more)! But that does not mean 20% is absolutely what you have to pay. If you have the 20% saved? Put it down. It will bring the amount of money you need to borrow for your mortgage significantly less.


Just because you have it, though, does not mean you need to spend it. And, yes, this does apply to down payments, too. Paying for more than 25-30% for your down payment may not be the best investment for you. Even though you may have the “cash” on hand, it is important to take other costs into consideration before you do. Those other costs range from closing costs to realtor fees to general maintenance of your home.

While it may seem like a great idea at the time, making a large down payment may not be the the ideal move for you in the future. Other options, besides making a large down payment, can be taking out a mortgage with a shorter term- so 10 years rather than 30, for example. You will ultimately pay less in interest and will have more “cash” on hand in the meantime. If you have questions about what is the best move for you, talk to one of our experienced loan officers. They can take a look at your unique situation to find what is best for you.

The Under 20 Crowd

Now, just because you don’t fall into the 20% or “more” categories doesn’t mean you can’t actually afford to buy a home. In certain areas (and in certain situations) you have the ability to put down as little as 0%. The USDA and VA loans offer 0% down, MSHDA offers 1% down, and FHA offers 3.5% down. Each of these options definitely makes purchasing a home significantly less daunting and more approachable for many buyers, especially first time buyers.

Like we mentioned before, if you are putting down less than 20%, you will be required to pay private mortgage insurance (PMI). What is it? Essentially insurance for your lender, in the event you foreclose on your home. And, as the borrower, you pay the premiums. The average cost of PMI can range from $30-$100, depending on the amount you make for your down payment. While that may seem like a lot of money to pay on top of your monthly mortgage payment, it does allow for you to purchase a home without making a huge down payment. Just think about it- 20% of a $300,000 home is $60,000. An additional amount of money each month can be called a “small-er” price to pay to buy the house of your dreams.

Now what?

The most important thing we can recommend is talking to a loan officer. Every individual situation is so unique. Not everyone can easily fit into a predefined category. The best approach is to talk about the amount you can put down, the monthly payment you can afford, the other factors in your life- with someone that has experience in the mortgage industry.

Don’t just take our word for it- we have so many happy clients (and new homeowners) who are happily living in the house of their dreams.

Total Home Lending

Natasha Mason


The Art of the Downpayment2020-09-28T15:14:20+00:00

Demystifying Mortgage Terms

You’re a first time home buyer. Or you’re looking for your second (or third or fourth) home. Either way, there are a lot of terms thrown around in the mortgage industry. And there are probably a few you aren’t familiar with quite yet.

Well, we are here to help with that. Here are a few of the top terms you may hear throughout your mortgage process. If there’s something you still want to know, tell us! We would love to answer any questions you may have.


Let’s start with the basics: types of loans

Adjustable Rate Mortgage- this is a mortgage whose interest rate can adjust throughout the payback period based on market interest rates. Typically, there is a maximum amount the interest rate can be adjusted over the life of the loan, as well as the number of times it can be adjusted throughout one given year.

This type of mortgage features lower interest and lower payments earlier on during the loan term. Lower rates and lower payments can provide the room, financially, for a borrower to purchase a larger home while still being able to afford the monthly payments. Additionally, it allows borrowers to take advantage of falling interest rates without refinancing.

Construction Mortgage- typically a short-term loan, it is given to the borrower to pay for the construction of a new home. If you are considering buying land and building a house, this may be a great option for you to consider to assist on the financial side of building your dream home.

Fixed Rate Mortgage- this is a mortgage whose interest rate stays fixed throughout the payback period of the mortgage. The stability of these loans make budgeting, saving and planning much easier. Fixed Rate Mortgages are also simple to understand, which makes them great for first-time (or any-time) homebuyers.

Jumbo Mortgage- any mortgage that exceeds the limits set by Fannie Mae or Freddie Mac is considered a jumbo mortgage. There is no government backing for these loans, so the requirements to obtain a jumbo loan are significantly higher. The “number” that makes a mortgage “jumbo” varies across the country. For instance, the minimum in Los Angeles, a more expensive housing market than Detroit, is significantly higher. To see if you qualify for a jumbo loan, talk to your loan provider.

Reverse Mortgage- this is where the equity on the house is turned into cash for the homeowner. Home equity is the portion of your property value that you actually own (you can think of it as the part of the property you have already “paid off”). There are a lot of factors to consider when it comes to a reverse mortgage. Fees, your financial stability and how long you plan on staying in your home are a few things to keep in mind when pondering a reverse mortgage.

VA Mortgage- this is a government sponsored mortgage that is guaranteed by the Veteran’s Administration. It is only available to active US service members, veterans and their spouses.


Now for a few more good terms to know

P&I- Principal and Interest. This will be your normal monthly mortgage payment.

PMI- also known as private mortgage insurance. Insurance on a mortgage is generally required of borrowers who make a down payment of less than 20%. Typically, FHA Loans fall into this category and require borrowers to pay a private mortgage insurance. At a certain point during the life of the loan, some borrowers no longer need to pay a PMI.

Foreclosure- the term used to define when a borrower is unable to payback their mortgage and legal proceedings have ensued. This is a period when the lender is, legally, obtaining the title and possession of the home. Typically, houses that have been foreclosed upon are sold and, after sale, the money owed to the mortgage lender is returned to them. For more information and details on foreclosure proceedings, you can talk to your mortgage lender.

Escrow- it is an account set up by the lender to set aside money for the eventual payment of home insurance and property taxes. They are typically required when you (the borrower) are putting down less than a 20% down payment. Requirements regarding escrow accounts are dependent upon your lender.

Don’t let your home buying process be overwhelming or confusing. Talk to one of our loan officers about what options you have available to you! And if there is something you don’t fully understand, just ask. We are here to help.


Total Home Lending



Natasha Mason

Demystifying Mortgage Terms2020-09-28T15:14:21+00:00
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