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Old 12-26-2011, 05:20 PM
 
Location: Greenpoint, Brooklyn
415 posts, read 1,340,433 times
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How hard is it to get one of these loans as opposed to a regular FHA 3.5% down loan? I started looking around my current area (San Diego, CA) this past summer and the houses I was looking at for around 300k had PMI of around 287 per month according to the mortgage broker with a FHA loan. I don't want to throw away that kind of money every month, on top of all the other stuff that goes with home buying, without the ability to reduce my taxes. So I was wondering how hard is it to get a lender paid PMI loan and how much higher % rate will I have pay? Also do the lender paid PMI loans have any pitfalls that a new home buyer would not know about? My annual income is 103k w/ 790 fico score.
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Old 12-30-2011, 07:59 AM
 
Location: Plano, Texas
1,675 posts, read 6,808,705 times
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First of all, mortgage insurance, PMI or MI, is tax deductible as long as your income is under $105,000 per year. So MI will be tax deductible making it less uglier.

FHA loans are easier to get then conventional loans with MI or lender paid MI.

The worst part of lender paid MI is that it never goes away. You accept a higher rate but dont have MI. But MI drops off at 78% loan to value...the higher rate never goes away.
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Old 01-03-2012, 01:17 PM
 
Location: New York
2,251 posts, read 4,721,684 times
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Quote:
Originally Posted by VictorBurek View Post
First of all, mortgage insurance, PMI or MI, is tax deductible as long as your income is under $105,000 per year. So MI will be tax deductible making it less uglier. FHA loans are easier to get then conventional loans with MI or lender paid MI. The worst part of lender paid MI is that it never goes away. You accept a higher rate but dont have MI. But MI drops off at 78% loan to value...the higher rate never goes away.
Good reply Victor..

Lender Paid Mortgage Insurance

The conventional mortgage lenders started offering lender paid mortgage insurance some time ago. Insurance is paid by the bank, not by the borrower. In return borrower pays higher interest rate and has one loan which is fully tax deductible.
To explain this concept better, consider this example:
You buy a property for $150,000 with down payment of only 10% or $15,000. Normally you would have one loan for $135,000 and pay mortgage insurance.
Or you would break $135,000 on two mortgages - $120,000 and $15,000 respectively, which is called 80/10/10 piggyback mortgage and explained in "no private mortgage insurance" page.

The Lender Paid Mortgage Insurance (LPMI) is convenient and less expensive than other options, especially if you obtain fixed rate mortgage (FRM) instead of adjustable rate mortgage (ARM). The tables below show the typical interest rate increases for both cases - fixed and adjustable, depending on LTV and FICO credit score.
ARM LPMI with FICO >= 680
LTV Rate Adjustment 80.01-85% .375% 85.01-90% .500% 90.01-95% .625%* 95.01-100% 1.00%*
FRM LPMI with FICO >= 680
LTV Rate Adjustment 80.01-85% .250% 85.01-90% .250% 90.01-95% .375% 95.01-100% .500% If in our example the interest rate is 6% for 30 year fixed mortgage, with borrower paid MI, then with LPMI the rate will be 6.25%. That is, if borrower has middle credit score 680 or higher.
*As you can see, LPMI gets rather expensive for ARMs with LTV over 90%. You need to calculate carefully what option out of three is better for you - one mortgage with tax deductible LPMI, one mortgage with non deductible MI or two mortgage option.
Many banks don't extend lender paid mortgage insurance to the borrowers with credit score below 680. Those which do, often offer LPMI only on fixed rate mortgages and charge premium rates, see the table below:
FRM LPMI with FICO >= 620
LTV Rate Adjustment 80.01-85% .375% 85.01-90% .500% 90.01-95% .750% 95.01-100% 1.00%
Lender Paid Mortgage Insurance



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Old 01-31-2012, 01:20 AM
 
Location: Greenpoint, Brooklyn
415 posts, read 1,340,433 times
Reputation: 256
My CPA told me today the PMI deduction ends in 2012 and is not likely to be extended. Does anyone know of any calculators on the web that let you easily run the numbers for PMI vs LPMI?
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