Saturday, May 1, 2010

Lower Mortgage Insurance Rates in Effect

Mortgage insurance rates for conventional (non-government) loans just got cheaper. Effective May 1, 2010, private mortgage insurance companies are basing the rates for the insurance on credit scores, in addition to the size of the down payment. This is good news for borrowers.

Here's how the new rates break down:
  • If your score is 720 or above, you get the cheapest rates
  • If your score is between 680 and 719, your pay more than someone with better credit
  • If your score is below 680, you pay a lot more than someone with better credit

FHA mortgage insurance rates have not changed, and are still generally cheaper than private mortgage insurance rates. It's always best if your lender (that should be us) prices the loan both ways to see which is a better deal for you.

Mortgage insurance is an insurance policy that is required for most mortgages that are for more than 80% of the value (or the purchase price) of a house. If you put 20% down, you don't have to pay it. If you put less than 20% down, you generally have to pay it.

The insurance policy only pays out if a borrower stops paying their mortgage and the loan goes into foreclosure. Then the mortgage insurance company writes a check to the lender to cover their losses. The borrower has to pay for the policy, but doesn't get a dime. The theory behind mortgage insurance is that if the loan is insured, the lenders will be more likely to offer cheaper interest rates.

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