does Private Mortgage Insurance have to be included with the monthly payment amount?

Asked by Lapkyaz, Mesa, AZ Wed Jul 27, 2011

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9
, ,
Wed Jul 27, 2011
Hi there,

You'll pay some form of Mortgage Insurance (MI) if you put less than 20% down.

With conventional loans, some lenders offer the option of rolling it into the rate for the life of the loan. That's called Lender Paid MI. So if your interest rate was 5% and the additional rate increase was .625% for MI, then your rate for your loan would be 5.625%.
It was a popular option when Mortgage Insurance was not tax deductible.

You can pay a one time premium for your Mortgage Insurance which will be calculated by Loan to Value, the type of premium you decide to pay, credit score and where you are buying (for example, an area classified as a declining market). So if the seller was paying your fees and you had a portion of their contribution leftover, it might be covered by that seller contribution.

The most common option is to pay a monthly premium as part of your regular monthly payment. This will be calculated again by Loan to Value, credit score, and the area in which you are buying. Some MI companies offer a break to borrowers with high credit scores -780 range.

Up until the "meltdown", you could do 2 loans and avoid MI, but those second loans are few and far between now. Banks who did those second loans have lost too much money to do those loans without very rigid parameters.

FHA has an Up Front Mortgage Insurance (UFMIP) which is rolled into the loan amount or paid by seller contributions. And you also pay a monthly MI premium which has increased over the last year to 1.1% or 1.15% on the most typical FHA loans.

Hope that helps clarify MI a bit.
4 votes
Gerard Carney, Agent, Spring Hill, FL
Thu Jul 28, 2011
The answer I believe you want is Yes they will bundle that amount for the insurance with you monthly mortgage payment, they like this so they know it is being paid and since they require you pay it, the same would go for the escrow Property Tax payment. This too is a simple guarantee to the bank that it gets paid, not paying your taxes would allow the county to sell your property to make the taxes owed them, and it over rides even primary lender, so you know that the banks want the Tax escrow paid each month, it takes the only default competitor off the table! So lets say PMI is $30 per month, your taxes $3600 for the year or $300 per month for the escrow account, and your monthly mortgage payment is $1250 per month, bundled into on sum we see a monthly payment of $1580. Rule of thumb if it has an importance to the bank then they like to add it to the payment so they know it is being paid and there is no risk to them!
0 votes
, ,
Thu Jul 28, 2011
Lapkyaz,

Since Catherine gave you such a good answer, do you think she deserves the "Best Answer" designation from you?
0 votes
, ,
Thu Jul 28, 2011
Hi Lapkyaz,

Catherine Ellinwood did a very nice job of explaining the details & options of Mortgage Insurance to answer your question.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite and fund FHA (w/a 580 score), 203k, 203k, VA, USDA, Jumbo, Conventional, loans to Canadians, Australians & other Foreign Nationals, on time. NMLS ID 263779 | AZ BK 0903725
0 votes
Ann Griffin, Agent, Mesa, AZ
Thu Jul 28, 2011
If you are required by your lender to have PMI, then yes it is included in your monthly payment.
0 votes
Doug McVinua, Agent, Gilbert, AZ
Thu Jul 28, 2011
Home Buyer

The answers below have done a good job of explaining PMI. Do you have other questions?

Arizona Homes for Sale by a Guy from Iowa
Web Reference:  http://www.McVinua.com
0 votes
Brenda & Ron…, Agent, Mesa, AZ
Wed Jul 27, 2011
Lapkyaz

The Private Mortgage Insurance is included in your monthly payment. If you put a larger down payment you can eleminate PMI
0 votes
Bill Parker,…, , Scottsdale, AZ
Wed Jul 27, 2011
Hi Lapkyaz:

If you are asking, "if I have monthly PMI, do I have to make it part of the check I send into my lender?" then the answer is "Yes". As Todd pointed out, the only time I know of it not being part of the monthly payment, if needed of course, is when a lump sum premium is either paid up front or added to the loan balance.

Good luck in your new home.

Bill Parker, Loan Officer
AZ Lic# 09011570
NMLS #223607
CPA--Licensed, no longer practicing

Legacy Group Lending, Inc.
15333 N. Pima Road, Suite 300
Scottsdale, AZ 85260
(O) 480-993-3080; (M) 602-565-3646; (F) 480-993-3081
EM: Bill.Parker@Legacyg.com
Website: http://www.LegacyG.com

MISSION STATEMENT: To create an unbelievably enjoyable experience for my clients, while guiding them through the most important financial transactions of their personal lives. My clients know me as their Mortgage Lender for Life. I truly appreciate your referrals.

If you think it's expensive to hire a professional to do the job, wait until you hire an amateur.
Red Adair, Oil well firefighter
0 votes
, ,
Wed Jul 27, 2011
Hi Lapkyaz,

No, altough it typcially is, there are options on conventional loans to pay a one time up front fee for mortgage insurance. The cost depends on credit score and loan-to-value.

On a FHA loan the mortgage insurance is always included int the monthly fee.

Best regards,
Todd Bookspan
602-522-9494
0 votes
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