PRIVATE MORTGAGE INSURANCE VS. FHA INSURANCE

26 Oct

Q: What is the difference between private mortgage insurance (MI)

used with conventional loans and FHA?

A: Private MI is the private sector alternative to Federal Housing

Administration (FHA) mortgage insurance, which is a government

program backed by taxpayers. While both guaranty repayment to

banks if a buyer defaults on their loan, there are some important

differences:

• Private MI generally costs less for high FICO buyers.

• Private MI may typically be canceled sooner.

• Private MI is available on a wider variety of loan products.

Q: When should I suggest private MI over FHA?

A: If your borrower has a FICO score of 720 or higher with at least 3%

down, then private MI with Radian is the clear answer for them!

Borrowers with a FICO score of 680 or higher and at least 10%

down will also benefit from this.

Q: How much does MI cost?

A: That depends. Less MI is required with a 15% down payment than

with a 5% down payment. In addition, it depends on other factors

including the type of mortgage, the amount of coverage, and the

MI payment option..

Q: What are the ways to pay for MI?

A: The premium can be paid monthly, in a lump sum at closing or by

financing it into the loan amount.

Q: Do borrowers have to pay for MI for the entire term of the mortgage?

A: No. A federal law called the Homeowners Protection Act requires

that MI be canceled when a home builds up a certain amount

of equity. Homeowners can request cancellation of MI when the

balance on the mortgage reaches 80% of the home’s original value.

Otherwise when the mortgage balance reaches 78% of the home’s

original value MI must automatically be canceled by the lender as

long as payments are current.

Q: Are MI premiums tax deductible?

A: Yes. Under federal legislation, families with a household income of

$100,000 or less may be able to deduct the full premium cost of

MI, while families earning up to $109,000 can qualify for a reduced

deduction. Borrowers should consult their tax professional for more

information.

Contact your Radian sales representative for more information today!

 

Kim Davis

The “Porikos” Team

Mortgage Loan Originator Assistant NMLS #272652     

Group One Mortgage NMLS #53185

900 E Indiantown Rd Suite 110

Jupiter, Fl 33477

561-745-6075  fax  561-747-8409

 

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