The benefits of mortgage insurance

For many, home ownership is important. When looking for a home, you should be prepared to purchase mortgage insurance. Why? There are a number of benefits for the borrower and the lender.

For the borrower, private mortgage insurance reduces the down payment and offers a wide range of payment options.

In addition, you won’t have to worry about having to get borrower-paid mortgage insurance.

How does private mortgage insurance (PMI) help the lender?

Lenders love PMI insurance for a number of reasons:

  • They can offer a wider range of loan and insurance products
  • They have access to a larger pool of buyers with lower cash requirements
  • They can perform faster closings
  • They can provide reduced exposure and work with safer loans

This also gives the buyer an advantage over those using FHA loans. With an FHA loan, an upfront payment is included in the overall loan amount.

This severely affects the buyer over the long term. Also, FHA requires a minimum down payment of 3.5%, which is not the case with loans using private mortgage insurance.

Any potential buyer going through the FHA has to have an FHA-approved appraiser, special Direct Endorsement underwriters, and the lender has to do a lot of extra work to close the loan.

By using PMI insurance, all of these variables are avoided, paving the way for a fast, smooth closing process. In a nutshell, having private mortgage insurance makes sense for both the buyer and lender.