Mortgage Insurance
A contract that insures the lender against loss caused by a mortgagor's default on a mortgage.  Mortgage Insurance is generally required on all First Mortgage Loans that have a down payment of less than 20% of the purchase price (or until 20% equity is accumulated in the property).  

Types of Mortgage Insurance:

• Mortgage Insurance Premium (MIP)
  MIP is paid on government-insured FHA loans only 
   
• Private Mortgage Insurance (PMI)
  PMI is paid on non-government-insured loans (Conventional Loan Types)
   
• VA funding fee 
  One time funding fee in lieu of mortgage insurance
   
• Tax Advantage Mortgage Insurance (TAMI)
  May be applied by increasing the loan rate so it incorporates the mortgage insurance into the loan and thus, makes it tax deductible. i.e. 90% LTV loan at 5.0% rate will be increased to 5.5%

Note: not to confused with Hazard Insurance that is  a form of insurance in which the insurance company protects the insured (homeowner) from specified losses, such as fire, hail damage, etc.  

Mortgage Insurance Premium (MIP)
MIP is paid on government-insured FHA loans only and whose equity is less than 22% after 2001 (prior to 2001 - MIP was paid the whole loan term),(see below for Conventional-PMI and VA-Funding Fee),    

FHA loans also require an upfront premium.  See below.

How MIP is Calculated:

SAMPLE CALCULATION:
The example below is based on a loan balance of $150,000 with a 30 year term.

One-time FHA upfront "Mortgage Insurance Premium" calculation info.:
1.50% of base loan amount for a 15 Year Loan originated after January 1, 2001
1.50% of base loan amount for a 30 Year Loan originated after January 1, 2001

To calculate your one-time upfront MIP
take the percent above representing your loan term, and then multiply that to the base loan amount:

$150,000 x 0.015 = $2,250.00

Your upfront MIP would be $2,250.00  
This premium is due at closing but may be financed into the loan.

MONTHLY PREMIUM
In order to calculate the monthly Mortgage Insurance Premium, you would make the following calculation:
0.25% for a  15 Year Loan Monthly Premium
0.50% for a 30 Year Loan Monthly Premium 

$150,000 x 0.005 = $750.00
$750.00 ÷ 12 months = $62.50

Your monthly Mortgage Insurance Premium would be $62.50

The VA funding fee is required by law

First time VA home buyers have a 2 percent fee on no downpayment loans, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. 

The funding fee for second time users who do not make a downpayment is 3 percent.  The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a downpayment.  

Second time users who make a downpayment of at least 5 percent pay a reduced funding fee of 1.5 percent, the same as first time users making the same downpayment.  

Second time users who make a downpayment of 10 percent, the fee drops to 1.25 percent. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan.  

Veterans with service connected disabilities, are exempt from payment of a VA Funding Fee on all loan transactions.

See our VA page for the latest updates from The Department of Veterans Affairs

 
 
Private Mortgage Insurance (PMI)
Private Mortgage Insurance, is paid on all non-government-insured loans and whose equity is less than 20%.  PMI insurance has no upfront fee (FHA loans with MIP have an upfront fee)

Private Mortgage Insurance is calculated using the following table

In order to calculate the Private Mortgage Insurance, make the following calculations based on a 30 year Fixed Rate loan with a 97% remaining balance of $150,000:

$150,000 x 0.0090 = $1,350.00

$1,350.00 ÷ 12 months = $112.50

Your monthly Private Mortgage Insurance Premium would be $112.50

Any time our borrowers have a down payment less than 20%, we offer a Combo Loan first and a second mortgage to avoid mortgage insurance and/or Jumbo pricing, to you save money!

We offer several different Combo Loan opportunities, including:

• 100% CLTV loans
  80/20
  
  
• 95% CLTV loans
  80/15/5
  75/20/5
  
  
• 90% CLTV loans
  80/10/10
  75/15/10

Please see our combo loan page 

Tax Advantages Mortgage Insurance (MI)- A Smart MI Alternative.
Tax Advantage Mortgage Insurance offers a smart alternative to regular MI, turning the need for mortgage insurance into a benefit for our borrowers.  By folding the cost of mortgage insurance into the loan, our borrowers may realize a tax deduction,* plus a lower net monthly payment that can help make home ownership more affordable.  Tax Advantage MI is available in two versions, depending on your financial circumstances:

Monthly Tax Advantage MI features an add-on to the loan's interest rate to cover the cost of MI, resulting in a potentially greater tax deduction than with traditional mortgage insurance.

One-Time Tax Advantage MI features a 3-point increase in the loan amount, which is financed over the life of the loan and typically results in a lower monthly payment than with traditional mortgage insurance.

*Borrowers should consult their tax advisor regarding the deductibility of mortgage interest.  Please contact us for any restrictions on Mortgage Insurance and eligible loan types in Colorado.

See Title Insurance for other insurance covering your purchase and past ownership faults.

Also see: Homeowners Insurance for important info. on personal property and calamities.