CAN MEAN A LOWER COST

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1 REALTOR Presentation FOR MOST HOME BUYERS, A CONVENTIONAL LOAN CAN MEAN A LOWER COST Right for You, Right for the Buyer Carolyn Delaney Senior Account Executive Cell: Proprietary 2015 United Guaranty Corporation. All Rights Reserved.

2 WHAT IS MORTGAGE INSURANCE? If a homeowner defaults on a loan and the loan goes to foreclosure, a mortgage insurer (United Guaranty) covers a portion of the expenses and outstanding loan balance that the lender cannot recover. Benefits for home buyers: Lower down payment as low as 5% or even 3% allowed. Can buy a home sooner; saving the cash for a traditional 20% down payment remains a significant barrier to home ownership. Can buy more home for the same amount of cash at closing. Home Purchase Price 20% Down Payment (no MI) 10% Down Payment (with MI) 5% Down Payment (with MI) 3% Down Payment (with MI) $200,000 $40,000 $20,000 $10,000 $6,000 $300,000 $60,000 $30,000 $15,000 $9,000 $400,000 $80,000 $40,000 $20,000 $12,000 2

3 OPTIONS FOR PAYING THE MI PREMIUM Monthly Premium Payment Options PostPay. This is our most popular option. The first premium payment isn t due until the first mortgage payment is due. Non-PostPay. Premiums are due monthly from the borrower. Borrower- or lender-paid. Monthly premium payments can be passed on to the borrower or can be paid by the lender (with the MI cost reflected in a higher mortgage interest rate). Single Premium Option A lump-sum MI premium for the life of the loan is paid at closing. The premium can be added to the loan amount and be financed as part of the total loan. Borrower- or lender-paid. Monthly premium payments can be passed on to the borrower or can be paid by the lender (with the MI cost reflected in a higher mortgage interest rate). Split Premium Option A lump sum premium is paid at closing to cover a portion of the total MI premium. Subsequent payments are made with the monthly mortgage payment. Borrower-paid only. Annual Premium Option This is our least common option. The mortgage insurance premium is paid each year. Borrower- or lender-paid. Monthly premium payments can be passed on to the borrower or can be paid by the lender (with the MI cost reflected in a higher mortgage interest rate). 3

4 MONTHLY PAYMENT MI PROGRAMS FROM UNITED GUARANTY PostPay Monthly (default payment method) No mortgage insurance premium has to be paid at closing. The premium is paid in arrears. The first premium will be billed the month after the mortgage insurance is activated and is due by the end of the following month. * Non-PostPay Monthly One month s premium is due at closing. The lender must choose to change the default selection from PostPay to this option. For Both Monthly Options Coverage goes into effect on the date the loan closes. The borrower pays no (or a minimal) premium payment at closing, depending on the premium option. There is no increase in the interest rate or loan amount to cover the premium. Monthly options may be cancelled (under the Homeowners Protection Act of 1998; HPA) when the mortgage insurance is no longer needed. * Lender discretion as to additional premium required for escrow. 4

5 SINGLE-PREMIUM MI PROGRAMS FROM UNITED GUARANTY Single Premium Paid at Closing One-time premium payment due at closing covers the entire life of the loan. An approved third party can make the premium payment for the borrower. Mortgage insurance may be cancelled when it s no longer needed. If there is any amount of mortgage insurance premium that hasn t been applied to the loan (unearned premium), it may be refundable. Premiums can be refundable or non-refundable. If the mortgage insurance is cancelled under the HPA, a refund of unearned premium is always allowed. Single Premium Financed The entire MI premium is added to the mortgage balance. The amount added to the mortgage balance may be limited by the lender and/or investor. Mortgage insurance may be cancelled when it s no longer needed. Premiums can be refundable or non-refundable. If the mortgage insurance is cancelled under the HPA, a refund of unearned premium is always allowed. 5

6 LENDER-PAID MI PROGRAMS FROM UNITED GUARANTY Lender-Paid Mortgage Insurance Available on Single, Annual, and Monthly premiums. Mortgage insurance premium is paid by the lender. Lender-Paid mortgage insurance is not refundable. The lender typically recovers the premium by charging a higher interest rate. Cannot be cancelled by borrower; lender can cancel at any time. There is no premium due at closing or with the borrower s monthly loan payment. The borrower may get a tax deduction for the additional interest from the higher interest rate. * Suited for borrowers who plan to stay in the home less than 10 years. Looking for more purchasing power compared to monthly? Lender-paid MI typically lets the borrower buy 5% more house for the same monthly payment. * United Guaranty does not provide tax advice. Please consult your tax professional. 6

7 UNITED GUARANTY S PERFORMANCE PREMIUM As the first and only true risk-based pricing model in the industry, Performance Premium goes beyond the usual rate-card pricing and considers each loan individually. Home buyers who have been responsible with their credit can save money. Gives your clients opportunities that can t be found on the rate cards used by other mortgage insurers. Allows coverage for borrowers with non-traditional credit. Includes coverage for non-primary residences (for example, second homes) that are usually more difficult to insure. 7

8 MORTGAGE INSURANCE CANCELLATION The borrower can request cancellation of private mortgage insurance when it s no longer needed, or the lender will cancel it automatically. Automatic Cancellation * When the principal balance of the mortgage is first scheduled to reach 78% of the original value of the property. The borrower must be current on mortgage payments. Borrower-Initiated Cancellation * When the principal balance of the mortgage reaches 80% LTV based on original value and scheduled amortization (or based on actual payments). There can be no subordinate liens. The property has not declined in value. The borrower must be current on payments and have a good payment history (no payment more than 30 days late in the past year, or more than 60 days late in the past two years). * Requirements vary by lender and may not be all-inclusive. Borrower must contact their loan servicer for details on initiating cancellation before reaching 80% LTV based on the original value of the loan. 8

9 FHA INSURANCE CANCELLATION The FHA insurance premium could total as much as THREE TIMES THE COST of United Guaranty MI over the life of the loan. UNITED GUARANTY PERFORMANCE PREMIUM Borrower-Paid Monthly Borrower-Paid Single Lender-Paid Single FHA Financed Total MI Cost over Life of Loan $9,860 $4,720 $15,626 $36,379 FHA insurance is not cancelable on new loans over 90% LTV. FHA insurance on loans at 90% LTV and under is not cancelable until after 11 years. Private MI remains refundable for certain plans, even for NO-REFUND financed premiums, under certain conditions. Assumptions: Base loan amount $200,000, two borrowers, both with 720 credit scores, 41% DTI, 30-year fixed-rate purchase loan, single-family house, stable market, 95% LTV United Guaranty, and 96.5% LTV FHA. Performance Premium pricing as of May 12, FHA Rate source: FHA Mortgagee Letter

10 THE ADVANTAGES OF CONVENTIONAL LOANS WITH MI Conventional insured (non-fha) loans often have a lower monthly payment with more product options than FHA loans. ADVANTAGES OF CONVENTIONAL LOANS WITH PRVATE MI For Qualifying Buyers: Potential to save thousands in mortgage insurance premiums. Gifts / grants allowed to satisfy borrower s minimum contribution.* Monthly and single MI options offer flexibility: Zero cash for premiums due at closing for monthly premiums or financed plans (including third-party financed options for singles). Cancelable and potentially refundable. Increased purchasing power and affordability. For REALTORS : Competitive edge Client savings on monthly mortgage payment, repeat business, and referrals from satisfied customers. Potential for faster and less complicated closings: No FHA appraisal / appraiser requirements. Easier for the seller to meet inspection requirements. Less paperwork can mean faster closing. * When standard Agency gift/grant and United Guaranty requirements are met. 10

11 COMPARE THE NUMBERS: OUR MI RATES VS. FHA United Guaranty Performance Premium FHA Borrower-Paid Monthly $1, Total Monthly Payment $96.67 Monthly MI Premium 58 bps 3.875% Five-Year MI Savings $6,444 Compared to FHA Total Cost of MI over Life of Loan Lender-Paid Single $ Total Monthly Payment $4,240 Up-front MI Premium Paid by Lender 212 bps 4.25% Five-Year MI Savings $8,551 Compared to FHA FHA Financed $1, Total Monthly Payment $3,500 Up-front (175 bps) + $ Monthly (85 bps) 3.50% $9,860 $15,626 $36,379 Assumptions: Base loan amount $200,000, two borrowers, 720 credit score, 41% DTI, 30-year fixed-rate purchase loan, singlefamily house, stable market, 95% LTV United Guaranty, and 96.5% LTV FHA. Total monthly payment includes PI + MI. Performance Premium pricing as of May 12, FHA rate source: FHA Mortgagee Letter

12 COMPARE THE NUMBERS: OUR MI RATES VS. FHA United Guaranty Performance Premium Borrower-Paid Monthly $96.67 Monthly Lender-Paid Single $4,240 Up-front paid by lender 58 bps 212 bps 4.0% Five-Year MI Savings $6,500 Compared to FHA Total Cost of MI over Life of Loan 4.375% Five-Year MI Savings $8,604 Compared to FHA FHA FHA Financed $3,500 Up-front + $ Monthly 175 bps (upfront) 85 bps (annually) 3.75% $10,534 $15,747 $36,587 Borrowers can use gifts and grants for the entire down payment.* United Guaranty allows higher LTVs than FHA.* Assumptions: Base loan amount $200,000, two borrowers, 760 credit score, 41% DTI, 30-year fixed-rate purchase loan, singlefamily house, stable market, 97% LTV United Guaranty, and 96.5% LTV FHA. Total monthly payment includes PI + MI. Performance Premium pricing as of May 12, 2014 using 35% coverage. FHA rate source: FHA Mortgagee Letter * Certain restrictions apply. Visit for complete details. 12

13 COMPARE THE NUMBERS: OUR MI RATES VS. FHA United Guaranty Performance Premium Borrower-Paid Monthly Lender-Paid Single FHA FHA Financed $1, Total Monthly Payment $ Total Monthly Payment $1, Total Monthly Payment $85 Monthly MI Premium 51 bps 3.875% Five-Year MI Savings $7,144 Compared to FHA Total Cost of MI over Life of Loan $3,920 Up-front MI Premium Paid by Lender 196 bps 4.375% Five-Year MI Savings $8,546 Compared to FHA $3,500 Up-front (175 bps) + $ Monthly (85 bps) 3.5% Assumptions: Base loan amount $200,000, two borrowers, 760 credit score, 41% DTI, 30-year fixed-rate purchase loan, 18% charter coverage, single-family house, stable market, 97% LTV United Guaranty, and 96.5% LTV FHA. Performance Premium pricing as of May 12, FHA rate source: FHA Mortgagee Letter AFFORDABLE HOME PROGRAMS Offer first-time home buyers a low MI premium with United Guaranty. Lenders choosing the minimum 18% MI coverage on a 97% LTV loan can help more young buyers and families purchase a home now. $9,350 $15,746 $36,379 * Certain restrictions apply. Visit for complete details. 13

14 CONVENTIONAL LOANS WITH MI CAN MEAN A LOWER COST Get your client thinking outside of rate focus on best payment! Carolyn Delaney Senior Account Executive Cell: United Guaranty Residential Insurance Company United Guaranty Mortgage Indemnity Company 230 N. Elm St., Greensboro, NC United Guaranty is a marketing term for United Guaranty Corporation and its subsidiaries. United Guaranty, PostPay, and Performance Premium are registered marks. Coverage is available through admitted company only. REALTOR a registered mark of the National Association of Realtors. 14

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