Conventional Loan Mortgage Insurance
Mortgage Insurance is required on a Conventional Home Loan when a borrower’s mortgage exceeds 80% of the home’s purchase price or value whichever is less on a home purchase. Mortgage insurance is also required on a refinance when a homeowner’s mortgage exceeds 80% of the homes appraised value.
Private Mortgage Insurance (“PMI”)
Mortgage Insurance on a Conventional loan is referred to as “PMI” which stands for Private Mortgage Insurance. Mortgage insurance on a Conventional Home Loan is provided by a third party insurance company. Your mortgage lender should help you obtain the best possible mortgage insurance quote.
4 Different Mortgage Insurance Options
There are 4 different Mortgage Insurance Payment Options to choose from when utilizing a Conventional Mortgage. It is very important to consider each option before choosing how you will pay for your Conventional mortgage insurance.
1. Monthly Mortgage Insurance: Mortgage insurance payment is added to the borrower’s overall monthly mortgage payment.
2. Financed Mortgage Insurance: A one time premium is financed into the borrowers final loan amount at closing (there is no monthly mortgage insurance payment).
3. Lender Paid Mortgage Insurance: The borrower’s Arizona Mortgage Lender increases their interest rate above the market rate in order to pay for the borrower’s mortgage insurance costs (there is no monthly mortgage insurance payment).
4. Single Borrower Paid Premium Mortgage Insurance: The borrower brings in funds at closing to pay for a one time mortgage insurance premium at the time of their loan closing (there is no monthly mortgage insurance payment).
Each of these 4 options results in a very different mortgage payment. In addition, the options outlined above fit different long and short term place. The HOUSE Team can help you compare each of the 4 options to help figure out which one meets your needs.