LPMI Loans – What are they?

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blog-author-clayjeffreys3

LPMI loans, or Lender Paid Mortgage Insurance, is a loan program that does not require a borrower to make monthly mortgage insurance payments regardless of the size of the down payment. A borrower can make a 3%, 5%, etc. down payment and not make monthly mortgage insurance payments.

Sound too good to go be true? Maybe. There is a catch. In exchange for not making a monthly mortgage insurance payment, the borrower agrees to a higher interest rate on the loan. The lender takes that higher interest rate and purchases a onetime up-front mortgage insurance premium at closing – thus Lender Paid mortgage insurance.

While the lender is technically paying the mortgage insurance, the borrower is really paying it through a higher rate. Does it make sense to use a LPMI loan?

If the goal is a lower payment, the answer is “yes.” When using an LPMI loan, the monthly payment will be lower than having a loan with a lower interest rate but paying monthly mortgage insurance.

Next time, I’ll discuss a couple of items to evaluate when considering a LPMI loan. In the meantime, if you’d like to know more about it, contact me today. I can help get you started on the path to home ownership.

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2 Responses to “LPMI Loans – What are they?”

  1. LPMI Loans – Things to consider | The Mortgage Blog Says:

    […] Professional, Honest Mortgage Advice from Dunwoody Mortgage Services « LPMI Loans – What are they? […]

  2. Home Buying Preparations – Down Payment | The Mortgage Blog Says:

    […] rate in exchange for no monthly mortgage insurance payment. For more details on this program, read this post from […]

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