real estate finance - full book (500 pgs)

625 thus the lenders exposure on the property would

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Unformatted text preview: r. But with what amounts to 97% financing, coupled with reduced closing costs and cash reserve requirements, more families may find the dream of home ownership affordable. Dynasty School (www.dynastySchool.com) 6-17 REAL ESTATE FINANCE PRIVATE MORTGAGE INSURANCE Private mortgage insurance may be defined as an insurance policy issued from a licensed company to an approved lender, protecting that lender from financial loss due to the default of a borrower. This insurance is issued only on first–lien mortgages secured by improved residential property. Usually the insurance is only issued on mortgages that exceed 80 percent of the appraised value of the property. PMI has become a viable alternative to FHA insurance. PMI COVERAGE TYPES OF PROPERTIES As a real estate professional, you should have knowledge of the types of properties and the amount of insurance available. All PMI companies will normally issue policies on first–lien mortgages on a one– to four–family dwelling used as a primary residence where the loan does not exceed 95 percent of the appraised value. Some PMI companies will issue mortgage insurance on a mortgage for a second home or a leisure home. In this case, the loan may not exceed 80 percent of the appraised value. Some PMI companies will issue insurance on mortgages of one– to four–family dwellings that are not the primary residence, but are held as investment property. For the investment property, the loan–to –value ratio generally should not exceed 80 percent. Not only will PMI companies issue insurance on single family dwellings, but some of the companies will issue mortgage insurance on manufactured housing. To get the details on this coverage, you will have to contact the various PMI companies to see if they issue this type of insurance. Due to losses recently suffered in the industry based upon improper appraisal techniques and poor underwriting, PMI companies are establishing stricter guidelines in the areas of negative amortized loans and accepting insurance applications on condominiums and planned unit developments...
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