Tag Archives: #downpayment

Understanding Mortgage Insurance Q&A

By: Kathleen Beck, Mortgage Lender

West Coast Mortgage Group

NMLS #243181 | BRE #01058848

Mortgage insurance is an important element of the loan process if you have a low down payment, yet many first time borrowers aren’t very familiar with what it is and how it works. Mortgage insurance helps borrowers lower the risk they are placing on lenders for qualifying them for a loan with a low down payment. There are two types of mortgage insurance, “Borrower Paid” and “Lender Paid.” Understanding the difference between borrower and lender paid, and why utilizing this insurance option could benefit the buyer as well as the lender.

Here are some great questions and answers that I have provided my clients that all borrowers may also find useful.

  • Q – Who needs mortgage insurance?
    • A – Most borrowers making down payments fewer than twenty percent of the purchase price need to obtain mortgage insurance.
  • Q – What is the purpose of mortgage insurance?
    • A – Mortgage insurance lowers the risk the lender making a loan to you holds, so you can qualify for a loan.
  • Q – What is Borrower Paid Mortgage Insurance (BPMI)?
    • A – BPMI is insurance on your loan for the lender when a borrower has a low down payment and a lender is looking for assurance that the loan will be paid in full and on time. If a borrower decided to utilize BPMI, the lender charges a yearly premium paid in monthly installments.
  • Q – What is the average a borrower will pay a lender for their BPMI?
    • A – On average, BPMI premiums costs between 0.3 and 1.15 percent of the total loan amount.
  • Q – What is Lender Paid Mortgage Insurance (LPMI)?
    • A – LPMI is mortgage insurance that the lender pays for the insurance premium instead of the borrower. The cost of the LPMI is reflected in a higher interest to the borrower.
  • Q – Does mortgage insurance increase your monthly payment?
    • A – Mortgage insurance does increases the cost of your loan.
  • Q – Will the mortgage insurance payment be included on my monthly payment statement?
    • A – Yes, mortgage insurance will be included in your total monthly payment.
  • Q – If I default on my payments and the insurance kicks in, what will happen to my credit and my home?
    • A – If you fall behind on your monthly payments, your credit score may suffer and there is a possibility your home could foreclosure.

There are multiple loan options available to borrowers with low down payments. I enjoy working with my clients to help them find the down payment and loan that best fits their financial needs and I always recommend that they ask questions and maintain communication throughout the lifecycle of their loan. The last tip I would like to leave you with is, once the loan is paid down some, you may be eligible to cancel your mortgage insurance. If you are able to cancel, you won’t have to continuing to pay the monthly insurance expense.

#Mortgage #MortgageInsurance #LPMI #BPMI #LenderPaidMortgageInsurance #BorrowerPaidMortgageInsurance #Market #RealEstate #Lending #HomeOwnership #Jumbo #FHA #VA #Conventional #Sacramento #BayArea #HomeBuyer #CreditScore #DownPayment #KathleenBeck #TrustedMortgageLender

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Many Overestimate Down Payment Needs

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Here is a good informational article I found on down payment requirements.  Many of the homebuyers I talk with think they have to come in with a larger down payment than is necessary when buying a home.  Kathleen Beck-Mortgage Lender.

By Kara Johnson, Published: June 16, 2014

Potential homebuyers routinely misjudge how much of a down payment they’ll need to buy a home, often assumed they’d need 3-5 times more than is actually required.

A recent survey of renters and adults living in someone else’s found that two out of five said they believed lenders would require a minimum of 15 percent down for a mortgage. In reality, FHA mortgages allow down payments of as little as 3 percent, while borrowers with good credit can get conforming mortgages backed by Fannie Mae or Freddie Mac with as little as 5 percent down.

On average, the non-homeowners responding to the survey said they believed lenders would require a down payment of 11-15 percent. The survey was conducted by the New York analytical firm Zellman and Associates.

The survey found that only 28 percent of all survey respondents thought they could qualify for a mortgage, although that figure rose to 40 percent among the prime first homebuyer demographic of 30-34 year-olds.

Just over one in five borrowers who took out a conforming mortgage (backed by Fannie Mae or Freddie Mac) so far this year have put down 10 percent or less, according to Freddie Mac executive Christina Boyle.

Financial assistance options

In discussing the survey results, Boyle noted that borrowers may be able to obtain assistance in putting together the money for a down payment, such as through gifts from family members or by obtaining a grant or loan from a non-profit agency or public institution.

Boyle noted in particular the HOME Investor Partnerships Program and the American Dream Down payment Initiative, two federal initiatives providing down payment initiatives funded through the Department of Housing and Urban Development (HUD) and other financial assistance to aspiring homeowners. Both are state-based

First published on MortgageLoan.com at: http://www.mortgageloan.com/many-overestimate-down-payment-needs-9731

Please call or email me with any questions… Let me help make your dream of homeownership come true. I specialize in finding you the right loan that meets your specific needs and financial goals. With mortgage rates still near historic lows, make this year the year to make your homeownership dream come true. Please email me today Kathleen@BeckHomeLoanPro.com or call 916-722-0395 to get started on your dream of home ownership. Kathleen Beck A person you can count on. West Coast Mortgage Group 2716 Broadway Sacramento, CA 95818 NMLS#243181

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