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Derick Condron

Mortgage Insurance Options

Monday, July 22, 2013 - Article by: Derick Condron - Right Start Mortgage - Message

You have a great job and make plenty of money to make your monthly payments but don't want to put all of your savings into your down payment? There are still options for you! All of these options will include some kind of Mortgage Insurance.

Typically if your 1st mortgage is over 80% LTV then you are going to be asked to pay mortgage insurance of some kind. Mortgage insurance is an insurance policy for the lender in the case you default on the loan. The lender can make a claim against that insurance policy to get repayment of a portion of the mortgage amount.
As the market changes the options for purchasing a new home does as well. As of June 3rd FHA or government back mortgage insurance is going to stay on your file for the life of the loan. With this happening there will be a major move to Private Mortgage insurance.

Private Mortgage Insurance

Private Mortgage Insurance is mortgage insurance that the lender will shop for thru a number of companies to find the best deal on your behalf. There are a few different options for purchasing this mortgage insurance
o Single Paid Lender Premium
This is a one-time premium that the lender will pay the mortgage insurance company. You will see an increase in your loan interest rate. The lender will be using what they call the rebate to pay the single premium, which will be a percentage of the loan amount.
o Monthly Borrower Paid Premium
This is a monthly cost you will see on top of your principal interest taxes and insurance. That payment is derived from taking an annual percentage amount and dividing it over a 12 month period.
o Split Level Premium
This will be combination of paying a one-time single premium as well as a monthly premium.
o Borrower Paid Single Premium
This option the borrower will pay a one-time premium at closing. The premium is a percentage of the loan amount.
o Single Premium Lender Paid thru the Loan
This option you pay a one-time premium and that premium is then rolled back into the principal of the loan. With this option you will not see an increased interest rate to pay the premium nor will you be asked to bring in a larger amount of cash for closing. You will however see a slight increase in your monthly payment because the loan amount will be larger.
Like with any options there is a fit for each person's needs.
? The single premium rolled into the loan will be a great option for people looking to put around 5%-19% down, as the payment difference for the increased loan amount is much smaller than paying the monthly mortgage insurance premium.
? If you only have 3% to put down then the monthly mortgage insurance premium will be a great option for you.
? If you have between 3-5% down you might want to look at the split level premium option, you can lower your monthly insurance cost by paying a portion of that premium in an up-front cost.
? The borrower paid might be a great option for someone that is willing to pay some of their own closing cost but get the seller or builder to add concessions to the sales agreement. Those concessions then could be used to pay the premium.

With all these options now more than ever you need a professional helping to guide you in the decision making process. Every person's needs and wants will dictate what program is the best for them.

Contact me today so we can talk about your situation and help you take advantage of the record low rates and prices before they move!!

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