Category: Mortgage Insurance

WHAT IS MORTGAGE INSURANCE?

  Many prospective homebuyers often ask us what mortgage insurance is and how it works. Mortgage insurance is imposed when less than 20% is paid toward the down payment on a home loan or a refinance.   Example:   You are purchasing a single-family home for $250,000, with 10% down payment. It will be your primary residence and you have excellent credit. Let’s assume you are applying for a 30-year fixed mortgage at 4.5%. The monthly principal and interest payment on a $225,000 loan is $1,140.04. Here are a couple scenarios:

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CALCULATING MORTGAGE INSURANCE

If you are applying for a conventional loan and put less than 20% down on a home, the lender will require you to pay mortgage insurance. The amount of mortgage insurance will depend on your credit score, what you are purchasing (e.g. condo, single family residence, etc.), the purpose (primary residence, second home, or investment property), and the amount of the down payment. There are different ways mortgage insurance can be paid. It can be paid monthly, in one payment as a single premium, by the lender by increasing the interest rate, or can be split with a portion being...

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PRIVATE MORTGAGE INSURANCE, WHEN CAN I GET OUT?

A common question for those who have private mortgage insurance (“PMI”) is when can I stop paying it? When can I get out? If you recently obtained a FHA loan, unfortunately, you cannot get out of mortgage insurance as it stays with the loan for the life of the loan. However, if you have a conventional loan, Federal Law provides for when PMI can be removed. This is governed by the Homeowners Protection Act (“Act”). The Act provides two ways PMI can be canceled: The borrower requests it to be canceled (to cancel PMI, contact your servicer); or it is automatically...

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MORTGAGE INSURANCE – WHO PAYS?

  Private mortgage insurance is added to the monthly payment of a conventional loan if you put less than 20% down on the purchase of a new home, or have less than 20% equity on the refinance of your home. The amount to be paid will depend on your credit score, the amount of down payment or equity in the home, the purpose for which you are purchasing the home, i.e. primary residence, second home or investment property, and what you are purchasing, e.g. condo or single-family residence.   Mortgage insurance can be paid by the lender or by the...

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