https://www.youtube.com/watch?v=41ySDSXqFyc&list=WL&index=10
Introduction to Mortgage Insurance: The video begins by introducing the importance of understanding mortgage insurance and emphasizes that online calculators often provide inaccurate information about it.
When You Pay Mortgage Insurance: The speaker explains that mortgage insurance is typically required when buying a house with a conventional mortgage and putting down less than 20% of the purchase price. FHA loans also require mortgage insurance. The focus of the video is primarily on conventional mortgages.
Exception for VA Loans: The speaker mentions that VA loans do not require mortgage insurance, addressing viewers who might be veterans or eligible for VA loans.
Misconceptions About Mortgage Insurance: The video dispels misconceptions about mortgage insurance being expensive. It clarifies that the cost of mortgage insurance depends on various factors, including the down payment, credit score, and debt-to-income ratio.
Factors Affecting Mortgage Insurance Cost: Mortgage insurance costs are explained to be influenced by down payment size, credit score, and debt-to-income ratio. The speaker highlights how small changes in these factors can significantly impact the cost of mortgage insurance.
Online Calculator Limitations: The speaker emphasizes the limitations of online mortgage calculators, noting that they often lack transparency in terms of assumptions. This lack of clarity can lead to inaccurate estimates.
Issues with Mortgage Calculator Apps: The video highlights issues with certain mortgage calculator apps that fail to provide accurate information about mortgage insurance. These apps may not consider critical factors like credit score and debt-to-income ratios in their calculations.
Lender-Paid Mortgage Insurance: Lender-paid mortgage insurance is explained as an alternative where the borrower pays a higher interest rate instead of a monthly mortgage insurance premium. The speaker mentions its potential advantages and disadvantages.
Okay, now let's talk about something else with mortgage insurance that comes up. There is what's known as lender-paid mortgage insurance. What that is, and look, there was a moment in time that I was doing a lot of it. It was years ago. I don't even know, like maybe I... I say prior, probably to 2018, like maybe 16. What lender-paid mortgage insurance is is that instead of charging you a monthly amount, they charge you a higher interest rate. Okay, back in the day when I was doing it, it was like the mortgage insurance would have been, you know, I'm just going to give you a random example, 0.6 per month, but I could go up in rate by .125. And if I looked at the overall monthly payment and where we thought the market was going, it made sense. Okay, and I would always discuss it with the client and give them the option. I don't do it now because it's really expensive. You know, to do lender-paid MI, you're going to be taking a significantly higher rate. And where I'm seeing lenders do it that I think is really stupid and messed up is they're doing lender-paid MI, which jacks up the rate, and then they're charging you discount points to lower the rate. The bottom line is that all you're doing is paying for the bulk of the mortgage insurance upfront, which is a... it's just a fancy way of doing it, you know, where you can... where the lender can say, 'Oh, I don't have mortgage insurance. You know, the rate's higher, but you can buy it down.'
One-Time Payment Option: The video briefly discusses a one-time payment option for mortgage insurance, where borrowers pay a lump sum upfront. The speaker expresses reservations about this approach, as it may not be financially beneficial in the long term.
Well, they also have what's known as a one-time payment with mortgage insurance that you can do. Never done it. I don't like it. I know it's another thing I don't like. I'm very fussy. But the reason I don't like it is because I think about it like this. So if someone said to me, 'Hey, Jen, your car insurance is going to be $200 a month, or you can pay $15,000 right now and not pay car insurance for, you know, forever, whatever, right?' Okay, maybe that's a bad example. But here's the... here's the question. When you're paying for it in a lump, like what happens if you sell the house? It's not like you get that money back, you know? What happens if you decide to refi? If you decide to refi, just because you paid that mortgage insurance upfront doesn't mean that you're not going to pay mortgage insurance on the refi if you don't have enough equity. You're going to end up having to do the same thing on the refi or paying monthly mortgage insurance. I think it's a slick trick to make people's payments look lower, okay? But that's my opinion, you know, and everyone's entitled to what they're comfortable with. You know, someone may be like, 'Hey, like, I'm never going to refi. I just really want to pay this mortgage insurance upfront.' Great. But here's the other thing you should know because we're talking about conventional loans, right? And you may be like, 'Oh, Jen, everybody should have paid upfront in 2021, 2020. Their rates are so low. They're never going to refi.' Jen, how are they going to get out of that mortgage insurance? Guys, you can cancel it, seriously.
Canceling Mortgage Insurance: The video explains that with conventional loans, mortgage insurance can be canceled once the borrower has at least 20% equity in the property and has made on-time payments for a year. Alternatively, if the home's value increases significantly, an appraisal can be used to remove mortgage insurance. This information clarifies that refinancing is not always necessary to eliminate mortgage insurance.
So mortgage insurance with conventional loans, once you have at least 20% equity in the property, and you've had to have made your payments on time for the last year, it cancels. You know, that's one way to get rid of it. The other way is after two years, let's say that your house is worth substantially more, okay? And we saw a lot of that like 2019 to 2021. Oh my God, if your house is worth substantially more, you call your lender and you say, 'Hey, like, my house is worth a lot more. I want to get rid of my mortgage insurance.' They'll have you pay for an appraisal. The appraiser goes out there, and if you have enough equity, you get rid of the mortgage insurance.
You do not have to refinance a conventional loan to get rid of mortgage insurance, okay? That's why I've never been a fan of the lump payment because I think there's a lot in life that can change. Like what if you get a raise or a bonus, and you start paying down the principal? You know, there's a lot of variables to it. But make sure you know that because there are a lot of lenders that try to trick people because they're desperate for business and they'll tell them, 'Oh, well, don't you want to get rid of your mortgage insurance,' without telling them the truth that, 'Hey, you can do it with a call and an appraisal.'
Lack of Transparency: The video highlights the lack of transparency in the mortgage insurance industry, where consumers may not receive clear information about how their premiums are calculated.
Advice to Homebuyers: The speaker advises homebuyers to engage with their lenders to understand how mortgage insurance costs are calculated, especially if they have specific financial circumstances. Being informed about the factors affecting mortgage insurance rates can help borrowers make more educated decisions.
Conclusion and Call to Action: The video concludes by emphasizing that mortgage insurance is not inherently negative, but borrowers should be aware of its cost factors. It encourages viewers to seek advice from experts and take advantage of free mortgage planning services provided by the speaker's team.
So overall, look, mortgage insurance is not the devil. But what's important to note is that the calculations that you're seeing online, they're not accurate. You know, many of them do not have assumptions. It's actually staggering how hard it is to find assumptions, and there seems to be a big disconnect between getting really transparent information to consumers on mortgage insurance.
So look, if you guys are buying a house and less than 20% down, conventional mortgage, and you're doing mortgage insurance, make sure you're talking to your lender about this. You know, and if you have a higher debt-to-income, ask the question. Say, 'Hey, like, if we got my debt-to-income down, can you run the mortgage insurance and tell me what that would be?'
It sounds crazy, but there's a lot of lenders that don't understand the nuances of how mortgage insurance is priced. So as always, questions, comments, feel free to reach out. If you have mortgage questions, you can always text, get on the calendar, Sandy and Alyssa answer questions. They do mortgage game planning all day long, and it's free to you guys. So please take advantage of their experience. Um, yeah, so I hope you guys enjoyed this video, and it helps you understand mortgage insurance a little better. Thanks for watching."
I hope this helps! If you have any more questions or need further assistance, feel free to ask.
Today, I want to talk to you about mortgage insurance. So, mortgage insurance is something that's important that you understand, and it's also important that you guys know the online calculators; they're not accurate. If you get anything from this video, that is what you need to get. So, let's crack into it.
First of all, when would you pay mortgage insurance? So, if you're buying a house with a conventional mortgage and you're putting down less than 20%, you would pay mortgage insurance. Okay, FHA also has mortgage insurance, regardless of how much you put down. Today, we're going to be focusing on conventional, okay? And I'm going to say this because I know my audience, VA has no mortgage insurance. Okay, so if you're VA, just stop watching this now or watch it and be like, 'Oh, that is confusing.'
First of all, mortgage insurance is not the devil. There's a lot of Reddit threads or stuff where people are like, 'Mortgage insurance is so expensive, or I need to save 20% because mortgage insurance is so expensive,' and it's really not. It depends on your situation. So here's the thing that most people don't realize about mortgage insurance.
So it's definitely one of those items that I'm paying close attention to because I want to make sure I'm quoting properly, you know? And sometimes what happens is maybe someone's looking for a $400,000 house, their debt-to-incomes higher, you know, but they find a house at 375; all of a sudden, everything looks better. And a big portion of that is because the mortgage insurance is less because their debt-to-income's lower. So it is important that you guys recognize this because credit score comes into play as well. You know, credit score is very important. The higher the credit with a conventional mortgage, the better the mortgage insurance. That is one thing that has not changed. So you want to make sure when you're thinking about buying a house, to be honest, that you're not looking at the online calculators if you're doing less than 20%.
And the reason I bring this up to you guys is because recently my team and I were looking at an app, and the app looked amazing. It would let you guys monitor your credit; it would let you do budgeting, and it had a mortgage payment component.
The reason we didn't move forward with that app is because the mortgage payment component didn't work. And when I say it didn't work, I'm like, 'Hey, like, where is this mortgage insurance amount coming from?' And there was nothing that said what it was based on. And I know enough about mortgage insurance to know that the amount you're being charged is based on the credit score, you know, the loan-to-value as well as the debt-to-income. So if I see something being quoted, it needs to say, you know, if it's generic, 'This is based on X, Y, and Z,' and I didn't see that.
And, you know, it's interesting because at the same time, I was talking to another app developer, um, and mortgage insurance was a problem on it as well because I was pricing out loans on it, seeing how close it was to what I was doing. And I was like, 'What the hell? The mortgage insurance is wrong on all of this.'
And when I talked to the developers, they're like, 'Oh, it's based on X, Y, and Z.' What? What? So you're basing this off of a 720 credit score, a 43% debt-to-income, and 5% down, even though I just put in the parameters for 10% down with a 760 FICO and a different debt-to-income. What? That's the thing that is. What we're seeing.
So it's like, look, even if you go to the big websites, right, because I had Alyssa after we noticed this on these two because I am desperate to get you guys an app that does everything I talk about in the videos because I feel like if you had that app, it just makes you so much stronger. And the reason why I keep on hesitating is because I see flaws. So I was like, Alyssa, can you go check out one of these big companies and just see if anyone's doing this right? She's like, 'Jen, they're high.' She's like, 'You know, I priced out on this, and I think they're doing it based on FHA, which is totally different than conventional.' You know, and that's what you guys need to be hyper-aware of when you're buying a house.
Okay. If, like, no matter what, you should be getting fully underwritten and approved by a lender, but it's important that when you're running numbers, you're having the lender, you know, say and look, 'I'm happy with clients asking me this. If they say, 'Jen, what is my mortgage insurance based on,' I'm happy to say, 'Hey, look, your credit came in at 714. I've got your loan-to-value at this, your debt-to-income is at this, I've got five mortgage insurance providers, and you're coming in at point 2 or point 7 or point 8, whatever it is.' Okay? So that if people want to run their calculations on their own, they can. But it's just not widely known that there is that variance in what mortgage insurance costs. And that's the real root of this for you guys to understand because if you're talking to your coworker Sharon, and Sharon's like, 'Yeah, we did 5% down, but oh my God, our mortgage insurance is so expensive.' Guys, Sharon might not have very good credit. You know, Sharon's debt-to-income might have been higher. Or maybe Sharon's telling you it's really, really cheap, but yours is much more. Maybe it's reversed. That's why you need to know that with mortgage insurance, it is personal.