4 Ways Mortgage Insurance Helps Homebuyers — RISMedia
As real estate agents know all too well, homebuyers today are navigating one of the toughest real estate markets in recent memory, and affordability has become a major hurdle. Home prices are at their highest levels on record, inventory is limited, competition for affordable homes is still fierce, and recent mortgage rate increases have undermined some of their buying power. Buyers are stressed, exhausted by the process, and financially strained by the increased cost of purchase.
Mortgage insurance (MI) may be the key to helping more buyers afford a home in this environment. It works by lowering the traditional 20% down payment barrier, which has become increasingly difficult for buyers to save. With the median home price in the United States now over $300,000, that means buyers need to save over $60,000 for a 20% down payment. With a 3% down payment loan made possible by Private MI, these buyers only need about $9,000.
Viewing MI as a benefit for homebuyers requires a shift in perspective for many agents who are used to viewing it as something to be avoided at all costs. But consider this: MI offers a range of benefits that can help struggling buyers realize their dream of owning a home, even in this tough market.
Here are four important ways MI can help buyers:
- Afford a house sooner. Waiting to save a 20% down payment can be a huge hurdle for many homebuyers. And, as house prices continue to rise, the savings needed also increase. With Private IM, a buyer may be able to buy a home with as little as 3% down payment and start building long-term equity and wealth.
- Increase their budget. If your buyer is struggling to find the right home in their price range, MI can help them increase their buying power by putting a lower percentage on a more expensive home. For example, a buyer planning to put down a 20% down payment on a $300,000 home could use those same savings to put 15% down on a $400,000 home if they qualify for the loan amount.
- Cover an assessment gap. MI can be a simple and almost seamless solution that can also work for buyers facing a valuation gap. In some cases, MI can be used to change the loan-to-value (LTV) ratio and restructure the loan so buyers can cover valuation gaps while still having enough money to meet minimum loan requirements. advance payment.
- Preserve their savings. Even for buyers who could afford a 20% down payment, they may still prefer a lower down payment with MI as an opportunity to put some cash aside as a cushion for uncertain economic times.
Keep in mind that most MI products are temporary. Once the owner makes a certain number of payments or the property appreciates to a certain loan-to-value ratio and meets loan maturity requirements, the insurance may be eligible for cancellation. When house prices rise rapidly, as they have in recent years, the payment can fall even faster.
It’s time to change the mindset about IM to make it a benefit, not a burden, for those who need it. MI helps millions of buyers achieve their dream of home ownership every year, and it can help your customers too.
Visit radian.com to learn more about private IM and educational resources for homebuyers.
As Executive Vice President of Mortgage Insurance Sales at Radian, Marshall Gayden is responsible for the strategic direction and leadership of Radian Guaranty’s national sales force. In his 35 years of experience in the mortgage industry, Gayden has led high performing sales teams in retail, direct-to-consumer, wholesale/correspondent lending and insurance. mortgage.