Mortgage lenders are aggressively touting their “No PMI loans” for loan-to-value (LTV) ratios above 80% – for three reasons.
Reminder: A mortgage loan with less than 20% equity (or over 80% loan-to-value) typically requires Private Mortgage Insurance or (PMI).
Here are the reasons is why lenders are touting “No PMI loans” for LTVs over 80%:
1. There is a huge percentage of borrowers with LTVs over 80% (either because the market has softened or because they put down very little to begin with).
2. No PMI loans are a great marketing gimmick when touting refis – and they are often necessary to make a refi appealing for borrowers.
3. Single-payment PMI (with only one upfront payment required) is less expensive than ever…
#3 is a factor now because lenders simply use their yield premium or “rebate” to pay for the single premium PMI on behalf of the borrower, enabling the lender to tout a “No PMI” loan.
A lender could simply bump the rate 1/4%, for example, and then use the additional “rebate” from that higher rate to pay for the single premium PMI.
Single-payment PMI is so cheap in some cases though that we only need to bump the rate 1/8% to pay for it.
We employ the “Lender-Paid-Single-Payment-PMI” solution often in fact when appraisals come in low for purchases or refinances.
DSCR Rates Are Lower Than Ever – A Huge Boon for Investors and the Mortgage Industry!
We continue to be amazed (truly; this is not just “marketing hyperbole”) by how low DSCR rates are.
As a reminder, DSCR (Debt Service Coverage Ratio) loans use ONLY rental income to qualify investors.
But what is so amazing is that the rates are sometimes lower (when rents are high relative to housing payments) than what Fannie Mae offers for investment property financing.
We now have an excellent webpage devoted solely to DSCR financing for anyone looking for more info or rate quotes: LOW RATE DSCR FINANCING.
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