secure.blownmortgage.com Lender Hotline: 888-581-5008 If you are purchasing a home and putting less than 20 percent down on it, you will be required to pay mortgage insurance, otherwise known as PMI. This insurance helps the lender know that he is covered should you default on the loan, rather than leaving him out of luck. Loans that have an LTV that is higher than 80% are considered riskier than loans with a lower LTV. The insurance, while beneficial for the lender, can be difficult for you as the borrower to afford. One way to get around this requirement is to take lender paid mortgage insurance. What is Lender Paid Mortgage Insurance? It might sound odd that the lender would pay you mortgage insurance. What would prompt a lender to do so? Basically it is a way for them to still obtain your loan while not putting you in a loan that you cannot afford comfortably. By paying your mortgage insurance for you, the lender still gets the profits that are generated from the interest you pay on your mortgage. The tradeoff, however, is that you will have to accept a higher interest rate in order for the lender to pay the insurance. The rate is typically .5% higher than if you were to pay the insurance yourself. Because the insurance is paid to a third party, it does not affect the lender if you they pay it rather than you. What are the Advantages to the Borrower? There are many advantages that you, as the borrower, can realize as a result of taking lender paid mortgage insurance. The most common benefit is the ability to get into a home with as little as 3.5% down and still not have to pay any type of monthly insurance fee. This means that you can get a conventional loan, which has very few fees rather than an FHA loan which requires upfront and monthly insurance fees. In addition, if you happen to close on your loan during a time when rates are exceptionally low, even taking a rate that is .5% higher will still be considered affordable and you do not have the added cost of the mortgage insurance to worry about. What are the Disadvantages? As with program, there are disadvantages to lender paid mortgage insurance programs. The most obvious issue is the higher interest rate that you will have to pay. Because every lender will differ, it pays to shop around to find the one that will pay the insurance and offer you the lowest rate. You might be surprised at how much they differ. Another disadvantage is the fact that your higher interest rate is for the life of the loan or for the duration that you keep it. If you were to pay PMI on your own, you could cancel it once you are below 80% LTV. If you plan on staying in the home a long time, this could be a significant savings in the long run. Not every lender offers lender paid mortgage insurance, so it will require you to shop around. Before you do so, however, you should determine if it is the right choice for you.

1. THE BASICS OF LENDER
PAID MORTGAGE
INSURANCE
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2. If you are purchasing a home and putting less
than 20 percent down on it, you will be required
to pay mortgage insurance, otherwise known
as PMI. This insurance helps the lender know
that he is covered should you default on the
loan, rather than leaving him out of luck. Loans
that have an LTV that is higher than 80% are
considered riskier than loans with a lower LTV.
The insurance, while beneficial for the lender,
can be difficult for you as the borrower to
afford. One way to get around this requirement
is to take lender paid mortgage insurance.
BLOWNMORTGAGE.COM

3. What is Lender Paid Mortgage Insurance?
It might sound odd that the lender would pay you mortgage
insurance. What would prompt a lender to do so? Basically it is
a way for them to still obtain your loan while not putting you in
a loan that you cannot afford comfortably. By paying your
mortgage insurance for you, the lender still gets the profits that
are generated from the interest you pay on your mortgage.
The tradeoff, however, is that you will have to accept a higher
interest rate in order for the lender to pay the insurance. The
rate is typically .5% higher than if you were to pay the
insurance yourself. Because the insurance is paid to a third
party, it does not affect the lender if you they pay it rather than
you.
BLOWNMORTGAGE.COM

4. What are the Advantages to the Borrower?
There are many advantages that you, as the borrower, can
realize as a result of taking lender paid mortgage insurance.
The most common benefit is the ability to get into a home with
as little as 3.5% down and still not have to pay any type of
monthly insurance fee. This means that you can get a
conventional loan, which has very few fees rather than an FHA
loan which requires upfront and monthly insurance fees. In
addition, if you happen to close on your loan during a time
when rates are exceptionally low, even taking a rate that is .5%
higher will still be considered affordable and you do not have
the added cost of the mortgage insurance to worry about.
BLOWNMORTGAGE.COM

5. What are the Disadvantages?
As with program, there are disadvantages to lender paid
mortgage insurance programs. The most obvious issue is the
higher interest rate that you will have to pay. Because every
lender will differ, it pays to shop around to find the one that will
pay the insurance and offer you the lowest rate. You might be
surprised at how much they differ. Another disadvantage is the
fact that your higher interest rate is for the life of the loan or for
the duration that you keep it. If you were to pay PMI on your own,
you could cancel it once you are below 80% LTV. If you plan on
staying in the home a long time, this could be a significant
savings in the long run.
BLOWNMORTGAGE.COM

6. Not every lender offers lender paid mortgage
insurance, so it will require you to shop around. Before
you do so, however, you should determine if it is the
right choice for you. There are many other options out
there, so make sure to look at all programs and how
they affect your monthly payments as well as your
financial picture in the long run. There is no cut and dry
right or wrong answer for everyone; you need to weigh
the options for your situation to see if it makes sense to
have the lender pay your mortgage insurance for you.
BLOWNMORTGAGE.COM

7. CLICK HERE
TO LEARN MORE:
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008
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8. INFORMATION PROVIDED BY:
Justin McHood
Mortgage Commentator
Information Originally Published: 10/06/15
Justin McHood is Americas Mortgage Commentator and has
been providing Mortgage commentary for over 10 years.
BLOWNMORTGAGE.COM

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