Sunday, September 12, 2010

Mortgage Insurance Rates

Now that FHA mortgage insurance is going up from .55% a year to .90% a year, conventional loans will become more attractive to many borrowers. If a borrower has good credit, their monthly mortgage payment might be cheaper with a conventional loan than it would be with an FHA loan.

However, it is important to know that not all private mortgage insurance companies have the same rates. On a loan that we originated recently, the lender told us the mortgage insurance (MI) payment was going to be $195 a month for a $250,000 loan. We told the lender that we wanted to use a different MI company and got a cheaper payment of $139 a month, lowering the borrower's payment by $56 a month.

It was cheaper with the company we asked to use because they give discounts for good credit scores. The MI company that the lender wanted to use does not give discounts for good credit.

Not every state has approved the MI rates that are based on credit scores, but Colorado has approved the lower rates.

Make sure you are using a lender who knows about the rates that are based on credit scores. The cheap rates are not automatically given to people when they apply for a loan.

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