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Homeownership More Accessible and Affordable in Raleigh with New FHA Mortgage Insurance Premium

February 23, 2023 by Kevin Martini

Are you in the market for a new home but worried about the cost of mortgage insurance? Well, we’ve got some excellent news for you! The Federal Housing Administration (FHA) has announced a 30 basis point reduction in their mortgage insurance premiums, providing some much-needed relief to homebuyers across the country.

In this special article, Raleigh mortgage broker and Certified Mortgage Advisor Kevin Martini explores the implications of this change and offering valuable insights into what it could mean for both current and future homebuyers, as well as the housing market.

For those who are not familiar with mortgage insurance, it is an insurance policy that protects lenders in case a borrower defaults on their loan. If a borrower defaults, the lender can file a claim with the mortgage insurer to recoup their losses. Mortgage insurance is typically required for borrowers who put down less than 20% on their home purchase, as they are considered to be at a higher risk of default.

FHA loans are designed to help first-time and repeat homebuyers plus those with lower credit scores or smaller down payments qualify for a mortgage. These loans are backed by the Federal Housing Administration and offer several benefits to borrowers, including lower down payment requirements and more relaxed credit score standards. However, they also require borrowers to pay mortgage insurance premiums.

The recent FHA announcement on February 22, 2023 by the FHA to reduce their mortgage insurance premiums by 30 basis points, effective on March 20, 2023, could result in significant savings for FHA borrowers. For example, a borrower with a $200,000 FHA loan who puts down 3.5% could save over $50 per month on their mortgage insurance premiums. Over the life of the loan, this could add up to thousands of dollars in savings.

This reduction in mortgage insurance premiums could make homeownership more accessible and affordable for first-time homebuyers or those with lower incomes who may struggle to afford a larger down payment. Additionally, this change could have positive implications for the overall housing market. By reducing the cost of homeownership, more people may be encouraged to enter the market, leading to increased demand and higher home values.

The Martini Mortgage Group can help you find the right mortgage for your unique situation. Since a FHA loan is not the only option that offers a low down payment, it can be overwhelming to know where to start. Our Raleigh based mortgage strategists are here to guide you through the process, answer all your questions, and ensure that you feel confident and informed every step of the way.

If you’re ready to explore your options and find the perfect mortgage for you, give us a call today. With our expertise and experience, we’ll help you achieve your dream of owning your own home while also saving you money with the reduced mortgage insurance premiums offered by the FHA.

Filed Under: Affordability, FHA Home Loan, Home Loans, Housing, Housing Market, Kevin Martini, Mortgage, Mortgage Insurance Premium, PMI, Private Mortgage Insurance, Raleigh, Real Estate Tagged With: Buying a Home in Raleigh, FHA Home Loans, Kevin Martini, Mortgage Tips, Raleigh, Raleigh Mortgage Broker, Raleigh Mortgage Lender, Real Estate

How to cancel Private Mortgage Insurance | Martini Mortgage Group 

February 6, 2023 by Kevin Martini

Some borrowers need a lower down payment and some borrowers choose not to put a significant down payment. Private Mortgage Insurance (PMI) is a powerful tool used to help borrowers buy a home with a down payment less than 20%. Not only does PMI allow one to buy a home with a lower down payment, first-time and repeat homebuyers do not need to have PMI forever — it can either be automatically terminated or a borrower can request cancellation without the need to refinance.  

Homeowners Protection Act (HPA)

As a primer, lenders view an 80% loan-to-value (which is a 20% down payment) as a standard for making a mortgage for a borrower.  This 20% equity position was established to ensure the borrower has sufficient interest in the property to make timely payments and in the event the borrower was not able to make payments, there would be sufficient equity to cover the foreclosure costs. 

PMI was created to mitigate this risk for a lender when a borrower needed or wanted to put less than 20% down at time of mortgage origination. Over time, equity is accumulated through amortization and home appreciation and an 80% loan-to-value is established.  When this 80% loan-to-value is secured, PMI is truly no longer needed since it does not provide any material protection to the lender and does not benefit the borrower.  

Prior to July 1999, it was close to impossible to cancel or terminate PMI.  Courtesy of the Home Protection Act (a.k.a. HPA or PMI Cancellation Act) the framework was established on when and how PMI could be canceled or terminated. 

PMI Cancellation for Conforming Loans

Conforming Loans (a.k.a. Agency Loans or Conventional Loans) meet the Fannie Mae or Freddie Mac guidelines to include loan limits.  Conforming loans are covered under the HPA and one can petition to request to cancel PMI when you have reached and 80% loan-to-value based the original value (i.e. the price paid for the home or the appraised value, whichever is less). 

Per the HPA, all cancelation requests must be submitted in writing to the loan servicer. The loan servicer must take action to cancel if: the principal balance is scheduled to reach 80% of the original value based on initial amortization schedule or actual payments; the borrower has a good payment history (i.e. no 60-day lates or more in the first 12-months of the last 24-months prior to cancellation petition date and has not made a payment that was 30-days  or more past due within 12-months of cancelation petition date); evidence the value of the collateral has not declined, at the borrowers expense; and evidence the current collateral is not subject to subordinate liens. 

If the value of a home has increased since closing, you may be able to cancel your PMI early based on the current value and current balance.  Your loan servicer will likely require evidence of the value increase, at the borrowers expense.  The method of validating the collateral will be determined by the the loan servicer and may be in the form of Broker Price Opinion (BPO) or full appraisal. 

IMPORTANT: in addition to HPA, the loan investor may also have seasoning requirements and/or cancellation requirements.  Consult you PMI Disclosure provided at closing or contact your loan servicer for a copy. 

PMI Termination for Conforming Loans

Your PMI will automatically be removed at a certain point.  That point is once the borrowers loan balance is at 78% or the original amount borrowed.

Refinance to remove PMI

For some not all, a refinancing strategy is the best way to remove PMI.  Consult with a Mortgage Strategist with the Martini Mortgage Group to discuss this advanced strategy

Certified Mortgage Advisor and Raleigh Mortgage Broker Kevin Martini Summary

•Private Mortgage Insurance (PMI) is a powerful tool used to help borrowers buy a home with less than 20% down payment.

• The Home Protection Act (HPA) established the framework when and how PMI can be cancelled or terminated. 

• Conforming Loans are covered under the HPA and one can petition to request cancellation of PMI when they have reached an 80% loan-to-value based on original value. 

• If the value of a home has increased since closing, it may be possible for early termination of PMI subject to lender requirements.  

• Automatic removal occurs once loan balance reaches 78%. 

• Refinancing may also be an option for some in order to remove Private Mortgage Insurance (PMI).

certified mortgage advisor kevin martini

Filed Under: Homeowners Protection Act, Kevin Martini, Mortgage, PMI, PMI Cancellation, PMI Termination, Private Mortgage Insurance, Refinance Tagged With: Certified Mortgage Advisor, Homeowners Protection Act, How to cancel Private Mortgage Insurance, Kevin Martini, Martini Mortgage Group, PMI, PMI Cancellation, PMI Termination, Raleigh Mortgage Broker

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