First-time buyers can use a low down payment to help them afford their first home, or to purchase a more expensive home sooner. Repeat home buyers can put less money down and gain significant tax advantages because they will have more deductible interest to claim. They can also use the cash they would have used for a large down payment for investments, moving costs or other expenses. This large down payment assures the lender that the borrower is committed to the investment and will try to meet the obligation of monthly mortgage payments to protect his investment. A low down payment also allows borrowers to purchase more home than they might otherwise be able to afford.
Mortgage insurance broadens a borrower's options.
Generally borrowers do. An initial premium is collected at closing and, depending on the premium plan chosen, a monthly amount may be included in the house payment made to the lender, who remits payment to the mortgage insurer. The cost is slightly more than traditional mortgage insurance plans, but monthly premiums dramatically reduce mortgage insurance closing costs. Borrowers pay for mortgage insurance monthly as part of their total monthly house payment, but only need to pay one month's mortgage insurance premium at closing, rather than one year's. These plans offer the choice of refundable or nonrefundable premiums.