If you are looking into getting a loan and have very low or no credit no doubt you have talked about getting mortgage insurance. There is an option called lender paid mortgage insurance that some banks and other institutions will offer to help people with low credit get a loan. Lender paid mortgage insurance will offer many benefits over the regular type of mortgage insurance. The question remains though, what exactly is lender paid mortgage insurance?
Defining Lender Paid Mortgage Insurance
Lender paid mortgage insurance is actually relatively simples the lender pays the premium on your insurance and charges you a higher interest rate. There are many advantages to doing it this way. The first is that there is no direct monthly MI premium, and on MI cost on your closing. By taking the payments and spreading them over the lifetime of the mortgage there is less of a big hit up front. While your payments monthly may be up slightly, overall these payments should be down for you if you were to compare it to your mortgage payment plus the premium for the mortgage insurance.
By getting lender paid mortgage insurance people without PMI can qualify for a much higher loan. This means that the dream house you always wanted can now be yours when before it seem completely out of reach. In addition after paying for a couple years you can refinance and get into a fixed term loan with no PMI once your credit rating has improved. By getting into a larger loan up front you can begin paying down on dream house today as opposed to tomorrow. Also, you can take advantage of lower home prices now and get locked in today. The real estate market is bound to jump back, and if you can use lender paid mortgage insurance to get in today you will have a much nicer house for years to come.
You also can get increased tax breaks with lender paid mortgage insurance at the end of the year. The interest you pay on your mortgage is completely tax deductable and by paying a higher rate you have more that you can deduct off of your taxes.
Lenders also like lender paid mortgage insurance because they offer many flexible packages that the lenders can opt into. If you have to get mortgage insurance, look at lender paid mortgage insurance as a very viable option for you new home today.
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