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