Changes

==Public mortgage insurance==

==Public mortgage insurance==

To obtain public mortgage insurance from the [[Federal Housing Administration]] in the United States, a homeowner must pay an ''upfront mortgage insurance premium'' (UFMIP) equal to 1.75 percent of the loan amount at closing<ref>http://www.fha.com/fha_requirements_mortgage_insurance.cfm</ref>. This premium is normally included in the mortgage amount and paid to FHA on the borrower's behalf. Depending on the [[loan-to-value ratio]] (LTV), there may be a monthly premium as well. The United States Veterans Administration also offers insurance on mortgages.<ref name="va1"/>

To obtain public mortgage insurance from the [[Federal Housing Administration]] in the United States, a homeowner must pay an ''upfront mortgage insurance premium'' (UFMIP) equal to 1.75 percent of the loan amount at closing.<ref>http://www.fha.com/fha_requirements_mortgage_insurance.cfm</ref>  This premium is normally included in the mortgage amount and paid to FHA on the borrower's behalf. Depending on the [[loan-to-value ratio]] (LTV), there may be a monthly premium as well. The United States Veterans Administration also offers insurance on mortgages.<ref name="va1"/>

== Private mortgage insurance ==

== Private mortgage insurance ==

Many lenders require private mortgage insurance  when equity (or downpayment) is below 20%. The premium can range from 0.5% to 6% of the principal of the loan per year based upon loan factors such as the percent of the loan insured, loan-to-value (LTV), fixed or variable, and credit score.<ref name="TexasPMI"/> The premium may be paid in a single lump sum, annually, monthly, or in some combination of the two (split premiums). In the United States, payments by the borrower were tax-deductible until 2010.<ref name="mgic2"/>

Many lenders require private mortgage insurance  when equity (or downpayment) is below 20%. The premium can range from 0.5% to 6% of the principal of the loan per year based upon loan factors such as the percent of the loan insured, loan-to-value (LTV), fixed or variable, and credit score.<ref name="TexasPMI"/> The premium may be paid in a single lump sum, annually, monthly, or in some combination of the two (split premiums). In the United States, payments by the borrower were tax-deductible until 2010.<ref name="mgic2"/>

If mortgage insurance is required in the monthly payment (or PITI - principal, interest, taxes and insurance) as it is in most cases, the higher monthly payment can affect the borrowers overall debt-to-income level in qualifying for a [[Fannie Mae]]-backed loan. <ref>Fannie Mae guidelines for prime borrowers typically are expressed as 28/38, or 28% housing expense and 38% all forms of debt service. No more than 28% of a prime borrowers verified income can be used for housing expense and no more than 38% combined with all credit obligations (autos, credit cards, student loans, etc). Exceptions are allowed if the borrower shows other cash value assets, such as stocks, bonds, cash value life insurance, savings, etc.</ref>

If mortgage insurance is required in the monthly payment (or PITI - principal, interest, taxes and insurance) as it is in most cases, the higher monthly payment can affect the borrowers overall debt-to-income level in qualifying for a [[Fannie Mae]]-backed loan.<ref>Fannie Mae guidelines for prime borrowers typically are expressed as 28/38, or 28% housing expense and 38% all forms of debt service. No more than 28% of a prime borrowers verified income can be used for housing expense and no more than 38% combined with all credit obligations (autos, credit cards, student loans, etc). Exceptions are allowed if the borrower shows other cash value assets, such as stocks, bonds, cash value life insurance, savings, etc.</ref>

=== Borrower-paid private mortgage insurance ===

=== Borrower-paid private mortgage insurance ===