UNDERSTANDING MORTGAGE INSURANCE
If you put less than 20% down on the purchase of your property, you could be required to pay for mortgage insurance in addition to your mortgage payment. Mortgage insurance, (sometimes called private primary mortgage insurance, private mortgage insurance, or PMI) protects the lender in the event that you default on the loan. The premium is typically added to your monthly mortgage payment as part of your principal, interest, taxes, and insurance (PITI). The less you put down, the higher the monthly premium and vice versa. First-time home buyers with limited income are often shocked by the monthly cost of mortgage insurance. Mortgage insurance companies have come up with a couple of ways to take the sting out of the PMI premium.
Lender Paid Mortgage Insurance: Mortgage insurance companies give a discounted rate for lender paid mortgage insurance. The lender pays the entire amount upfront and passes the cost on to the borrower through a higher interest rate. Even with this higher interest rate, the borrower’s monthly payment is often lower than options where the borrower pays monthly mortgage insurance in addition to their mortgage payment.
Financed/Borrower Paid Mortgage Insurance: A one-time premium is added to the amount of the first mortgage resulting in a slightly higher mortgage payment, but still a considerable cost savings over making the mortgage insurance payments separately. These loans often include a loan-to-value over 100%; however, the mortgage, including financed mortgage insurance, is fully insured by Mortgage Insurance companies. Borrowers retain the option to cancel mortgage insurance according to lender guidelines and receive a refund of the unamortized portion. Lower monthly payments allow borrowers access to a higher mortgage or more expensive home.
Government Insurance: While shopping for a mortgage, you may hear about federal mortgage insurance programs that offer lower down payment requirements than conventional mortgage products. Your lender will underwrite, process, and close your loan, which is then insured by the specific government program. Here are a few government insurance programs you should ask about.
• Federal Housing Administration (FHA): A federal agency within the Department of Housing and Urban Development (HUD) that provides mortgage insurance for residential mortgages and sets standards for construction and mortgage underwriting.
• Veterans Administration (VA): A federal agency that, among other things, helps eligible veterans purchase housing at an affordable interest rate and term and low mortgage insurance premiums.
If you have any questions about mortgage insurance, please give me a call.
Oh, By the Way…whenever you come across people who are thinking about buying, selling or refinancing a home and would appreciate the same level of service I provide to you, please forward their name and telephone number to me. I will gladly follow up and offer them the high-quality service you currently receive!
Ron Meyer
GSF Mortgage Corporation
920-788-9608
920-213-0428 cell
rmeyer@gsf-mortgage.com
http://www.getapprovedfast.com/
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© 2007 GSF/HBRC
Ron Meyer is a Wisconsin licensed Sr. Loan Originator NMLS #222688 with GSF Mortgage Corporation NMLS #1018 located at 300 Patriot Dr. Little Chute, WI 54140 We specialize in financing purchases and refinancing home loan mortgages for all of Wisconsin. As a local lender we pride ourselves on offering quality service before and after your closing. Our underwriting is all done in house, allowing us to have quicker than normal processing time of your loan.
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