Welcome back to the Capital City Real Estate Group video blog! I’m Marc Iafrate, Broker-in-Charge of the Capital City Real Estate Group here in Raleigh. Today we are going to discuss Mortgage Insurance and your options.
What is Mortgage insurance and what does it mean to me as a borrower?
Finding a proper mortgage loan and understanding the processing procedures behind the loan is the basis of good research during the home purchase process. Most loan applications with less than 20% down payment are required to include mortgage insurance with the loan.
Most home mortgage applications undergo a strict set of standards for approval. This approval process is known as underwriting. The idea behind mortgage insurance is that the less a borrower puts down, the higher the risk is to the lender. Mortgage insurance is a way that lenders can obtain insurance against a default.
Most underwriting requirements require adequate information on the borrower’s credit and employment history for a complete application. Self-employed individuals or those with alternative forms of credit may need a few additional hoops to jump through when dealing with mortgage requirements.
Lender-paid Mortgage Insurance
Lender-paid mortgage insurance is a popular option with potential homeowners that seek to avoid the cost of Private Mortgage Insurance known as PMI. Most lenders incorporate payment of private mortgage insurance in exchange for a slightly higher interest rate. As with anything, you’ll always want to speak with a mortgage professional before you make any decisions so that they can fully explain all of the positive and negative aspects of the different loan types out there.
What’s Involved With Risk Assessment?
Strict lending requirements and banking policy now limit the number of mortgages with zero down payment options. There are few exceptions, including VA loans but conventional mortgages and FHA both require private mortgage insurance if it is less than 20% down payment. However, FHA loans can be more flexible with the initial down payment requirements with adequate credit. FHA mortgage costs are now for the life of the loan which is why it’s a great idea to speak with a loan officer to ensure you are making good decisions.
Lenders look at mortgage insurance as risk protection.
The risk protection process may or may not require mortgage insurance in your home loan. Conventional loans have a reduction in risk once there is at least 20% equity in the home.
Contact the brokers at the Capital City Real Estate Group for a list of lenders that you can start with. There are a lot of questions you need to be asking so let’s get the process started today!
To search all homes for sale in the Raleigh area and surrounding communities, visit this link to our website http://search.capitalcityrealestategroup.com/search-landing.php
Marc Iafrate, MBA
Capital City Real Estate Group
(919) 390-7810 Office
8319 Six Forks Road, Suite 201
Raleigh, NC 27615