Private Mortgage Insurance: Conventional Loans

Mortgage insurance is required for all conventional loans with greater than 80% loan to value.  All FHA loans require mortgage insurance of 1.35% of the mortgage balance amount throughout the life of the FHA loan.  For conventional loans, mortgage insurance is mandatory until the property has at least a 80% loan to value.  Mortgage insurance for conventional loans are much lower than FHA mortgage insurance premiums.  Unlike mortgage insurance of FHA loans with a set limit of 1.35% of the mortgage balance amount, private mortgage insurance varies depending on the loan to value and borrower’s credit and financial profile.  It is based on risk and the lower the risk, the lower the mortgage insurance factor.

Lender Paid Mortgage Insurance: Alternative To Eliminating FHA Mortgage Insurance Premium

Lender paid mortgage insurance, also known as LPMI, is where a conventional mortgage loan borrower does not have to pay private mortgage insurance on conventional mortgage loans with higher than 80% loan to value.  Refinancing a FHA insured mortgage loan into a lender paid mortgage insurance conventional mortgage loan will eliminate the FHA insured loan’s mortgage insurance premium.  FHA insured mortgage loan borrowers need to pay a 1.35% FHA mortgage insurance premium on the balance of their mortgage loan every year for the duration of their FHA insured mortgage loan.  FHA insured mortgage loan holders can eliminate their monthly FHA mortgage insurance premium by refinancing their FHA insured loans into a conventional lender paid mortgage insurance mortgage loan if they have greater than a 80% loan to value.

Lender Paid Mortgage Insurance Conventional Mortgage Program

Conventional mortgage loans have generally higher credit requirements than FHA insured mortgage loans credit requirements.  Conventional mortgage rates are also higher than FHA insured mortgage rates.  Conventional mortgage loans are credit sensitive unlike FHA insured mortgage loans.  The higher your credit scores are the lower your mortgage rates are.  To get the best conventional mortgage rates on the market, the mortgage loan borrower needs a credit score of over 740 FICO.

Two Types Of Lender Paid Mortgage Insurance Program

There are two types of conventional lender paid mortgage insurance programs.  The first conventional lender paid mortgage insurance program is where there are no fees or upfront mortgage insurance costs but the mortgage rates are about 0.50% higher than regular conventional mortgage rates.  The second type of lender paid mortgage insurance program is where the conventional mortgage loan borrower gets the same par conventional mortgage rates but they are charged an upfront mortgage insurance premium.  The upfront mortgage insurance premium can be paid by sellers concession on purchase transactions.

Gustan Cho

www.gustancho.com

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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