Michael Santos

MLB Residential Lending

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Do You Need Mortgage Insurance Even if It’s Not Required by Your Lender? Let’s Take a Look

February 3, 2015 by Michael Santos

Do You Need Mortgage Insurance Even if It's Not Required by Your Lender? Let's Take a LookFinding a proper mortgage loan and understanding the processing procedures behind the loan is the basis of good research. The down payment on a mortgage loan is typically significant when dealing with mortgage insurance.

Most loan applications with less than 20% down payment are required to include mortgage insurance with the loan. However, mortgage insurance may still be required even if it’s not typically required by your lender.

Underwriting Requirements

Most home mortgage applications undergo a strict set of standards for approval. These standards are known as underwriting and make up the bulk of time spent on a mortgage application. Unique situations in employment or credit history may require an additional down payment percentage to avoid PMI or private mortgage insurance.

Most underwriting requirements require adequate information on the borrower’s credit and employment history for 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 insurance requirements.

Lender-paid Mortgage Insurance

Lender-paid mortgage insurance is a popular option with potential homeowners that seek to avoid the cost of a PMI or FHA-backed insurance on a home loan. Most lenders incorporate payment of private mortgage insurance in exchange for a slightly higher interest rate.

This is one example of the points system on a mortgage application that eliminates the cost of PMI. The increase in interest rate may or may not warrant the need for a lender-paid mortgage insurance arrangement.

What’s Involved With Risk Assessment?

Strict lending requirements and banking policy now limit the number of mortgages with zero down payment options. 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. Lenders will look at mortgage insurance as risk protection.

The risk protection process may or may not require mortgage insurance in your home loan. For example, VA and USDA loans do not usually require mortgage insurance if the borrower’s credit and employment history are adequate.

Conventional loans have a reduction in risk once there is at least 20% equity in the home compared to the principal of the mortgage. Don’t hesitate to contact your trusted mortgage professional about potentially dropping mortgage insurance in the future to reduce overall loan costs.

Filed Under: Home Mortgage Tips Tagged With: Home Mortgage Tips, Mortgage Insurance, Mortgages

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Branch Manager Executive / Mortgage Loan Originator

Top Loan Originator Since 2001

Call (908) 296-6608

NMLS #199875
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MLB Residential Lending, LLC.
NMLS# 1101220
1095 Morris Ave.
Suite 104
Union, NJ 07083

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This is not a commitment to make a loan. Loans are subject to borrower and property qualifications. Contact loan officer listed for an accurate, personalized quote. Interest rates and program guidelines are subject to change without notice.
MLB Residential Lending is an Equal Housing Lender.
NMLS# 1101220.
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Michael Santos is not licensed in NY and this site is not intended for NY loans.
Michael Santos NMLS #199875 • MLB Residential Lending, LLC. NMLS# 1101220. Michael originates NJ loans only. MLB Residential Lending, LLC. is located at 51 Commerce Street, Springfield, NJ 07081, 732.243.0140. MLB Residential Lending, LLC. NMLS#: 1101220 is a residential lender, licensed by the NJ Department of Banking and Insurance; licensed by the PA Department of Banking and Securities; licensed by the CT Department of Banking; licensed by the DE Dept. of the Banking Commissioner; and is licensed under the FL Mortgage Lender Service License # MLD1128. All rates are subject to change without notice. MLB in no way, claims to represent or to conduct business on behalf of HUD, the FHA or the Federal Government. This site is not authorized by the New York State Department of Financial Services. THIS SITE IS INTENDED ONLY FOR NJ CONSUMERS.

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