Mortgage Insurance for Conventional Loans in Kentucky.
Four different types of private mortgage insurance
1. Borrower-Paid Monthly (BPMI)
BPMI permits the borrower to pay the MI premium monthly, or as a single upfront premium.
BPMI helps lenders offset the risk of a low down-payment mortgage.
Borrowers can qualify for a loan with a smaller down payment, enabling them to purchase a home sooner.
2. Lender-Paid (LPMI)
Benefits the borrower and lender
With LPMI, the lender pays the MI premium on behalf of the borrower, thus allowing the lender to charge a slightly higher interest rate on the loan.
In addition to increasing loan volume, LPMI lets you realize additional servicing profits through secondary marketing execution. Benefits include:
Potential to originate larger first mortgages, resulting in higher servicing values
Increase retention rates and repeat loan transactions through higher customer satisfaction
Risk based pricing options can offer even better rates for credit worthy borrowers
Benefits to the borrower:
Lower down payment needed
Possibility of qualifying for a larger loan without increasing monthly payments
3. Borrower-Paid Single Premium
A single premium is a MI product that can be financed, paid using seller concessions, other contributions, or paid out of the borrowers own funds.
Saves the borrower significant money on the long term cost of MI. If it is financed it is also tax deductible because it is financed into the loan.
The cost of MI overall usually equates to four-five years of premium. In some cases, with credit score buckets, it can be much less.
By splitting the MI cost into an upfront premium and a smaller monthly renewal, split MI dramatically reduces a borrower’s monthly MI payment.
Split monthly can help the borrower qualify for a larger loan while generating higher profits for the lender.
Split MI can give you a competitive advantage over the competition by lowering the monthly MI. The monthly MI may be reduced by paying an “upfront premium” to buy down the monthly MI. The upfront premium may be financed: paid using seller concessions, lender credits, or paid in cash at closing. You can use a combination of these options to cover the upfront premium.
The upfront split premium counts in points and fees just like single premium MI.
May be used as a strategy to help reduce a DTI over 45 to avoid a price adjustment.
Questions on what the best mortgage insurance option is for your mortgage loan.
Contact me below:
Senior Loan Officer