Real Estate Blogging

To buy mortgage insurance, or not...many buyers now days are being forced into purchasing mortgage insurance! Most lenders require mortgage insurance if the buyer is putting in a down payment that is less than 20% of the purchase price. In Orange County, CA, the median home price has jumped to $574,000. A 20% down payment would be $114,800 - much more than the average Orange County resident has sitting in their bank account. In this market it is almost impossible for a first time home owner to produce a 20% down payment.

The alternative...
Many lenders are offering buyers in a bind an alternative to purchasing the mortgage insurance. They allow them to obtain two loans - a first for 80% of the purchase price and the second for 20% of the purchase price. The advantage to this alternative is that the interest on the first and second are tax deductable, where the mortgage insurance holds no tax benefit. This method allows buyers to get into a home who may not have been able to otherwise.

Is this method of getting more buyers into homes adding to the rise in prices and the "bubble" in Orange County?