PMI vs. MIP – What’s the Difference?

 

PMI vs. MIP – what’s the difference?

Purchasing a home, especially for the first time, can feel overwhelming and intimidating. With all of the mortgage and real estate lingo, it’s no wonder buyers often find themselves confused. One of the most common questions home buyers have during the purchasing process is, “What is PMI (mortgage insurance), and why do I need it?”

What is Mortgage Insurance

Mortgage insurance is typically required of home buyers when their down payments are less than 20 percent for their home loans. Note that mortgage insurance is designed to help protect lenders and guarantee agencies when borrowers don’t have enough equity in their homes. It is not intended to protect the borrowers. There are two types of mortgage insurance – PMI & MIP.

PMI & MIP

Although the concept of insurance protection is similar, there are distinct differences between private mortgage insurance (PMI) and FHA mortgage insurance premiums (MIP) that should be considered when deciding which loan program best suits your financial needs.

PMI, provided by private companies, is typically available in a variety of premium plans and offers payment options that can usually be tailored to the borrower’s needs. There are a number of private mortgage insurance providers and each structure their offerings a bit differently.

MIP is the government-administered mortgage insurance program for the FHA. Since FHA loans offer reduced down payment options, MIP is required to offset the risk of borrowers defaulting on their loans.

Major Differences Between MIP & PMI

Major differences between these insurance programs include:

  • No upfront mortgage premium required with PMI, while an upfront MIP is required
  • Cancellation
    • PMI can be canceled after a stated LTV (loan-to-value) is achieved and favorable payment history has been established
    • MIP is paid for the life of the loan regardless of LTV. In order to remove MIP, borrowers must refinance their FHA mortgage loans, and meet minimum down payment and credit requirements

Contact an Inlanta Mortgage loan professional to discuss your options and ensure that you select the program that is right for you! Click here to find a licensed mortgage loan professional near you or apply online today.

New Year, New Home?

New Year, New Home?

A new year always has a way of stopping us in our tracks to evaluate where we’re at and where we want to be. Often, it’s our health and work situation we strive to change. But for some, a new year could mean looking at moving to a new home.

Here are 5 reasons to consider a new home this year.

You’ve Outgrown your Current Home

Maybe your family is growing and expanding. Or maybe, there’s simply no longer enough space for your family in your current place. If you’re feeling crowded, it may be time to consider a new home that meets your current needs.

You’re Downsizing

The kids have left or your roommate has moved out. Your current home may be feeling a bit too spacious for your current situation. If so, you may want to consider downsizing to find a home better suited for you. Also, consider the perks of downsizing – perhaps, a lower mortgage payment!

You’re Renting

If you’re currently renting and have been waiting for the right time to purchase a home – it’s now! Rates have been historically low and often renters may find that rent prices are actually higher than a monthly mortgage payment. Another reason to purchase a home and stop renting is that when you buy, you become your own landlord! This means no more raising the rent, the freedom to make cosmetic changes without asking permission, and the ability to invest in yourself and your own financial future, instead of paying your landlord’s mortgage.

The Timing Makes “Cents”

Perhaps you’ve been saving for some time now and have been waiting for just the right time to buy a home. If you’re feeling comfortable with mortgage rates and your finances are where you want them to be, you may just be a few clicks away from getting preapproved. Your mortgage lender can walk you through your options and help you make the best financial decision.

You’re Ready for a Change of Scenery

Maybe your neighborhood is on the decline, you dislike your neighbors, you’re wanting to move somewhere with more walkability, or you just want to be closer to family/friends. Whatever your reason may be, if you’re anxious in your space and feel like it’s time for a change of scenery, it may be the right time to move.

5 Home Resolutions to Make in 2021

5 Home Resolutions to Make in 2021

Resolutions are a great way to set yourself up for success in the New Year. While you may have committed to some for yourself, your family or your business, setting resolutions for your home will help keep your space well-kept and cared for.

Here are some homeowner resolutions you can make in 2021:

  1. Create a Home Maintenance Schedule

Caring for a home is a big responsibility that requires time and attention all year long. That’s why it’s best to get ahead of your home’s needs by creating an annual home maintenance schedule. If you’re wondering where to start, check out our Home Maintenance Checklist to help keep your home in great shape.

  1. Update One Outdated Feature

We all have features in our homes that we’d like to hit the refresh button on. Maybe it’s your outdated bathroom, popcorn ceilings or outdated kitchen cabinets and laminate counter-tops. Whatever is giving you a headache, choose one thing to check off your list in 2020.

  1. Take Some Time to De-Clutter

Clutter can bring chaos. Start the New Year off by clearing your space to help get you cleaned and organized. Here are some top tips from decluttering experts via The Huffington Post to help get you started.

  1. Accomplish a DIY Project

You don’t have to be an expert or hire one to make improvements around your home. DIY, or “do it yourself,” projects are great for saving you money and upgrading your home for less. Check out our Pinterest page for some DIY home improvement ideas you can tackle in 2020.

  1. Make Extra Mortgage Payments

Resolving to put a little extra money toward your mortgage in the New Year can make a big impact on paying off your mortgage that much sooner, saving you money on interest. Talk to your local Inlanta Loan Officer today to see if making extra mortgage payments could benefit you!

We hope your new year is filled with joy, success and a happy home!

3 Reasons to Do a Mortgage Review

3 Reasons to Do a Mortgage Review

It’s officially the end of 2020 and like most, we are truly looking forward to a new year.

In spite of the many ups and downs we’ve experienced this past year, one thing that stayed down for the better was mortgage rates.

Given the positive changes in the housing market and a new year on the horizon, now is a great time to do a review of your current mortgage loan with a trusted lender.

Here are top 3 reasons we believe you should do a mortgage review today:

  1. Rates are Low

If you’re a homeowner, you have likely heard or been contacted about today’s historically low interest rates. Lower rates offer the opportunity to refinance at a better rate than you originally secured when you first purchased your home which can benefit you by lowering your monthly payment, for example.

  • Your Situation has Changed

Another great reason to conduct a mortgage checkup would be a change in your current financial/familial situation. For instance, if you purchased your home and needed PMI (premium mortgage insurance) at the time, you may be able to refinance now and eliminate PMI to lower your payment.  

  • It’s Been a While

Perhaps it’s been quite a while since you purchased your home or even had a mortgage review. If you’ve been in your home for several years, there’s a good chance you have built up enough equity to take out to live more comfortably, pay off some debt or even buy the car or take the vacation you’ve always wanted.

A brief meeting with your mortgage lender can make all the difference. If you’re ready to have a mortgage review, contact your local Inlanta Mortgage loan expert today.

Here’s What You Need to Know About Gift Funds

What You Need to Know About Gift Funds

It’s the holiday season and we’ve all got presents on the brain. Some gifts, however, don’t come from a store and can help us with one of the biggest purchases we’ll make in our lifetime – a new home.

For first time homebuyers, coming up with a down payment is often one of the greatest barriers to homeownership. But did you know that you can leverage “gift funds” to help with your down payment?

What Are Gift Funds

Gift funds are simply contributions from other parties, such as family members, to be used for a down payment or to help cover closing costs. These funds have no expectation of repayment by the borrower hence why they’re called “gifts”.

For most loans, generally acceptable gift donors include your family members by blood or marriage (closely related in most cases – mother, father, aunt, uncle, grandparent, spouse, etc.), fiancés, employers, charitable organizations, or government entities.

But the FHA (Federal Housing Administration) also allows gifts to come from a close friend with a clearly defined and documented interest in you, the borrower. This means that someone with a long-standing or close relationship with you, such as an ex-step-parent that truly continues to think of themselves as a parent of a child.

How Do Gift Funds Work?

When you’re using gift funds, there’s mandatory documentation required to ensure the funds meet the approved criteria. In these cases, you can count on your mortgage company’s underwriting team to ensure there is proper documentation for the gift funds to document that adhere to the requirements.

Here’s how it works – It’s acceptable for the gift donor to borrow funds to gift to the borrower, as long as they’re not borrowed from an interested party to the transaction (seller, builder, realtor, lender, etc.). Cash is not an acceptable method of giving gift funds as underwriters cannot document the source of the funds as coming from the gift donor.

Additional gift options can include gifts of equity, which occurs when a borrower is related to the seller of a property that they’re purchasing. In this case the seller, may choose to give a gift of equity to the borrower to reduce the amount of funds the borrower needs to have available for down payment/closing costs.

Gifts cannot be used to meet reserve requirements that may apply to the loan. For conventional loans, gifts are allowed for either owner occupied properties or second homes.  They are not eligible for investment properties.

For some loan types, the borrower might be required to bring a certain amount of their own funds to the loan in order to qualify (minimum borrower contribution).

Contact Us

If a new home is on your holiday wish list and you’re seeking down payment assistance, receiving a gift may help give you just what you need to achieve the home of your dreams.

Contact us today if you’d like to learn more about down payment assistance programs or to discuss which type of loan is right for you and your financial situation.