House hunting? Here's an open secret that may transform your search: You don’t need a 20% down payment to buy a home.
Southern California home buyers talk about how they made it through — or around — the flurry of ever-higher bids.If you put less than 20% down on a conforming loan, the lender will typically require you to buy something called private mortgage insurance, which protects the lender in case you default.
How much you have to pay in PMI will help determine how much the lender is willing to let you borrow. Your PMI premiums will go away automatically on the date the unpaid balance of your loan was scheduled to hit 78% of the home’s original value, and no later than halfway through the loan period. But if you pay down the principal faster than required, you can ask the lender to waive PMI as soon as your balance falls to 80% of the home’s original value.
Some lenders allow you to put down less than 20% and not pay PMI. They will charge you a higher interest rate to do this.
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