Lender Paid PMI or LPMI is a great way to potentially lower a home loan monthly payment.

Let’s face it, everyone wants as low of a mortgage payment as possible!  No one says give me the biggest payment you can, right?  Well, one solution for receiving a lower mortgage payment is to use a product / insurance called Lender Paid PMI.  Private Mortgage Insurance (PMI) is required in one form or another on conventional Fannie Mae or Freddie Mac loans when borrowing over 80% of the value or purchase price as one loan.   We offer several types of PMI options to go along with your conventional loan in this case.

 Options we offer on PMI type loans include:

• Borrower Paid Monthly PMI
• Single Premium PMI, learn more
• Split Premium PMI, learn more
• Lender Paid PMI

Each PMI type has advantages in different scenarios over the other depending on the borrower’s needs and goals.  But in this article, we are discussing when and how to use Lender Paid PMI on a purchase or refinance.  Often, the total mortgage payment with Lender Paid PMI is less than the total monthly payment with borrower paid monthly PMI.  So when looking for a creative way to lower a payment for budgeting or qualifying reasons, Lender Paid PMI could be a great option which we offer.  There are several differences between Lender Paid PMI and monthly PMI, plus not all lenders offer this product.

Lender Paid PMI – How It Works to Lower Your Mortgage Payment

1. The cost of the PMI is factored into the rate.
2. The total payment is usually lower than a traditional principal, interest, and monthly PMI payment.
3. PMI cannot be cancelled.  Other words, there is no PMI to drop off of the payment down the road.  Learn more about when tradition or government loan PMI can stop .
4. The rate is a little higher on Lender Paid PMI but this is because the lender is paying the PMI for the borrower.
5. It is possible that the borrower’s regular monthly PMI may not be tax deductible.  But the whole rate with Lender Paid PMI may be deductible (consult your tax professional).
6. Lender Paid PMI could also be an advantage over an FHA loan because FHA has an up-front financed PMI.  Additionally it has a monthly amount that could continue for the entire term of the loan.  This applies to FHA loans when a buyer puts down less than 10%.

When Lender Paid PMI May Be An Option for You:

• When you are looking to finance 85% or more of a home price or value
• Prefer a lower mortgage payment option
• May not have the mortgage for an extended period (over 10 years or so)
• Are interested in a potential higher tax deduction (consult your tax advisor)

Other Details for Lender Paid PMI (guidelines subject to change):

• Primary residences only
• 45% maximum debt ratio
• Minimum 680 credit score required
• 1 unit detached or attached homes only
• Purchase or rate/term refinance only (no cash out refinancing)

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We hope you find this article helpful and encourage you to reach out to our dedicated loan officers. So let us help you buy your next home!