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Conventional loans: mortgage insurance

By
Mortgage and Lending with Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289 Loan Officer, NMLS 184479

Many home buyers ask about mortgage insurance and ways to avoid it. First it is important to recognize that mortgage insurance allows home buyers to purchase a home with low down payments and with low interest rates. Its cost is well justified by its benefit.

The best way to reduce the cost of mortgage insurance is to have a high credit score. For a 95% conventional mortgage, the monthly premium with buyer paid monthly mortgage insurance can more than triple for a buyer with a 660 credit score compared to a buyer with a 780 credit score. Such a difference can change the price range of a home that a buyer can purchase.

Mortgage insurance offers home buyers different payment plans. Basically the buyer can pay monthly premiums, or the premium can be paid up front with rate premium. Additionally these options can be combined, partial monthly and partial with rate premium. These different payment choices affect the monthly payment.

The payment option with rate credit is called Lender Paid Mortgage Insurance (LPMI). With this option, the interest rate of your mortgage is increased and rate premium is used to pay the mortgage insurance. The overall monthly payment is typically lower than the total payment with borrower paid monthly mortgage insurance.

The catch with LPMI is that your mortgage interest rate remains the same throughout the mortgage. With the borrower paid option, the monthly mortgage insurance premium can eventually be stopped, once the required loan to value ratio is reached.

Mortgage insurance helps many home buyers purchase a home with a low down payment. Even though the benefit of mortgage insurance is acknowledged, home buyers should make an informed decision as to which payment option best fits their circumstances.

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Richard Byron Smith
Mortgage Loan Officer
NMLS# 184479 TN# 104002 Georgia Residential Mortgage Licensee, GA#28928
Conventional, FHA, FHA 203k, HUD $100 down purchases, VA,
Rural Development (USDA), THDA and Jumbo Loans

Cell phone: 423-280-0345 Email:  Richard.Smith@FairwayMC.com
Branch Contact: Fairway Independent Mortgage Corporation,
2115 Stein Dr, Suite 215, Chattanooga, TN  37421
Office Phone: 423-280-0345  Office Email: richard.smith@fairwaymc.com

Mortgage Loan Officer helping home buyers in Tennessee and Georgia for over 20 years.

Fairway Independent Morgage Corporation
NMLS #2289
Chattanooga, TN

Equal Housing LenderNMLS

Visit my website to inquiry about a home loan.

This blog represents the opinions of Richard Smith. The posts and comments written on the blog do not represent the opinions or positions of Fairway Independent Mortgage Corporation.

 Copyright ©2018 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-877-699-0353. Georgia Residential Mortgage Licensee #28928. Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply.

 

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Comments (1)

Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Good title for clicks..I am sure you will get a bunch of them!

Sep 27, 2016 12:55 AM