Podcast
Questions and Answers
When is Private Mortgage Insurance (PMI) typically required for a conventional loan?
When is Private Mortgage Insurance (PMI) typically required for a conventional loan?
- When a borrower has a high credit score.
- When a borrower has at least 20% equity in a refinance.
- When a borrower makes less than a 20% down payment or has less than 20% equity. (correct)
- When a borrower makes a 20% down payment on a purchase.
What is the primary purpose of Private Mortgage Insurance (PMI)?
What is the primary purpose of Private Mortgage Insurance (PMI)?
- To guarantee a lower interest rate for the borrower.
- To pay for the borrower's closing costs.
- To protect the borrower in case of job loss.
- To reduce the risk to the lender and enable higher LTV loans. (correct)
How does Lender Paid Mortgage Insurance (LPMI) function?
How does Lender Paid Mortgage Insurance (LPMI) function?
- The borrower accepts a higher interest rate, which the lender uses as a credit for the PMI premium. (correct)
- The lender pays the PMI premium directly, with no additional cost to the borrower.
- The lender pays the PMI premium by taking a credit from the borrower's loan.
- The borrower pays a lump sum upfront while the lender covers monthly payments.
What is the difference between Private Mortgage Insurance (PMI) and the mortgage insurance on FHA loans?
What is the difference between Private Mortgage Insurance (PMI) and the mortgage insurance on FHA loans?
Who typically makes the final decision on PMI approval when a lender has delegated underwriting authority?
Who typically makes the final decision on PMI approval when a lender has delegated underwriting authority?
What is typically the coverage of the private mortgage insurance?
What is typically the coverage of the private mortgage insurance?
What does obtaining private mortgage insurance commitment entail?
What does obtaining private mortgage insurance commitment entail?
Which insurance is always required as a condition of a mortgage loan?
Which insurance is always required as a condition of a mortgage loan?
Which type of insurance is typically included in Condominium Homeowners Association fees?
Which type of insurance is typically included in Condominium Homeowners Association fees?
What is the primary purpose of a flood certification?
What is the primary purpose of a flood certification?
What is a potential issue that must be resolved before ownership can be transferred, as identified by a preliminary title report?
What is a potential issue that must be resolved before ownership can be transferred, as identified by a preliminary title report?
Which of these most accurately describes 'replacement cost' in the context of homeowners insurance?
Which of these most accurately describes 'replacement cost' in the context of homeowners insurance?
What is NOT typically covered by a standard homeowners insurance policy without additional endorsements?
What is NOT typically covered by a standard homeowners insurance policy without additional endorsements?
Which entity creates flood zone maps and categorizes properties by flood risk?
Which entity creates flood zone maps and categorizes properties by flood risk?
For a standard FEMA flood insurance policy, what are the maximum coverage limits for a 1-4 family residential property?
For a standard FEMA flood insurance policy, what are the maximum coverage limits for a 1-4 family residential property?
When are borrowers required to show a paid receipt for flood insurance?
When are borrowers required to show a paid receipt for flood insurance?
Who typically pays for a Flood Certification during the loan process?
Who typically pays for a Flood Certification during the loan process?
What is the function of 'Lenders' Title Insurance'?
What is the function of 'Lenders' Title Insurance'?
Flashcards
Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI)
Insurance that protects lenders against borrower default when equity is less than 20%.
Loan-to-Value Ratio (LTV)
Loan-to-Value Ratio (LTV)
The ratio of the loan amount to the appraised value of the property; important in determining PMI.
Lender Paid Mortgage Insurance (LPMI)
Lender Paid Mortgage Insurance (LPMI)
PMI paid by the lender in exchange for a higher interest rate on the loan.
PMI Commitment
PMI Commitment
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Borrower Equity
Borrower Equity
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Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac
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PMI Costs
PMI Costs
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Homeowners Insurance
Homeowners Insurance
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Escrow Account
Escrow Account
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Flood Insurance
Flood Insurance
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High-Risk Flood Zones
High-Risk Flood Zones
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National Flood Insurance Program (NFIP)
National Flood Insurance Program (NFIP)
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Title Insurance
Title Insurance
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Preliminary Title Report
Preliminary Title Report
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Flood Certification
Flood Certification
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Condominium Homeowners Association Fees
Condominium Homeowners Association Fees
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Lenders' Title Insurance
Lenders' Title Insurance
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Study Notes
Loan Processing and Required Insurance
- Private Mortgage Insurance (PMI): Required for conventional loans with less than 20% down payment or equity (80% LTV). Covers lender loss if borrower defaults. Reduces lender risk, enabling higher LTV loans. PMI costs vary (credit score, loan product, term). Borrowers can pay monthly or upfront. Lender-paid PMI is possible by accepting higher interest rates.
- PMI Commitment: Obtained during processing. Details coverage and premium. Lenders may delegate underwriting authority for PMI.
- Government Mortgage Insurance: (FHA, VA, USDA) obtained after loan closing. Requires certification of loan compliance.
- Homeowners Insurance (Property Insurance): Necessary for all loans. Covers property losses/damages and liabilities; borrowers must provide proof of paid policy at closing. Costs vary based on the loan program and specifics, like location and risk factors. Could be paid directly to the insurance provider or escrowed by the lender, depending on the loan program and the borrower's preference
- Condominium Insurance: HOA fees often include insurance for common areas. Additional coverage for interior and contents may be needed.
- Flood Insurance: Required by lenders under certain conditions. Obtained through private companies (federal or private), costs are determined by flood zone designated by FEMA (Federal Emergency Management Agency). Flood zones are determined by risk of flooding, such as Risk A or V. FEMA surveys help determine flood risk. Borrowers need to present a paid receipt for the first year's premium (or it might be collected at closing). Covers building(s) up to $250,000 and contents up to $100,000 in a 1-4 family residential structure, private insurance providers may offer greater limits in some circumstances.
- Title Insurance: Ensures ownership rights to the secured property. Lenders require Lender's Title Insurance in most states. Obtaining preliminary title reports and determining current status of the title before lender approval. These reports include details on property owners, easements, liens, and encumbrances and aid in any potential issues.
Title Insurance Process
- Preliminary Title Report: Crucial for lender approval. Reveals the state of the title (property owners, easements, liens, encumbrances). Helps identify issues needing resolving before ownership transfer. The title report can also identify refinancing issues and prioritize lender liens.
- Report Provider: Usually provided free from the title insurer.
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