A Complete Guide to FHA Mortgage Insurance Alternatives

Robin Fenchel May 23, 2013

As FHA mortgage insurance rates continue to sky rocket, leaving more and more home buyers with fewer home loan options, private mortgage insurance comes to the rescue.

After 2007, private mortgage insurance became more more difficult to qualify for and was not a great alternative to the low cost of FHA financing and the then, much lower cost of FHA mortgage insurance.

Today is a different story.  Private mortgage insurance has relaxed qualifying guidelines almost in direct reaction to the constricting of FHA costs.

Whereas FHA only offers one option for mortgage insurance, PMI offers several flexible options to meet almost any home buyer or homeowners high loan to value financing needs.

5 Private Mortgage Insurance Solutions Available Now

1.  Annual Mortgage Insurance is your typical monthly mortgage insurance premium that is paid monthly and included on your mortgage statement.  It is calculated as an annual premium, divided into 12 equal payments and included in your payment.

As of today, PMI annual mortgage insurance is anywhere from half to two-thirds the cost of FHA annual premiums.

2.  Split Premium PMI closely resembles the way that FHA mortgage insurance is structured, except that private mortgage insurance only has one rate, that’s the annual premium.  FHA requires an up front premium in addition to the annual (monthly) premium.

Split Premium PMI takes the lower cost of the annual, and splits it into a small up front fee, and an even lower annual fee.  This is a great option for reducing your monthly mortgage insurance payment significantly.

3.  Single Premium PMI is typically higher than annual private mortgage insurance, and is paid in full at the closing of escrow.  The result is that you have no annual, or monthly mortgage insurance payment to worry about.  If you’re using a buyer assistance program, getting gift funds from a relative, or getting a seller or broker credit, this is a great option for wiping out PMI completely.

4. Lender Paid Mortgage Insurance (LPMI) is a great option for “rolling in” the cost of mortgage insurance into the interest rate, resulting in lower upfront costs, and higher monthly payments.

While the lure of not having mortgage insurance is appealing, keep in mind that you are unable to remove the PMI at a later date and that you will have to continue to pay the higher interest rate until you refinance the loan.

5. Community Lending Programs like the Broadview BCA home loan allows for discounted private mortgage insurance rates for low to moderate income borrowers.  Thing is, low to moderate is still pretty high.  In Orange County California, if you make less than $98,000 a year, you could be eligible for deep discounts on your mortgage insurance.

Private mortgage insurance is available for both home buyers and home owners wishing to refinance up to 97% loan to value.

A Complete Guide to FHA Mortgage Insurance Alternatives was originally posted on FindMyWayHome.com.

 

 

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