What is Lender Paid Mortgage Insurance?

Avoid paying monthly mortgage insurance by putting as little as 5% down and ask your lender for lender paid mortgage insurance.

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Private mortgage insurance (PMI) is a term every homebuyer will hear if he/she is buying a new home with less than a 20% down payment. PMI is a necessary evil if you don't have the cash available to make that 20% down payment. PMI rates vary, but expect a significant payment increase if you are required to pay it monthly.

Lender Paid Mortgage Insurance

Lender paid mortgage insurance is exactly that. Instead of you paying PMI upfront in a lump sum or monthly as part of your mortgage payment, your lender pays it. Now, as you've probably guessed, this isn't free. Your lender will offer you a slightly higher interest rate in exchange for paying the PMI. However, the payment increase resulting from the higher rate is almost always lower than the monthly PMI you'd be paying on your own.

As with all conventional loans, your down payment, credit score, and loan amount will determine how much extra interest you'll pay with lender paid PMI. As always, talk to your lender about all options available to you and your specific situation.

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Next: USDA Increases Upfront Fee to 2.75%

*Every effort is made to post valid, up to date information. Mortgage guidelines and programs constantly change. Therefore, the content of each post should be viewed and used as a starting point. Please contact us for current guidelines pertaining to this post or for more information.

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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
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