by Tim Storm | Jun 19, 2017 | FHA Home Loan
Canceling FHA mortgage insurance seems the be the first thing Orange County FHA borrowers want to know about after they have bought their home. FHA mortgages offer very attractive interest rates and with less demanding qualification requirements to allow first time home buyers and borrowers with less than perfect credit the opportunity to get into the real estate market. FHA allows Orange County home buyers to get a mortgage with a down payment as low as 3.5% as well as allowing borrowers to refinance without appraisal. The only real caveat to FHA mortgages is that the Mortgage insurance premiums are typically higher than other mortgage programs. Since FHA is essentially an insurance policy to lenders due to the higher risk potential borrowers, the higher insurance premiums are an essential aspect to the program. Types of Mortgage Insurance Premiums FHA has two different types of Mortgage insurance premiums, or MIPs, that are required as a part of an FHA mortgage. The first of these MIPs is the Up Front Mortgage Insurance Premium which is paid at closing. This premium is 1.75% of the loan amount and is financed into the loan amount. The second of these MIPs is the annual mortgage insurance premium. This is paid monthly as a part of your monthly loan payments. Rates for annual MIPs on a 30 year fixed rate term have ranged between .55% and 1.35% since 2008. Currently the annual mortgage insurance rate for 30 year fixed FHA loans is .85% for down payments less than 5%, and .8% for down payments more than 5%. Canceling MIPs With Conventional loan programs it is possible...
by Tim Storm | Dec 15, 2016 | Conventional Loan
A common request amongst Orange County home buyers is to get a loan with no mortgage insurance. But unless they have a down payment of 20%, or qualify for a specialized program like a VA loan, then understanding what PMI is and why it is beneficial to home buyers with less than 20% down is important. What is PMI? If you are entering into a Conventional loan and are going to be paying a down payment of less than 20 percent, the lender will require you pay Private Mortgage Insurance, or “PMI”. Having borrowers pay mortgage insurance protects lenders in the case that the borrower forecloses. Private Mortgage Insurance will usually vary between .2% and 1.5% and depend on your credit score and down payment size. Obviously, the better the credit score the lower the PMI factor. Also, the bigger the down payment percentage, the lower the PMI factor. It makes sense that a borrower with 15% equity and a FICO score of 740 will pay less for PMI than a borrower with 5% equity and a 620 FICO score. For example, if an Orange County first time home buyer is putting 5% down on a purchase price of $500,000, they will have loan amount of $475,000 (after their $25,000 down payment). If the PMI factor is .62%, then the monthly PMI would be $245, which will be part of the monthly mortgage payment. ($475,000 x .0062 / 12 = $245). Paying for PMI There are several potential ways that you can pay for PMI on your loan. The most common way to pay for PMI is through a...
