Hi everyone. This is your Tampa Bay Realtor Lance Mohr and in this video I
want to talk about what is mortgage insurance
how does mortgage insurance work and what are the different types of mortgage
insurance so I'm going to talk about that in this video
okay so what is mortgage insurance I get a lot of questions on this a lot of
people are very confused they say words like mortgage insurance and PMI and what
is that how does it work let me break it down into three different types the
first is on a conventional loan when I say conventional I pretty much mean
financing by either a Fannie Mae or Freddie Mac the second is on an FHA loan
so the Federal Housing Administration which is department within HUD Housing
and Urban Development the third is the VA which is Veterans Administration so
let me talk about VA first a lot of people think oh well they don't have
mortgage insurance and in a way that would be right because what VA does is
they have a one-time upfront fee that you can roll into the price of the home
and it's called a funding fee so you're not like a typical mortgage insurance
you're not paying upfront and then every month or you're not paying just every
month so you're paying a one-time fee and that's it you're sort of one and
done now the thing about the insurance the thing about the funding fee is this
is VA zwey being the government of ensuring the mortgage of default so if
they go into the default the lenders not on the hook which is the whole reason
for the funding fee or mortgage insurance in the first place now the
second one is FHA now FHA is a program that's primarily designed if you're not
going to put a lot of money down but there's a lot of other great benefits to
FHA the one negative to FHA is their mortgage insurance now it's mortgage not
private mortgage insurance there's this EMI for mortgage insurance it stays with
you the entire time of the loan so if you live in a home and you have the FHA
loan for five years you're going to have mortgage insurance for five years if you
have the FHA loan for 25 years you're going to have the mortgage insurance for
25 years the only way to get rid of it is to get
rid of the loan and that could be good it could be bad so it's not you don't
fall under that where the where you're going to get 20%
equity and then you automatically get it removed
that isn't what FHA does now again a lot like VA if they chase the government so
they're ensuring the the lender in case there's default the third is
conventional and this is what most people talk about when they talk about
mortgage insurance is called PMI or it's called private mortgage insurance the
difference is is FHA is mortgage insurance
am i conventional as PMI private mortgage insurance because they're not
the government they're private companies that are
basically insuring the lender of default now if you put down 20% on a loan you
don't have to worry about mortgage insurance or private mortgage insurance
I should say you won't have it if you put down 15% or 10% or 5% you're going
to have mortgage insurance because the lender is going to require now the less
money you put down the more reliability it is so the higher the insurance cost
so someone put down 5% is going to have a higher mortgage insurance than someone
putting down 10% or someone pinning down 10% their insurance is going to be more
than someone putting down 15% most most of the time people just put down 5 or
10% or then it then jumps to 20 but that's basically how it works again
they're insuring the lender in case of default now on a conventional if you get
that 20% equity then you could get the mortgage insurance taken off what
usually happens and I don't want to speak for every mortgage company out
there but I always tell people when they feel they reach that 20% mark pick up
the phone give a lender a call tell him you would like to take the mortgage
insurance off sometimes they just do everything in-house to see what the
value is other times they might send out an appraisal and you may have to pay for
the appraisal but you know maybe 300 or 350 dollars or something and they'll
value it in to see where you are so if you could take
the mortgage insurance off your home so that's how mortgage insurance works or
private mortgage insurance or a funding fee again it's just protecting the
lenders assets in case the buyer defaults on the one so hopefully this
never happens if you have any questions at all don't hesitate to give me a call
or you know I always tell people call wonder they could give you all the all
the detailed information in your area and and what you're looking for but I'd
be more than happy to answer any questions if I can and I hope you have a
wonderful day if you're looking for an agent in Tampa give me a call I'd love
to talk to you if not I wish you guys the best of luck and thank you for
watching my youtube videos don't forget if you like these videos please give me
a thumbs up thank you very much
you