Midlands For Sale By Owner Blog

Note:  I should have titled this post:  ”LPMI, PMI and Piggy Back Mortgages…Oh My”.  I just realized my error thanks to Bill’s comment.   My bad…my apologies!  And there’s no way for me to 80/20 in the title. 

LPMI (Lender Paid Mortgage Insurance) is one of my favorite mortgage products to use for clients with less than 20% down.   Here are some of the benefits of an LPMI mortgage:

• Loan amounts up to the conforming loan limit (currently $417,000 for a single family dwelling).
• Mortgage interest tax deductible for adjusted gross incomes over $100k (unlike PMI).
• Convenience of one mortgage payment vs. two mortgage payments on a property.
• Often provides lower payments a lower total mortgage payment than the “piggy back” scenario.
• No additional closing costs for a second mortgage (title, escrow and recording fees).
• Loan to value ratios up to 100%
• Credit scores as low as 620
• Pricing is credit score and loan to value based
• Works great with Flex and My Community Programs (or without!)
• Available for conforming products:  30 year fixed rates and 5/1, 7/1 and 10/1 ARMs, including interest only

For the following scenarios, let’s assume our buyers have 700 mid scores and 10% down and 5% down payment and closing costs for a $439,000 home that they will reside in.   (This is not intended to be a rate quote and is only a comparison of possible programs).

The rate on LPMI programs are slightly higher than conforming rates since the cost pmi is financed into the rate.  However, the mortgage interest is tax deductible and pmi is currently deductible for mortgages originated this year (they’re trying to have this expanded into the future) and for incomes below $100k. 

A plus for PMI vs. LPMI is that PMI can be removed once certain conditions are met.   LPMI cannot be removed without refinancing or selling the home.  There are times when having a second mortgage may make sense over having LPMI, such as if a borrower is expecting to come into cash and wants to pay off the second mortgage.   

Every borrower’s personal scenario varies and this is why it’s crucial to work with a Mortgage Professional who will take into account what someone’s financial goals are to develop plan that is suitable and who has a complete selection of programs to offer.

Mortgages are certainly not a “one size fits all” product.     

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80/20, lpmi, Mortgage, mortgage planner, piggyback, PMI

> Posted on May 11th, 2007 by admin
Filed under: Real Estate Guide