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How To Avoid Mortgage Insurance In A Credit Crunching Market

By
Mortgage and Lending with Ameritime Mortgage Company, LLC.

Two words that have  become more and more common in mortgage transactions:  Mortgage Insurance.

With credit standards tightening, the days of the piggyback mortgage (80/20, 1st and 2nd Mtg) have slowly dissapated from any borrower that cannot put more than 5% down.  Now more than ever it is time for everyone to be educated on Mortgage Insurance and how to work with or around those expensive premiums.  Provided is an example of ways that I have found to maximize my borrowers money when looking to purchase of refinance any property over a Loan to Value of 80%.

Example:  First Time Home Buyer Looking for a No Money Down Mortgage

Recent years have allowed for most first time home buyers (should they have over a 680 credit score and be able to fully document themselves) the ability to avoid mortgage insurance premiums.  2nd Mortgage rates were low enough to offset the cost of a MI premium...

Today, very few Lenders offer 80/20 products and if they do, they come at a cost to the borrower.  2nd lien rates typically lie at or over 9% and because of recent years statistics, have also caused 1st mortgage rates to adjust higher as well.  In order to sell this, you have to have settled in as a mortgage professional and aren't willing to put the time and effort in to finding a better solution for your customer...maybe until now.

With FannieMae's "MyCommunity" product, 100% financing is now available to most borrowers (620+ FICO & Income limitations unless area classified as underserved) with a reduced mortgage insurance premium.  On top of that, a majority of MI providers will allow the insurance premium to be split between a reduced upfront premium (which can be included in their seller paid closing costs!) and reduced monthly premium (hence the term "split").

Imagine your first time homebuyer obtaining a $200,000 mortgage with as little as a $500 earnest money deposit and getting one loan and paying $15/mo. in mortgage insurance as compared to $160/mo. payment under conventional loan standards.  See below for split premium options and contact me for further information. 

I would explain more in detail but it's Friday and my wife and son are in my office waiting for me.

 

Jefferson Otwell
Homestar Financial Corporation - Atlanta, GA

You make a good point that there are several different ways to structure these deals.  Many home buyers will be interested in the choices you and others can provide them.

That said, it is a bit confusing to list loan size, PMI payment, and down payment without also mentioning the part of the PMI paid upfront.  Surely that must go into consideration as well.

Sep 14, 2007 09:49 AM
Kevin Hancock
Evergreen Home Loans NMLS 3182 - Poulsbo, WA
The Hancock Mortgage Team

Great post.  Split premium MI is an excellent tool in this market!

Sep 14, 2007 10:30 AM
Zach Dahl
Ameritime Mortgage Company, LLC. - Charlottesville, VA
Virginia Home Loans

Jeff - Thanks for the response.  And you are correct, the upfront premium does need to be taken into consideration.  Coordinating a solid offer price based on seller concessions will allow you to eliminate having to pay for a majority of your mortgage insurance premium (as MyCommunity products will allow up to 6%)

Kevin - You are correct.  The harder part is finding Lenders that will allow it.  Most only like to work on a monthly MI schedule.

Sep 17, 2007 09:06 AM
Charlottesville Solutions
Charlottesville Solutions - Charlottesville, VA
Zach - Great Post, Thank you...Charles
Sep 17, 2007 12:38 PM
Anonymous
paul

You need to be aware and ask your lender about split primium PMI. 90% will not even mention it.

Aug 27, 2008 05:22 AM
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