14 Mar What is Mortgage Insurance?
You found the mortgage that fits your family the best, finally. While doing research, you’ve come across mortgage insurance a few times. What exactly is mortgage insurance? Is it something you need? How does it work?
What You Need to Know About Mortgage Insurance?
Mortgage insurance sounds like insurance you get to protect yourself and your mortgage. When actually, it is something the lenders use to protect themselves in case you default on your loan. This way they have a guaranteed way of making sure they don’t lose all the money they have given you.
Mortgage insurance is required for many different loans, the 2 main ones are Convectional and FHA (Federal Housing Administration). Every Conventional mortgage that borrows more that 80% of the home’s value requires mortgage insurance and comes as part of the monthly feel you pay. This type of mortgage insurance is called Private Mortgage Insurance (PMI). If you have a FHA mortgage loan you pay a Mortgage Insurance Premium (MIP).
PMI insurance has many perks. One of the main being that in most cases, when you receive your monthly premium fee, you will know it is determined by your loan risk. This means that if you have a high credit score and the lower your loan to value, the cheaper your premium will be. Some banks allow you to pay this all up front when signing the contact, to get it out of the way. Most of the time it is just a monthly payment with the mortgage.
MIP insurance premiums are predetermined, but still can be affected by risk. Since the rate is set, the premiums always decrease as payments are made to the loan. Some of the loan is paid up front but can be rolled into the loan at closing. With this insurance, you can deduct it from you taxes if it is through 2014. If you get a FHA loan after June 2013, MIP insurance must be paid for the life of the loan unless you have a down payment of more than 10%.
Both of these insurances can be cancelled once the loan is paid down to 80% or less of the homes value. Although this is more common with Conventional mortgages, it can still happen with FHA ones as well. If you find one that does, it will automatically.
How We Can Help
There is a lot that goes into a mortgage. Here at Staples Mortgage we want to help you go through that process. When you get a mortgage through us, we will make this process easier and understandable. We want to make sure you know exactly what goes on in your mortgage process and answer any questions you may have. With a team that has over 75 years of experience, who understand that getting you into your dream home is key, we don’t want to make this harder. So come see how we can help you get into the home you’ve been dreaming about.