What is mortgage insurance and how does it affect me?

Mortgage insurance is issued to prevent loss to lenders due to the non payment and subsequent forclosure on loans with loan to values (LTV) exceeding 80%.  This insurance is issued on both conventional and government loans.  Companies such as MGIC, Radian, TRIAD and Genworth issue policies for conventional loans, the Federal Housing Association issues policies for government loans.

Can I get a loan without PMI?

Yes, anyone can get a loan without Private Mortgage Insurance.  You can purchase your home without this policy if your down payment is at least 20% of the sales price or you utilize a "piggy-back" financing option.  Piggy back loans are a 1st mortgage of 80% or less LTV and a 5,10,15,20% 2nd mortgage.  Your combined loan-to-value (CLTV) would then be 85,90,95 or 100% of the purchase price.  Piggy back transactions became popular in the 1990's, however in the current financing environmet it is becoming more and more difficult to obtain 2nd mortgages when approaching the higher combined loan to values.  Borrowers are finding that the value of mortgage insurance can still allow them to buy using 100% or 95% financing where in a "piggy back" transaction their loan is declined.

 What to look for:

There are several payment options for mortgage insurance.  Pre paid, financed, annual/monthly, monthly, lender paid, and split premium.  Not all lenders offer all options.  Some programs are pre paid and paid on a monthly basis as well.  Both "pre paid" and "split premium" mortgage insurance have  the advantage of, negociated seller contribution which reduces the borrowers monthly payment amount.  Lender paid mortgage insurance can is paid through an increase in points on the loan (it could be as little as .125) or in increase in rate.  Ask your loan consultant to cover all options with you.

Tax Deductability:

Please see the attached PDF availailble through this link to answer your questions about the tax deductability of mortgage insurance. http://www.tgic.com/pdf/FAQ%20About%20MI%20Tax%20Deductibility.pdf

 For more information link to any of the below MI company websites:

 http://www.gemortgageinsurance.com/

 http://www.mgichome.com/

 http://www.radian.biz/homebuyers/english/index.aspx

 http://www.tgic.com/homebuyers/