Tag: homeowner

Blog: How to lower your monthly mortgage payment

Posted on by Rhina Portillo

Owning your own home comes with many advantages, including escaping rising rents and the personal and financial stability associated with homeownership. Fortunately, millions of Americans, with less than 20 percent down, have been able to buy a home sooner thanks to mortgage insurance (MI). If you don’t put down 20 percent of the mortgage cost, you will likely be required to purchase MI, which enables low-down-payment borrowers to qualify for home financing from lenders.

While homeownership has many benefits and continues to be part of the American Dream, it is not without costs. Several surveys have found that the majority of first-time homebuyers — over 80 percent according to one study — put less than 20 percent down. For these borrowers, there is usually the added expense of MI, which may give some of these borrowers pause.

But there is good news: the monthly private mortgage insurance premiums do not last forever on most conventional loans. And when private MI (PMI) cancels, homeowners will have more cash in their pockets each month — money that is available for home improvements or other goals. It is important to understand, however, that not all MI is the same, and not all MI can be canceled.

There are numerous low-down-payment mortgage options available that include MI. The two most common are: (1) home loans backed 100 percent by the government through the Federal Housing Administration (FHA) that include both an upfront and annual mortgage insurance premium (MIP); and (2) conventional loans, which are typically backed at least in part by private sources of capital, such as private MI. The key difference is that one form can be canceled (PMI) while the other (FHA) typically cannot be canceled.

An FHA loan can be obtained with a down payment as low as 3.5 percent. However, be aware that you will typically have to pay a mortgage insurance premium (MIP) of 1.75 percent of the total loan amount at closing or have it financed into the mortgage. In addition to your regular monthly mortgage payments on your FHA loan, you will also pay a fixed monthly MIP fee for the life of the loan. This means you could pay hundreds of dollars extra every month — thousands over the life of the loan — until you pay off the entirety of the loan.

If you obtain a conventional loan with PMI, you can put as little as 3 percent down. Like an FHA loan, PMI fees are generally factored into your monthly mortgage payment. However, PMI can often be canceled once you have established 20 percent equity in the home and/or the principal balance of the mortgage is scheduled to reach 78 percent of the home’s original value. This means that the rest of your mortgage payments will not include any extra fees, so that your payments go down in time, saving you money each month. What you save in the long run can then be put toward expenses like home renovations, which can further increase your home’s value.

MI is a good thing because it bridges the divide between a low down payment and mortgage approval. But not all MI is created equal. If you want to buy a home but still save in the long run, PMI might be the right option for you. Check out lowdownpaymentfacts.org to learn more.

Newsletter: March 2017

Posted on by Rhina Portillo

Here is a roundup of recent news in the housing finance industry, including the unveiling of USMI’s new logo to commemorate 60 years of making homeownership possible through private mortgage insurance and housing policy developments in Congress and in the executive branch.

  • The private mortgage insurance industry turns 60. USMI unveiled its new logo to commemorate 60 years of private mortgage insurance (MI) making homeownership possible for millions of Americans. Since 1957, private MI has served as a reliable and affordable method of expanding homeownership, while simultaneously protecting American taxpayers and the government from exposure to mortgage credit risk. Stay tuned for more activities!
  • USMI and others send letter to Congress on g-fees. Scotsman Guide reported on a letter sent by USMI and 13 other industry trade groups to Reps. Mark Sanford (R-SC) and Brad Sherman (D-CA) on a bill they introduced to ensure that guarantee fees (g-fees) charged by Fannie Mae and Freddie Mac (the “GSEs”) are used solely to insure against the credit risk of home mortgages. In 2016, the mortgage finance industry successfully fought off a legislative proposal to use g-fees collected by the GSEs to fund highway projects. The letter reads: “G-fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from loans that default. Increasing g-fees for other purposes imposes an unjustified burden on homeowners who would pay for any increase through higher monthly payments for the life of their loan. … whenever Congress has considered using g-fees to cover the cost of programs unrelated to housing, we’ve informed lawmakers that homeownership cannot, and must not, be used as the nation’s piggybank. By preventing g-fees from being scored as a funding offset, H.R. 916 gives lawmakers a vital tool to prevent homeowners from footing the bill for unrelated spending. We are grateful to you for introducing this bipartisan legislation and urge its consideration by the House.”
  • Carson confirmed as HUD Secretary. On March 2, Dr. Ben Carson was confirmed as the new Secretary for the Department of Housing and Urban Development (HUD). USMI released a statement congratulating Secretary Carson on his confirmation and welcoming the opportunity to work with the Secretary and his team to promote a stronger and more equitable mortgage finance system, as well as an expanded role for private capital.
  • Investopedia has good video explaining MI. USMI’s website features a new video courtesy of Investopedia to help people better understand what private MI is and how it helps people who cannot afford a 20 percent down payment to buy a home. To watch the video, click here.

Blog: An affordable way to qualify for a home loan without that big down payment

Posted on by Rhina Portillo

For many Americans, the biggest hurdle in buying a home is the 20 percent down payment they think is required for mortgage approval. According to a recent survey by the National Association of Realtors, 34 percent of respondents believe they need more than 20 percent.

Meanwhile, low down payment mortgages account for a significant amount of home buying annually.

Families with down payments as low as 3 or 5 percent have been able to purchase a home thanks to private mortgage insurance (MI) for 60 years. Since 1957, MI has helped 25 million families become homeowners. In the past year alone, MI helped more than 795,000 homeowners purchase or refinance a mortgage. Nearly half were first time homebuyers and more than 40 percent had incomes below $75,000.

How MI works

Mortgage insurance is simple. In addition to the other parts of mortgage underwriting process — such as verifying employment and determining the borrower’s ability to afford the monthly payment — lenders traditionally required 20 percent down to ensure the borrower had some of their own money committed before the bank would provide a loan. This is where MI enters, bridging the down payment divide to qualify borrowers for mortgage financing.

Benefits of MI

  • It helps you buy a home, sooner. For the average firefighter or school teacher, it could take 20 years to save the typical down payment. Private mortgage insurers help borrowers qualify with as little as 3 percent down.
  • It’s temporary, leading to lower monthly payments. MI can be cancelled once you build 20 percent equity, either through payments or home price appreciation — typically in the first five to seven years. This is not the case for FHA loans, the federal government’s form of MI. The majority of which require MI for the life of the loan.
  • It provides several flexible payment options. Your lender can offer several options for MI payment; the most common is paid monthly along with your mortgage.
  • It’s tax-deductible. Subject to income limits, MI premiums are tax deductible — similar to interest paid on a mortgage. In 2014, 4 million taxpayers benefited from this deduction with the average being $1,402.

MI is a stable, cost effective way to obtain low down payment mortgages, and offers distinct benefits to borrowers. It’s been a cornerstone of the U.S. housing market for decades, providing millions the opportunity to own homes despite financial barriers. Ask your lender for low down payment options using MI.