Mortgage Insurance Explained: What You Need to Know

St. Louis, MO – September 27^th, 2023 – When in the process of purchasing a home, it’s important to keep in mind and understand the costs you will be responsible for when you buy with a mortgage loan…One of which could potentially be mortgage insurance.

We asked Loan Officer, Clint Winberry (NMLS #2475127), to walk us through understanding mortgage insurance, how it works and other specifics that go into having mortgage insurance. Check out what he says to has to say!

Q: Are there different types of mortgage insurance? If so, what are they and how do they differentiate from each other?

A: Yes, there are three different types of mortgage insurance!

1. Borrower-Paid (this is when the borrower is paying within their mortgage payment)
2. Lender-Paid (a fee that lenders pay)
3. FHA (this is specific to an FHA loan and is held differently than regular mortgage insurance such as Borrower-Paid or Lender-Paid)

Q: When is having mortgage insurance required?

A: Mortgage insurance is required when a borrower is making a downpayment of less than 20% of the loan value, or in the case of FHA loans, mortgage insurance is always required.

Q: Does having mortgage insurance affect monthly payments?

A: Typically, borrower-paid mortgage insurance will be 0.5% to 1% of the loan amount per year which is split up into your 12 monthly payments per year. On conventional loans, your mortgage insurance is automatically terminated after your loan-to-value reaches 78%. On FHA loans, mortgage insurance is for the life of the loan. You can potentially eliminate mortgage insurance in the future by refinancing your home if your loan-to-value is at or below 80%.

Q: Why is mortgage insurance necessary?

A: Mortgage insurance lowers the risk to the lender, so a borrower can qualify for a loan that they might not otherwise be able to obtain!

If you’re interested in purchasing your first home, it may be a good idea to sit down with a knowledgeable loan officer before you are ready to buy. Gershman Mortgage staffs only the best and brightest loan officers in the game and they will help you make the best decision for you and your family. Especially when it comes to down payments, they can help you determine a price range that fits your budget and how much you’ll need. 

When you are ready, contact a Gershman Mortgage Loan Officer to start your journey home today.

 

About Gershman: Communities, families, and homes are at the heart of what we do at Gershman Mortgage. Our founding principles are based on the core values of honesty, integrity, the entrepreneurial spirit, and putting our customers first. We are passionate and committed to customer service and strive to ensure that we exceed the expectations of our customers. We are a customer-centric company devoted to creating and maintaining long-lasting relationships.

NMLS #138063 16253 Swingley Ridge Road Suite 200 Chesterfield, MO 63017 (800) 457-2357 Equal Housing Lender.