If you’re self-employed and you’re thinking about buying a home, mortgage insurance can be a great way to protect your finances and help you qualify for the best possible loan. Mortgage insurance is an extra layer of protection that can help to protect lenders from losses if borrowers are unable to make their payments. It also helps borrowers gain access to more favorable loan terms and lower interest rates. Here are some of the advantages of mortgage insurance for self-employed homebuyers:
1. Lower Down Payment Requirements: When you have mortgage insurance, your down payment requirement may be lower than it would be without it. Depending on the loan program, you may be able to get a loan with just 3% or 5% down—or even less if you qualify for specific programs. This is especially helpful for self-employed borrowers who may not have the same kind of cash reserves as those who work in more traditional jobs.
2. More Flexible Credit Requirements: Mortgage insurance can also provide some flexibility when it comes to credit requirements. Self-employed borrowers often don’t have regular paychecks or W2s that lenders use to verify income, so having mortgage insurance helps lenders feel more secure about extending loans to them.
3. Lower Interest Rates: Mortgage insurance can often result in lower interest rates when compared with loans without it, potentially saving thousands over the life of a loan. For example, if you get a 30-year fixed rate loan for $200,000 at 4% interest without mortgage insurance and with mortgage insurance at 1%, your monthly payments would be approximately $954 per month without mortgage insurance and $898 per month with it—a difference of $56 per month or $672 per year in savings! Over the life of the loan, that adds up to $20,160 in savings!
4. Reduced Private Mortgage Insurance (PMI): PMI is required when there is less than 20% equity in your home but with mortgage insurance you may be able to reduce this requirement and save money every month on your payments. The amount saved depends on the size of your down payment but could potentially save hundreds each month!
5. No Upfront Cost: One of the best things about mortgage insurance for self-employed homebuyers is that there is no upfront cost associated with getting it—the cost is built into your monthly payments so there won’t be any additional out-of-pocket costs when getting your loan approved.
Having mortgage insurance as a self-employed borrower can provide some peace of mind knowing that if something were to happen where you couldn’t make payments on time, there would still be someone else helping out financially should anything occur that would prevent you from making those payments—this could end up saving thousands in potential losses! Plus, having access to better interest rates and reduced PMI requirements could mean huge savings over time as well!