Hey everyone, Alex Hernandez here. Your Utah mortgage officer where I help you find and qualify to buy your next home. I’m going to talk about how you can get rid of your mortgage insurance…or ways to never get mortgage insurance to begin with. Lets jump into it!
Mortgage insurance protects the lender in the event that you fall behind on your mortgage payments. As you may know or can assume if you get behind on your mortgage payments you can lose your house and destroy your credit in the process.
This type of insurance lowers the risk to the lender and allows you to purchase a home and qualify for a loan other you may not be able to get
Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for mortgage insurance. Mortgage insurance also is typically required on FHA and USDA loans. But, it increases the cost of your loan. If you are required to pay mortgage insurance, it will be included in your total monthly payment that you make to your lender, your costs at closing, or both.
So lets talk about ways to avoid Mortgage insurance in the first place..
1: Put 20% of the purchase price down as a form of a down payment. By putting 20% down you will want to do a 20% down conventional loan. Since you are putting that much money down, you will stay from FHA, USDA, or Utah Housing loans since you have the cash and those loans require Mortgage Insurance for the life of the loan.
2. Lets say you don’t have the full 20% down, you can do a Lender Paid mortgage insurance loan program or also known as LPMI. This type of loan program the mortgage lender will be buying the insurance up front. You as the borrower will take a higher interest rate and that is how it is worth it to the lender. You could refi whenever you wanted with no pre-payment penalties.
3. You can do a single premium loan program. This is where you don’t put the full 20% down but you buy out all of the mortgage insurance up front. This is very similar to LPMI as stated earlier but the difference is you are buying it out and you qualify for the lower rate.
Let’s say you currently own your home and you have mortgage insurance currently. Here is what you can do…
1) If you have a conventional loan you can get your mortgage insurance taken off at 80% LOAN to value. This is where the loan is under 80% of the value of your home. You will need to contact the servicer of your loan and see what they need to do if you believe you are under that 80% mark. You will need to pay for an appraisal and if it is indeed under 80% then they will remove the MI. if you don’t want to pay for an appraisal you can wait until your loan hits 78% LTV based on your amortization schedule and it will automatically fall off.
2) If you have an FHA loan, you are required to have mortgage insurance on there for the life of the loan. So your only option is to refinance your loan to a conventional loan. Depending on market conditions and interest rates and how much you owe on the property will depend if it’s a good time for you to do a refinance. You will need to pay closing costs and a new appraisal if you were to do a refinance.
Thank you for watching. For more content follow me on Instagram and Facebook at – Alexh.mortgage. You can also join my exclusive group for mortgage education by searching on Facebook for Utah Mortgage Education or hit the link in the bio below. If you want to download my loan calculator app or fill out an application for a mortgage loan online you will find that information down below as well. Until next time, this is Alex Hernandez have a grateful day.