Loans With No Private Mortgage Insurance Are Available

Pic credit to Vichie81

 

 

Are there  loans without private mortgage insurance or mortgage insurance where less than 20% equity, or less than a 20% down payment exists?  YES.  There is a loan option called lender paid mortgage insurance.  What happens is that the lender buys the private mortgage insurance instead of the borrower.  The cost for the lender who buys in bulk can be much less than an individual private mortgage insurance policy that an individual borrower can purchase (thru a lender).

On a lender paid mortgage insurance loan, the lender bumps your interest rate in exchange for purchasing your private mortgage insurance policy.  Lender paid mortgage insurance loans are only available on conventional loans not FHA and as you’ll see it’s an alternative worth exploring.

So let’s go over a loan scenario comparing three loans, a conventional loan with private mortgage insurance, an FHA loan with mortgage insurance, and a lender paid coventional mortgage insurance loan.

Scenario: A buyer with a 720 FICO score wants to purchase a single family residence property for $300,000 using a 10% down payment.

Projected payments on a 30 year fixed rates :

Conventional loan amount $270,000 at a 4% rate: p&i – $1289 + $121 pmi=$1410/month.

FHA loan amount $272,700 (higher because of the possible upfront mortgage insurance premium) $272,700 at 4.125% rate: p&i $1323.60 + 261.34 m.i. = $1584.94/month

Lender paid mortgage insurance loan amount, $270,000 at 4.5% rate: p&i- 1368.05/month.

Even though the rate is higher the overall payment is……lower.  Plus you’ll have a larger mortgage interest tax deduction due to the higher interest rate.

In this case the higher interest rate loan, is a better overall loan.  Borrowers must look at the bottom line and not just the interest rate.

Now what can be done for those borrowers with less than a 720 FICO score?  FHA and it’s version of mortgage insurance will still be an option for them and some lenders have deals with a 3.5% down payment and 620 FICO score can still be had although most lenders have moved up to the 640 minimum.

But for those with higher scores loans without private mortgage insurance are alive and well, the message just needs to reach the masses.

If you would like to forward me your loan scenario, please click here. I’ll get back to you in 24 hours and let you know if the No PMI California real estate loan fits your situation.

Best,

KW

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