This post was contributed by Genworth Financial.
The good news is that I just finished paying off my college loans. The bad news is that my husband and I are about to buy a house – which means we can look forward to mortgage payments for the rest of our lives.
All in all, this has been a sobering process to say the least. We have no assets to speak of (I have a Roth IRA that I never managed to grow past the minimum contribution). And he has parents who’ve agreed to fork over some cash to help us out. We’ve been making our own coffee for five years now, which has saved greatly on cappuccino expenses (between the two of us, that’s almost $12K that we’ve stashed away for the sole purpose of a down payment on a home). But it’s still not enough.
We both have jobs (thankfully), but are hyper-aware that we could lose them at any moment in this economy. Sometimes we ask ourselves if buying a home is worth it. The security of homeownership is no longer a certainty.
But we still come back to two key ideas that spur us onwards. The first is that any way you look at it, renting is tossing money away and precluding the possibility of building equity. The other is more emotional; we’re a young couple and we want to build a life together – we want to create a home.
So even though we seem to keep coming up against some wall or another, we always return to our sense of conviction that this is the right thing to do at this point in our lives.
Since we don’t have the requisite 20% for a down payment, we are required to get yet another loan, this time to protect the lender. Frankly, when it was put to me that way, I almost hit the roof. However, once I educated myself about private mortgage insurance, I calmed down… significantly.
What is private mortgage insurance?
Private mortgage insurance (MI) protects lenders from foreclosure losses on low down payment loans. Not to be confused with any sort of sub-prime fiasco, MI allows you to buy your home with minimal down payment. For many, there’s no other way to achieve this particular part of the American dream. Not only that, but it ensures that we’ll have more cash on hand in these early days for emergencies, any work that needs to be done on the house, or just paying off debt.
Isn’t there something called FHA, and how is it different from MI?
Federal Housing Administration (FHA) mortgage insurance is a government program backed by taxpayers. MI is the private sectors’ answer to that. The two key differences between them are:
- Private MI typically may be cancelled sooner (which is a very good thing)
- Private MI is available on a wider variety of loan products.
Are MI premiums tax-deductible?
The short answer is yes – and not just for first-time homebuyers. Household income and marital status affect deductions.
Are there any other benefits?
YES! For example, Genworth Financial offers Job Loss Protection to help with mortgage payments in the event that we lose our jobs. The company also offers a Counseling Saver that gives a mortgage insurance discount after eight hours of pre-purchased classroom homebuyer education on budgeting, personal finance, and homeownership. And hey, who couldn’t use a little help?
It’s nice to know that even though buying a home feels a little like jumping into an abyss, there are ways to protect yourself.