July 17, 2017
Orion loves helping our brokers help their clients with purchasing a home. With the increase in the purchase market and more first-time buyers coming to market, it is prudent to revisit mortgage insurance for some of our programs.
Some of our brokers do them, others not, but FHA mortgages require two forms of insurance premium be paid. An upfront premium added to the loan amount and a monthly mortgage premium. All new FHA loans now require the monthly premium be paid for the life of the loan. Our brokers know that the minimum down payment for FHA is 3.5% for the maximum loan amount of $625,500, so are there advantages. With that much leverage risk, it is not surprising that FHA has mortgage insurance to off-set some of the costs should the loan go into foreclosure.
Turning to Freddie Mac and Fannie Mae programs, regardless of lender mortgage insurance is required on all conventional or conforming mortgages that have a loan to value greater than 80% of the property value; i.e., if the value of the home is $400,000 and your mortgage is greater than $320,000 you will be required to have mortgage insurance. This is for all conforming mortgages, regardless of refinance or purchase, condo or single family detached home.
Private insurance (PMI) is specific to conforming loans that Orion offers. The premium varies depending on the loan to value of the mortgage, type of mortgage and borrowers' credit scores. The lower your equity if refinancing or down payment on a purchase, the higher the insurance payment will be.
Other loans also may have mortgage insurance depending on the product. Or they may not. For example, “jumbo" mortgages, greater than $625,500 conforming loan limit, with no mortgage insurance for loans with LTV greater than 80% up to 90%. These programs often "self-insure" the loan by charging a higher interest rate than a mortgage with 80% loan to value, but there is no separate underwriting or payment.
Veterans obtaining a VA mortgage also have a version of mortgage insurance, called a "funding fee" that is added to the mortgage amount. Orion’s AEs welcome questions for more information.