Advice On Eliminating Mortgage Insurance
If you have a FHA insured mortgage loan, you will have a mortgage insurance premium for the life of the FHA loan of 1.35% of the mortgage loan amount every year until you refinance that FHA loan into a conventional loan. If you have a conventional mortgage loan and have less than 20% equity on your home purchase, you will pay private mortgage insurance premium until your loan to value is at 80% LTV or lower.
Eliminating Mortgage Insurance: Why Is It Required?
The main purpose of mortgage insurance is to protect mortgage lenders in the event a mortgage loan borrower defaults their mortgage loan. For FHA insured mortgage loans, the mortgage insurance premium is 1.35% of the mortgage balance amount and with conventional mortgage loans, the mortgage insurance premium varies depending on the amount of down payment and borrowers credit scores but it is normally half of the FHA mortgage insurance premium.
Eliminating FHA Mortgage Insurance Premium
For homeowners who have FHA insured mortgage loans, the 1.35% mortgage insurance premium can be a big portion of their monthly mortgage payment. The only way to eliminate that hefty mortgage insurance premium is to refinance the FHA insured mortgage loan into a conventional mortgage loan with at least 20% equity. Conventional mortgage loans are credit score sensitive unlike FHA insured mortgage loans. To prepare to refinance your current FHA insured mortgage loan into a conventional mortgage loan, the borrower should start working on their credit by making sure that they pay their monthly credit obligations on time. Make sure that you have various types of credit trade lines such as three credit cards, installment loans, and auto loans. With credit card debt, make sure your credit balance does not exceed 25% of your credit limit. To get the best possible mortgage rate on a conventional mortgage loan, you should have a 740 FICO credit score or higher. If you do not have 20% equity, no worries. There are conventional mortgage loan programs where the lender pays mortgage insurance, however, the rates are slightly higher. For the best available mortgage rates on a conventional mortgage loan with no mortgage insurance, you should have at least 20% equity. 25% equity will get you even lower mortgage rates. Home prices are steadily increasing so while you are boosting your credit scores, your home is probably appreciating at the same time where you can get the best of both worlds.
Eliminating Mortgage Insurance Premium On Conventional Loans
If your home appreciates and you feel you have 20% equity in your home, you can request your mortgage lender to eliminate your private mortgage insurance or you can pay down your mortgage balance so you have 20% equity. Not all mortgage lenders will eliminate your mortgage insurance premium just because you have 20% equity or you are paying down your mortgage balance so your loan to value is at 80% LTV. If your current mortgage lender is giving you a hard time, the best way of getting rid of your mortgage insurance premium is to refinance your current mortgage loan into a new conventional mortgage loan. In the event you do not have 20% equity, there are new conventional mortgage loan programs that do not require the borrower to pay mortgage insurance. It is called LPMI conventional mortgage loan program, Lender Paid Mortgage Insurance, where the mortgage lender will be responsible of the monthly mortgage insurance in lieu of a slightly higher mortgage rate. If you are a homeowner and are interested in learning about the LPMI conventional mortgage loan program where you no longer need to pay mortgage insurance, please contact me at 262-716-8151 or contact me at www.gustancho.com .