Mortgage Insurance (MI)

Mortgage Insurance, often known as Private Mortgage Insurance (PMI), is a policy required for borrowers who make a down payment of less than 20% on a conventional mortgage loan. This insurance protects the lender if the borrower defaults on the loan. Essentially, it acts as a safeguard for lenders against the increased risk associated with lower down payment loans.

Why You Need Mortgage Insurance

The inclusion of Mortgage Insurance allows mortgage lenders to offer loans to borrowers who might not have a substantial down payment but are otherwise qualified. For the borrower, while PMI doesn’t offer direct financial protection, it enables them to access homeownership with a smaller down payment.

Cost and Payment of MI

Typically, homeowners pay a percentage of their mortgage value annually as PMI. If they fail to make mortgage payments, the insurance company compensates the lender. However, this additional cost can increase the overall expense of owning a home.

Canceling PMI

It’s important to note that you can cancel PMI when:

  1. A significant portion of the mortgage is paid off.
  2. The principal balance falls to 80% of the home’s original value.

This cancellation is subject to certain lender-specific rules and requires a history of timely payments.

Mortgage Insurance Premium for FHA Loans

For FHA loans, borrower requires a Mortgage Insurance Premium (MIP) regardless of the down payment. The rules for maintaining MIP depend on the loan-to-value ratio at the time of loan issuance and can extend for the mortgage’s life or up to 11 years.

Grow Your Business

As a mortgage broker, your clients rely on your expertise to find them the best deals. Our Quick Pricer tool can be an invaluable asset in your quest to secure the most advantageous mortgage rates. Be sure to explore our Programs section for additional resources tailored to your needs. If you have specific scenarios in mind, don’t hesitate to request them; we’re here to assist you. And if you’re interested in joining forces to provide even more value to your clients, consider becoming a partner with us. Together, we can empower individuals and families to achieve their dreams of homeownership.