Get More & Pay Less for Private Mortgage Insurance – How to do the numbers
Thank you for connecting with me and Real Estate Mortgage Shoppe. My mission is to help you get the information you want to provide you with the real estate financing solutions you need to have a successful real estate transaction. In this podcast you will get a good understanding of how private mortgage insurance affects the mortgage terms. We will cover the most common ways borrowers can reduce the amount of money they pay for private mortgage insurance by choosing from a variety of different PMI structures and we’ll look at ways to avoid private mortgage insurance altogether.
If you do not find what you are looking for in this blogpost and podcast, contact me at (901) 482-0354 or jo@192.232.195.219 www.JoGarner.com
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Good morning, Memphis! Good morning to our listeners in your fair cities across the 50 states. You’re on Real Estate Mortgage Shoppe. I’m your host, Jo Garner, Mortgage Loan Officer. Connect with me at www.JoGarner.com If you’re on twitter, you can make post your questions or comments at #JoGarner or you can call us while we are live in the studio February 27, 2016 at (901) 535-9732 or outside the Memphis area at (800) 474-9232. Today’s show is sponsored Joe Rojas marketing for Fearnley, Martin and McDonald closing attorneys. For closing your mortgage or home buying transaction, call Joe Rojas at 901 289-5821. Today our general topic is “Get More & Pay Less For Private Mortgage Insurance-How To Do The Numbers” You will 1. get a good understanding of how private mortgage insurance affects the mortgage. 2. We will cover the most common ways borrowers can reduce the amount of money they pay for private mortgage insurance by choosing from a variety of different PMI structures and 3. we’ll look at ways to avoid it altogether.
In the studio we have a Kimberly Miller of ARCH Mortgage Insurance Company. Kim has been saving her lenders’ clients money on monthly private mortgage insurance payments and with the single premium plans too. If you are a lender or a realtor listening to Real Estate Mortgage Shoppe, you can probably remember a time your customer’s home purchase how much would need to be paid for private mortgage insurance. Kim has saved MANY mortgage loan approvals with her variety of product offerings and lower-than-average costs. Kim, I was delighted when you agreed to talk with our listeners today. Tell us a little bit about yourself and what ARCH MI does for its customers.
(Jo’s talks about mortgage market) You have certainly been able to get more and pay less for mortgage rates over the last few weeks, but yesterday the price of mortgage rates moved higher—but hey—they’re still a bargain. 30YR FIXED – 3.625 to upper 3’s; FHA/VA/USDA Rural Housing 30 year rates coming in from the mid 3s to upper 3’s. call me and let’s talk about some jumbo loans over $417,000 dollars with rates in the 3’s. If you thought you missed your opportunity to refinance your primary residence, your second home or investment property in the Memphis area or anywhere in the country, you need to relook at the numbers you can get right now. Home values have been going up significantly in some areas so you also may have more equity in your home than you did few years ago. If you want to compare some mortgage programs to reach your goals, call me personally while we are live on the air (901) 535-9732 or you can call me after this show personally at (901) 482-0354. Let’s make your plan, work your plan. If the deal works for you today, do it today.
(Jo talks about some ways to structure pmi payments for maximum convenience and savings) Private mortgage insurance is so important to the real estate deal. The mortgage insurance is pretty well set in stone on the government loans like FHA, VA, and Rural Housing, but if you are getting a conventional loan over 80% loan-to-value, most lending products will require the borrower to buy private mortgage insurance to protect the lender for loss if the borrower goes into default on the payments. Private mortgage varies in price depending on how high the loan-to-value is. For instance, private mortgage insurance is priced at a higher percentage for a loan at 95% Loan-to-Value as opposed to a loan at 90% or 85% loan-to-value. The borrower’s higher credit scores bring a lower price on mortgage insurance too.
Mortgage insurance on a conventional loan can be a monthly payment that is included in the mortgage payment to the lender that is paid until the loan is at 78% Loan-to-value when the private mortgage insurance payments no longer have to be paid. There are split-premiums where the buyer pays a smaller amount each month but pays more on a lump sum amount when they first close on the loan. There are also single-premium private mortgage insurance premiums. The buyer or lender can pay the one-time lump sum payment and never have to pay monthly private mortgage insurance. The buyer can pay the private mortgage insurance on conventional loans or the lender can pay. Most of the time the lender goes up a little bit on the mortgage interest rate to use the premium price on the higher-than-market rate. The lender uses the premium he gets when the loan closes in order to pay the buyer’s pmi. If my mortgage customer indicates he or she wants to stay in the home for over 4 or 5 years, it is usually better to pay a little PMI and let get the lower interest rate, because if you get a higher rate just to have the lender pay a small amount of private mortgage insurance for you, you are, in a way, being penalized because now you have to pay the higher interest rate over the entire amount of the loan for a loan time. If you want to compare your own scenario, call me personally after this show at 901 482-0354 or connect with me at www.JoGarner.com
(Jo) We’re talking about Get More & Pay Less For Private Mortgage Insurance-How To Do The Numbers” Kim, what are some ways, as a home buyer or someone refinancing a home I already own, what are some ways I can look at individually tailoring the private mortgage product to work best with my budget and my bank account?
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It’s time to talk shop with Talk Shoppe’s Business Tip For Real Estate Professionals. Talk Shoppe is a marketing company offering free education and networking to anyone interested in real estate or in business. Talk Shoppe is made possible by the financial support of its sponsors and advertisers. For more about Talk Shoppe, go to www.TalkShoppe.com (shoppe) For our Talk Shoppe Business Tip today we have Talk Shoppe advertiser, Leah Anne Morse of Cartridge World 1016 West Poplar 104 Collierville, TN Global Brand-Local Experts. Leah Anne, What is our Talk Shoppe Business Tip for Real Estate Professionals today? (Jo says, “Thanks Leah Anne Morse of Cartridge World. You can reach Leah Anne at 901 853-3230)
QUESTIONS ANSWERED BY KIMBERLY MILLER:
⦁ Mortgage Insurance 101 – Why does a borrower need mortgage insurance? How does mortgage insurance benefit both borrower and lender?
⦁ Arch Mortgage Insurance – Who are we? Opportunity to discuss mortgage insurance landscape nationally including new FHFA PMIERs requirements.
⦁ What’s new at Arch MI? What is Arch MI’s RateStar? What is Risk Based Pricing? Share examples of how RateStar is helping borrowers lower their monthly payments and how RateStar is helping lenders provide better home mortgage options for their clients.
⦁ Great River Mortgage Banker’s Conference, Memphis, TN April 13 – 15, The Peabody Hotel (Conference includes mortgage professionals from the States of Tennessee, Mississippi, Arkansas and, new addition this year, Missouri) – Talk about speakers, educational opportunities, sponsorship opportunities and golf tournament at Windyke Country Club.
⦁ Give some examples of how you have saved the deal for a lender and their mortgage customer.
⦁ How have you saved a deal for a home buyer by getting their payment lower?
⦁ Talk about the difference between a single premium and a monthly mortgage insurance premium?
⦁ Can lenders pay the pmi for the customer? When is this most common? (our example this week on about a $300K sales price and $285,000 30 yr loan. Monthly pmi .54% or $128/mo until the loan balance is at 78% when pmi is eliminated. Or single pay premium 1.24% upfront with no monthly pmi at all $3,534. In this case the buyer took a wee bit higher rate and had the lender pay the upfront PMI for him so we can enjoy lower payments without the $128/mo pmi to have to pay. ?)
⦁ What are some approximate calculations a borrower can do to get a general estimate of what monthly PMI would cost him on a $100,000 loan on a 90% loan-to-value on a 30 yr fixed rate? How would he calculate an estimate on a single premium PMI plan? A split premium private mortgage anymore.
10.
QUESTIONS ANSWERED BY JO GARNER :
⦁ At what point do you compare the difference between an FHA loan and a conventional loan for borrowers? If a client is putting less than 10% down, I will almost always compare the conventional loan with the FHA loan to see which way my client would pay the least amount of mortgage insurance over the next 5 years. If my client has low credit scores like down in the 600’s , FHA is usually the best loan product due to program not penalizing the client as much on the rate for lower scores. The FHA loan product only requires 3.5% down and allows the seller to pay up to 6% of the price of the house toward the buyer’s costs instead of only 3%. These factors play heavily into which loan product will work best for an individual .
⦁ What are the most common methods you share with your customers on how to lower their private mortgage insurance costs?
⦁ A. Get rid of the private mortgage insurance. On a conventional loan private mortgage insurance is referred to as PMI. PMI insures the lender in case the borrower defaults on the loan. It doesn’t help the borrower—just the lender so the least amount you pay the better. If you buy a house with a conventional loan and put down less than 20%, you are probably going to pay private mortgage insurance unless the first mortgage is at no more than 80% and your adding a piggy-back 2nd mortgage to make up the difference between what you can put down.
Another way to get rid of private mortgage insurance is to ask your current lender to remove it. If they think the value on the house puts your loan at 78% loan-to-value, then they need to remove it. They may get an appraisal just to make sure you have paid down enough ( and you will probably have to pay for the appraisal.) and you have to wait 2 to 5 years into the loan to even make the request. The lender will check and make sure you have not had any 30 to 60-day-late payments on the mortgage over the last 2 years.
⦁ On government loans like FHA and also Rural Housing USDA loans, the buyer is going to pay an upfront mortgage insurance premium that is added to the loan and also a monthly mortgage insurance premium. ON the FHA loan if the borrower is getting a term longer than 15 years, and he is putting less than 10% down on the home, the monthly mortgage insurance never goes away. On the Veteran Loan for most veterans the upfront funding fee is added into the loan. On the government loans, there is very little that can be done to lessen or remove the MIP. But on the conventional you can look at a number of options to lessen the cost you pay for PMI. If you aren’t going to be in the house more than 3 or 4 years, you could see if the lender would give you a little bit higher rate in exchange for paying all of your private mortgage insurance for you. If you are going to keep the house for many years, you may not want the lender to pay it because you will want to enjoy a lot lower interest rate over the course of time. Paying 20% down to get the loan balance to 80% or less, will eliminate the need for private mortgage insurance altogether.
⦁ How do you calculate the mortgage insurance on the 30 yr FHA loan? The 95% conventional loan? 90% FHA loan and conventional 90%? 85% conventional?
⦁ FHA 30 yr maximum loan example
Sales price: $100K X 96.5= base loan amount $96,500 + ($96,500 base loan amount X 1.0175 <1.75% upfront MIP>) =$98,188 total loan including the $1,688 upfront mortgage insurance. The FHA monthly mortgage insurance on $100,000 sales price with 3.5% down on a 30 yr fixed rate loan = base loan amount $96,500 X .0085/12= monthly mortgage insurance of $68/mo for the life of the loan.
⦁ Conventional 95% 30 yr fixed rate loan. Sales price $100,000 X .95= loan amount of $95,000. (Private mortgage insurance rates can vary widely from pmi company to pmi company depending on the loan-to-value, loan type, loan program and credit score.) check ⦁ www.archmi.com/ratestar for quotes on the differences between the 95%, 90% and 85% loan-to-values
[maybe kim can help give some examples on the air]
Conventional 90% 100K sales price X.90= $90,000 x .0039/12= $29/mo pmi
Conventional 85% 100K sales price X.85= $85,000 x .0023/12= $16/mo pmi
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REAL ESTATE TIP OF THE WEEK: (Kimberly Miller of ARCH MI and Jo Garner offer a time-saving, money-saving real estate –related tip )
Announcements: 1. Talk Shoppe offers free networking & education to anyone interested in real estate or in business. Talk Shoppe meets every Wednesday 9A-10A CT at the University of Phoenix 65 Germantown Center 1st floor Cordova, TN. This Wednesday March 2nd, 2016 9A-10A CT Talk Shoppe presents Liz Miller, Family Services Manager, All About Habitat for Humanity in Memphis & How Your Business Can Be Involved” LMiller@MemphisHabitat.com
2.Talk Shoppe events are free thanks to our sponsors and advertisers like Tim and Katie Gilliland of www.BackupRX. Protecting your important computer data and your peace of mind. And thank you to Pat Goldstein, Realtor with Crye-Leike-the Gold Standard in Real Estate. 901 606-2000
3. Thank you to www.SauceMarketingMemphis.com, our Real Estate Mortgage Shoppe webmaster and brand expert.
4. Thank you, Joe Rojas, of Fearnley, Martin and McDonald for sponsoring today’s Real Estate Mortgage Shoppe. You can find out more about Joe Rojas on www.JoGarner.com and you can reach him at (901) 289-5821.
4. FOR THIS PODCAST OF REAL ESTATE MORTGAGE SHOPPE AND MORE, GO TO JOGARNER.COM
⦁ 6. Kimberly Miller shares about Great River Mortgage Banker’s Conference, Memphis, TN April 13 – 15, The Peabody Hotel (Conference includes mortgage professionals from the States of Tennessee, Mississippi, Arkansas and, new addition this year, Missouri) – Talked about speakers, educational opportunities, sponsorship opportunities and golf tournament at Windyke Country Club.
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QUOTE CORNER : (on the subject of more for less) Yogi Berra-“A nickel ain’t worth a dime anymore.”
Joyce Mattingly- “ There are 3 books my daughter felt were the most important influences in her life. “The Bible, her mother’s cook book and her father’s checkbook.”
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Transitional Songs: “Born To Hand Jive (how low can you go )” from Grease Soundtrack; “25 or 6 to 4” Chicago; “21” ?” Roger Miller and Dean Martin ; “Taking Care of Business” Bachman Turner Overdrive (for Talk Shoppe Business Tip of the Day)
REJOINERS:
Marx Sterbcow- Sterbcow Law Group marx@yourrealestatelawyer.com
Pat Goldstein, Realtor Crye-Leike, Inc (901) 606-2000
Tom King, Appraiser with Bill King Co (901) 487-6989
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OUR SHOW TODAY WAS SPONSORED BY – JOE ROJAS, Fearnley, Martin, and McDonald
(901) 289-5821
Joe Rojas has been in the title company business for over 15 years and has helped hundreds of clients have a smooth closing over the years.
ABOUT FEARNLEY, MARTIN, AND MCDONALD-
Fearnley, Martin & McDonald is Memphis law firm, providing quality, accurate and convenient settlement services in both Tennessee and North Mississippi. The partners, Michael A. Fearnley, Myra Q. Martin and W. Grady McDonald, have over 75 years of combined legal expertise.
Fearnley, Martin & McDonald’s extensive real estate practice provides a complete range of services from contracts to closing and title abstracts to title insurance. The firm’s real estate clients include realtors, brokers, developers, contractors, private investors, and homeowners.
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ABOUT KIMBERLY MILLER
Bio
Kim Miller is the Account Manager for Arch Mortgage Insurance in Tennessee. Building upon deeply valued relationships cultivated with over 20 years in mortgage sales, Kim uses her experience and enthusiasm to promote Arch MI’s mortgage insurance innovative solutions to support her client’s business strategies. Supported by an amazing team at Arch MI, her goal is to provide the Tennessee mortgage community with superior and responsive service along with extremely competitive products for clients and their borrowers.
A graduate of the University of Tennessee in Knoxville, Kim began her career as a Loan Originator moving quickly into Retail Management with Pulte Mortgage! Moving from retail sales, Kim focused her career on B2B sales as the Wholesale Account Executive for SunTrust Mortgage followed by an Account Executive opportunity in correspondent sales with Flagstar Bank. Kim’s most important role is that of “Mom” to her two children and she enjoys watching her son play high school basketball and soccer and her daughter play golf as a freshman at Tennessee Tech University!
Account Manager – Tennessee
Arch Mortgage Insurance Company
3003 Oak Road Walnut Creek CA 94597
kmiller@archmi.com | www.archmi.com
Mobile 615.424.1500 |
ABOUT ARCH MORTGAGE INSURANCE COMPANY-
Arch MI is the strong MI partner that can help distinguish you in the 2016 marketplace. Our unique and innovative MI solutions for growing your share of new originations include Arch MI RateStarSM, a dynamic risk-based rates program that more precisely matches MI rates to individual loan risk. archmi.com/ratestar
ABOUT JO GARNER-MORTGAGE LOAN OFFICER:
www.JoGarner.com (901) 482 0354 jo@192.232.195.219 twitter @jogarner
Jo describes her job description: “As a mortgage loan officer, my job is to give my client the benefits they want from their financing terms– listening to my client and determine what’s of the most value to THEM– What is their comfort level on a house payment, how much are they comfortable paying down, what type of financing do they need to get the house they want to buy or refinance. Different clients have different priorities in life—some are buying their first home with very little down payment funds. Some are recovering from medical challenges, divorces or preparing to send children to college and some are embarking on a long term goal of buying properties to build rental income. Whatever their personal priorities are, my job is to put together a mortgage with comfortable terms that will help them achieve their goals.”
Jo Garner is a mortgage officer with extensive knowledge in tailoring mortgages to her customers who are refinancing or purchasing homes all over the country. She offers conventional, FHA, VA or other loan programs for refinancing and purchases.
Jo can help you look at rent vs buy, when it makes sense to refinance, how to get the best deal on your home purchase financing.
Jo Garner has been in the real estate/financing business for over 20 years. She got her start in Portland, Maine where she first began her real estate career. She received her real estate education from the University of Southern Maine and was personally mentored in San Diego, California by Robert G. Allen, author of Nothing Down, Creating Wealth and The Challenge.
On moving back to West Tennessee in 1987, she went into business buying and selling discounted owner-financed notes secured on real estate. In 1990 Jo went to work for a residential mortgage company and has been a mortgage loan officer for over 20 years. Her goal is to offer excellent, affordable service to her customers, tailoring the loan programs to the specific needs of her clients.
In addition to her work in the mortgage field, Jo Garner is the primary sponsor and founder of Talk Shoppe in Memphis. www.TalkShoppe.com She was also the editor of Power Shoppe, a free weekly e-zine designed for real estate professionals and others indirectly connected to the real estate industry and currently publishes on her blog www.JoGarner.com