Benefits Of Using Private Mortgage Insurance…

The FHA loan product is becoming less appealing.

This is due to FHA continuing to raise their mortgage insurance rates, and their recent changes to make the annual MI permanent.

There is an alternative!  …You can always go with a conventional mortgage using private mortgage insurance.

Here are some benefits of using a conventional mortgage with private MI…

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Affordable: In many cases, private MI is more affordable than other mortgage finance options.

Low Down: Private MI allows a borrower to put down as little as 3% to 5% on a home.

Predictable: Private MI premiums are fixed and remain at predictable levels throughout the period the insurance is in force on the mortgage loan.

Cancellable: A mortgage loan that carries private MI can be cancelled when the homeowner acquires 20% equity in the home.

Payment Options: There are a range of payment options with Private MI. (monthly, annual, lender paid, etc.)

Federal law assures consumers that they can enjoy the benefits of Private MI knowing that lenders will cancel it when it is no longer needed.

The law includes two basic consumer protections:

It requires lenders to inform home buyers—both at closing and annually—about their right to request mortgage insurance cancellation and how to do it.

It requires lenders to automatically cancel insurance for those who do not request cancellation.
How the Private MI Cancellation Law Works:

Initial disclosure—For loans originated on or after July 29, 1999, lenders must give borrowers a written notice at closing that explains they have PrivateMI on their mortgage and that they have the right to have it canceled at a certain point.

Annual disclosure—Lenders must send borrowers an annual reminder that they have Private MI and have the right to request cancellation once they’ve met cancellation requirements. This requirement applies to all loans with cancelable Private MI, not just those obtained after July 29, 1999.

Borrower-initiated cancellation—For most loans originated on or after July 29, 1999, a lender must cancel Private MI at the request of a borrower whose mortgage balance is 80 percent of the original value of the house. The borrower must be up to date on mortgage payments and have no other loans on the house. The lender must be satisfied that the property value has not declined.

Automatic termination—For most insured loans originated on or after July 29, 1999, Private MI will be canceled automatically when the mortgage balance is at 78 percent of the original value of the house. The borrower must be up to date on mortgage payments. Otherwise, insurance will be canceled automatically once the borrower becomes current.

That’s it for today!