Mortgage Insurance 101 Protecting Your Home Loan
Mortgage companies like On Q Financial, Inc. require some borrowers to purchase mortgage insurance in order to protect the lender if the borrower is unable to pay the mortgage.
However, for borrowers, this type of insurance has benefits as well. Getting mortgage insurance allows borrowers to purchase a home before they have a full 20 percent down payment saved. This can open up more opportunities for home buyers.
Rates and Costs
When considering mortgages, there are two factors that determine the total cost of the loan — the interest rate and the costs associated with the transaction.
There are two types of mortgage insurances
Borrower-Paid Mortgage Insurance
Borrower-paid mortgage insurance (BPMI) is paid monthly or as a single upfront premium. BPMI helps lenders offset the risk of a low down payment mortgage. It also allows borrowers to qualify for a loan with a smaller down payment. Therefore, enabling them to purchase a home sooner.
Benefits to Borrowers
BPMI is subject to cancellation when the loan to value is amortized down to 78%.
In a booming market with rapid appreciation, it might be advantageous to choose BPMI.
Lender-Paid Mortgage Insurance
Lender-paid mortgage insurance (LPMI) is different than BPMI as the borrower has no monthly payments. Instead with LPMI, the borrower accepts a slightly higher interest rate and/or a higher fee at closing and the monthly paid mortgage insurance is simply bought out.
Benefits to Borrowers
Lower monthly mortgage payment while taking a slightly higher interest rate.
If you don’t believe you’ll be in your mortgage for the life of the loan it might be beneficial to select LPMI.
On Q Financial, Inc. works with five separate mortgage insurance companies to ensure that our borrowers are getting the most competitive quote that makes sense for each individual loan.
Frequently Asked Questions
Will my credit history prevent me from getting a mortgage?
An On Q Financial Mortgage Consultant can help explain how your credit will affect your ability to get a loan and can discuss available financing options.
What will my rate be?
Interest rates are based on variety of factors including by not limited to; loan purpose, credit history, ability to repay, and loan amount.
How much do I need for a down payment?
Your down payment requirements will depend on the type of home loan you choose and the type of property you are buying. Your required down payment will usually range from 3-20% of the home’s purchase price. On Q Financial, Inc. offers a variety of different loan programs including a variety of down payment assistance programs, contact a Mortgage Consultant for more information.