For most of you LPMI or BPMI is just one more cluster of capital letters in a sea of acronyms. However, if you are looking into a refinance or purchase, odds are you’ve asked about it.
Mortgage Insurance is one of those things no one likes. It’s an added expense with no benefit to the borrower, and if you’re coming in with less than 20% down, you’re stuck with it. So how great is it when someone tells you they can do your loan with only 5% down and no MI (mortgage Insurance).
The truth here is if someone is telling you they can do the same loan with no MI with under 20% down, they’re being a bit misleading. This is one of those moments where if it sounds too good to be true, than it probably is. These programs, which are generally accompanied by some sort of clever name such as “The Economic Opportunity Program” are simply programs where the lender agrees to pay the mortgage insurance and in turn they give you a higher rate than you qualify for. These are called Lender Paid Mortgage Insurance Programs (LPMI).
As with every program, there are pros and cons. And ultimately, whether or not the program is right for you it is based on your goals with the home, and your priorities. A higher interest rate with no MI might make sense for someone who has shorter term goals with the home. Similar to buying your rate down, it makes sense if you’re planning on keeping that loan for a long time.
The take away on this, is not that Lender Paid Mortgage Insurance programs are designed to be sneaky, or that they are bad programs, but just like every other program they are important to understand how they work, and if they pros of the program align with your priorities. Which is no easy task, but is the exact reason we are here. As always please feel free to reach out with any questions.
858.273.3663. ext 114