Craven Academy: Real Estate

If you do not have the resources to pay cash or are unable to get the seller to finance the deal, you need to obtain a loan to complete the purchase. If possible, you should try to finance the purchase using a conventional mortgage. There are many types available including fixed and adjustable rates for a variety of different repayment periods, the most common being a 30-year term. The down payments can vary by lender from nothing down to the traditional 20%. If you use little or no down payment, you may be required to carry Private Mortgage Insurance or PMI. PMI will protect the lender in a case where the buyer defaults and the lender cannot recover the full loan amount through the foreclosure process. The PMI premium is paid by the borrower and is added to the monthly mortgage payment. When the borrower has a certain amount of equity built up, he can request that the PMI be dropped.