Mortgage

Mortgage Protection Insurance: When You Might Need It

Before you accept the responsibilities of taking on a mortgage that spans several decades, there’s an option you might consider to protect the home from foreclosure in case you’re not able to make the monthly mortgage payments.

Mortgage protection insurance (MPI) protects homeowners if a health issue arises and they become disabled, or a job loss is lengthy. In the worst-case scenario, this type of coverage can pay off the balance of the mortgage if the borrower dies.

MPI can be a safety net for some homeowners while others may view it as an unnecessary expense that will drain an already tight budget. Deciding whether to purchase a mortgage insurance policy depends mostly on your health and financial circumstances.

What is mortgage protection insurance?

MPI policies basically function as a type of life or disability insurance. The cost of the monthly premium varies, depending on the amount of the loan

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FHA Requirements: Mortgage Insurance for 2020

Mortgage Insurance (MIP) for FHA Insured Loan

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requires both upfront and annual mortgage insurance for all borrowers, regardless of the amount of down payment.

2020 MIP Rates for FHA Loans Over 15 Years

If you take out a typical 30-year mortgage or anything greater than 15 years, your annual mortgage insurance premium will be as follows:

Base Loan Amount LTV Annual MIP
≤ $625,500 ≤ 95% 80 bps (0.80%)
≤ $625,500 > 95% 85 bps (0.85%)
>$625,500 ≤ 95% 100 bps (1.00%)
> $625,500 > 95% 105 bps (1.05%)

2020 MIP Rates for FHA Loans Up to 15 Years

Homebuyers who can afford to pay off their loans quicker and opt for a shorter term, such as a 15-year mortgage, will benefit from lower mortgage insurance premiums, as follows:

Base Loan Amount
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Loans – Personal, Student, Business and Home Mortgage

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