In California’s increasingly competitive market, a study has found that mortgage insurance significantly helps California buyers with their down payment.
18 years of saving for a California 20% down payment.
California’s increasingly competitive market has made property prices soar. With the high price tag associated with California real estate, many homebuyers are increasingly concerned about how they will afford a down payment on a home.
Zillow recently released a study that showed that it takes an average of 7.2 years to save for a 20% down payment in the United States.
Within San Francisco, CA, the study found that it takes homebuyers an average of 18.3 years to save for a property’s 20% down payment.
In San Jose, CA, the study found that homebuyers spend an average of 21.8 years saving for a 20% down payment – the longest within the study!
In Dallas- Fort Worth, Texas, it takes homebuyers an average of 6.8 years to save for a 20% down payment on a property.
Twenty years ago, homebuyers usually saved for 5.5 years for their 20% down payment. Americans now need to save for more than twice as long to keep up with the increasing home values and property prices.
Mortgage Insurance makes down payments easier.
California homebuyers who cannot afford a 20% down payment are generally required to pay for mortgage insurance. There are two types of mortgage insurance:
- Private mortgage insurance (PMI): PMI is used for conventional home loans that are not backed or guaranteed by the government.
Monthly PMI ranges for 0.2% to over 1% of the loan amount and is paid over the course of 12 months. Depending on the homebuyer’s loan-to-value (LTV) ratio, credit, and the loan amount, they can petition out of PMI once they have built up enough equity.
- Mortgage Insurance (MI): MI is used for FHA loans and is simply referred to as “mortgage insurance.”
MI will always be required when homebuyers use an FHA loan. Homebuyers pay for MI either as an upfront premium or an annual premium spread out over the course of 12 months.
Upfront Mortgage Insurance is usually 1.75% of the loan amount and is added to the buyer’s total loan amount.
The Monthly Mortgage Insurance Premium is usually 0.85% of the total loan amount divided by 12 months. Monthly mortgage insurance premiums are permanent payments in most cases.
Questions? While this article covers the very basics of mortgage insurance in California, we can provide additional information to those who request it. You can reach us here, or at (925) 855-4491 or [email protected].