The Different Kinds of Mortgage Insurance
Eleanor explains mortgage insurance and funding fees very well here. If you have comments, leave them for her. I have disabled comments on this blog. The only thing I would add is that there are different premiums for different loan to value and different credit score. As always, your situation may be similiar but could best be answered personally.
Most folks want to avoid PMI... but they don't realize that they are happily paying a "kind" of mortgage insurance no matter what kind of loan they are getting!
Mortgage Insurance is not the insurance that covers you if you die, or are disabled and can not pay the mortgage... it's the insurance that protects the BANK in the event you go into foreclosure.
Given the recent UP TICK in foreclosures, you can see why banks are requiring higher coverage amounts! If you are applying for a Conventional mortgage, and you are putting more then 20% on a property you plan to live in, you avoid this additional insurance...
if not, well, there are some cases whereby you can get it Lender Funded (meaning the rate is higher to cover the cost) or you might be offered secondary financing (often called a 80-10-10). OTHERWISE, you're stuck... but it's often tax deductable, and PMI is what's keeping the mortgage wheels rolling, so play along!
If you are applying for a FHA mortgage - you're insurance premium has gone up to 1.75% with monthly payments of .55% of the total loan amount. For more information on the FHA PMI (or MIP), please click here.
USDA and VA loans both have Guarantee Fees. These fees are charged by the respective agencies - but I've always considered them as the "insurance" collected to cover the agency in the event of a default on the mortgage. The main difference between the Guarantee Fees and PMI (or MIP) is that there's no MONTHLY fee (plus they call it a fee, not insurance)!
If you have additional questions about MIP, PMI or Guarantee Fees, CALL US!
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