We had clients ask about the 95% Loan-to-Value loans with no mortgage insurance that are being touted by some lenders. But despite the lack of mortgage insurance, these loans are often less competitive than they might appear at first blush.
When there is “no mortgage insurance” on a high LTV loan, that simply means the mortgage insurance is built into the rate, so the rate is much higher. So if a buyer ends up with a 6% rate to avoid mortgage insurance he or she would have been better off with an FHA Loan at 5.0% with 0.55% mortgage insurance. Not only is the effective rate much lower, but FHA mortgage insurance can, in most cases, fall off in 5 years, leaving the borrower with a 5.0% fixed rate with NO mortgage insurance.
Founder/Broker | JVM Lending
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