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Mortgage insurance remains a good option

William A. DesPortes

Mortgage insurance. The term doesnt sound good, and for a long while, mortgage insurance was costly, tedious to eliminate and just not the most effective means of financing residential real estate. However, the mortgage industry is in the midst of an historic correction and monumental changes. Mortgage insurance has now come to be a viable and advisable financing option.Mortgage insurance is available through the federal government (FHA) or through private mortgage insurers such as MGIC or Radian. Lets focus on the private mortgage sector.Private mortgage insurance (PMI) provided by third-party mortgage insurers is intended to minimize the exposure and risk of the primary mortgage lender on homes that are financed with little down payment or equity. Private mortgage insurers play a crucial role in renewing the health and prosperity of the countys residential mortgage financing system. Due to the fact that secondary financing (piggyback mortgages, second loans, subordinate liens, etc.) is more or less nonexistent in todays mortgage industry, mortgage insurance is efficiently filling a void and allowing borrowers to finance homes with as little as 3 percent downpayment or equity. Third-party insurers collect a premium, and they insure repayment of a certain percentage of the primary lenders loan in the event of a homeowner default. As with any mortgage financing, the exact terms, parameters and costs are dependent upon the borrowers qualifications, property type/usage and loan criteria. Generally speaking, mortgage insurance is available in conjunction with most loan programs currently on the market, on loan amounts up to $650,000, and for primary or secondary homes. It is tax-deductible, and is easy to eliminate once there is 20 percent equity in the property. Also, its not restricted only to first-time home buyers. Furthermore, mortgage insurance is now surprisingly affordable, allowing borrowers to increase their buying power while keeping monthly payments to a minimum.Payment of the insurance can be structured in a couple of different ways. The insurance can be paid in the monthly mortgage payments or it can be paid at closing in one fee or even factored into the interest rate. Each scenario is different as to what payment method is most advisable. Dissecting the exact terms and payments is different with each individual and should be fully reviewed with a seasoned and educated mortgage professional. The availability and affordability of mortgage insurance is evidence that there are bright spots within the mortgage industry which will ultimately help pull us through the current state of affairs. William A. DesPortes is a managing member of DesPortes, Selig & Associates, Professional Mortgage Services. He can be reached at 970-926-9393 or william@dsmortgage.org.


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