In order to purchase a home with less than 20 percent down payment, most lenders will require you to obtain mortgage insurance (MI). The following information provides you with facts about MI in order to help you determine if this product is the right option for you or your client.

Over past several years, there has been a significant increase in what is known as “piggyback” loans – which provides consumers with a competitive first mortgage (typically 80% LTV) combined with a second mortgage that covered the remaining portion of the loan. Many Asian American borrowers and housing professionals that serve the Asian American community have generally avoided MI in order to reduce the monthly cost of a mortgage. While there are many cases where piggyback loans can be a lower cost option for consumers, consumers and housing professionals should always compare all mortgage options, including MI, to ensure that they are getting the best deal.
Comparing Mortgage Options

Mortgage options are changing. Use AREAA’s resources, including PMI’s eCompare calculator, to provide your customers the best options.

Benefits for Consumers
* With mortgage insurance, there is only one loan and one monthly payment.
* Borrower-paid mortgage insurance automatically cancels when you’ve built up enough equity in your home, and may be cancellable sooner.
* With mortgage insurance, you don’t have to worry about the balloon payments that many second mortgages carry.
* Mortgage insurance premiums are fixed and are not affected by rising short-term interest rates.
* Interest paid on financed mortgage insurance may be tax deductible.
* For loans that close on or after January 1, 2007, the MI premium may be tax deductible. Borrowers with a yearly household adjusted gross income of $100,000 or less can deduct the entire cost of their MI payments. Households with incomes between $100,000 and $110,000 can claim a partial deduction.
* Instead of waiting to save up a 20% down payment – and paying a higher sales price as home values increase – you can use mortgage insurance to get into a house and begin to build wealth immediately. Although, in a flat real estate market, it may make sense to save rather than purchase a home immediately.
* The sooner you buy your house, the more you can benefit from asset appreciation. Click here to learn more. (Link would go to Asset Appreciation Overview, at end of this document)

Benefits for Housing Practitioners
The following are some basic benefits that housing practitioners should consider when advising borrowers:

* With MI, there are special products for first-time buyers, low- to moderate-income borrowers, and minority borrowers who may not qualify under traditional FICO, LTV, and credit guidelines.
* Closings are often faster, with only one loan to underwrite, process, and close.
* Customized financing options and advice satisfy customers – creating the opportunity for referrals and repeat business.
(reprinted courtesy of AREAA.org)