How Much Does Mortgage Insurance Cost?

There are many factors that can impact the price of mortgage insurance for a homeowner. You can determine the cost of your own mortgage insurance quite simply. Mortgage insurance is simply in place to help protect the lender against default from the borrower. Your mortgage insurance will cost more or less based on a few factors including, but not limited to, down payment amount and credit score of the borrower.

How your down payment will affect how much your mortgage insurance will cost

Your mortgage insurance cost will most likely decrease with a greater down payment amount. Typically, any down payment on a mortgage less than twenty percent of the purchase price will require a monthly mortgage insurance payment. Mortgage insurance will cost less if you make a greater down payment, because you are viewed as being less of a risk than if you were to put down a smaller down payment for your home. If a borrower puts down a small down payment, they may be required to pay a mortgage insurance premium at closing, which can be around 1.75 percent of purchase price, as well as paying a monthly mortgage insurance payment.

How your credit score will affect how much your mortgage insurance will cost

The greater the risk, the more expensive your insurance will cost. You can figure that your mortgage insurance will cost more the lower your credit score. A borrower with a low credit score is considered a higher risk than a borrower with a high credit score. Insurance will cost more on a monthly basis for those that have low credit scores.

How you can avoid paying mortgage insurance

If you would like to avoid making an additional payment to your monthly mortgage payment, it is best to make a down payment over twenty percent of the purchase price. You will not have to pay mortgage insurance if you put down twenty percent, because you are no longer considered a risky loan to the bank. good luck!

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