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Loan Mechanics

What is LPMI?


Post number three in our Loan Mechanics: The Inner Workings of a Mortgage series is all about LPMI.

LPMI is exactly what it sounds like—the lender pays for the mortgage insurance. The fact that someone else is paying for it doesn’t make it free, but depending on your circumstance, it could save you some cash.

A price adjustment for LPMI is typically reflected in a higher interest rate. Still, some borrowers can benefit from lower monthly payments and greater potential tax deductibility. Plus, the overall loan cost can be lower than for loans with conventional mortgage insurance.  If you want to see how it compares to other options, check out this blog post from 2011 where we compared this option, to several other options as well.

We’re here to help you make comparisons, so never hesitate to ask. My team’s contact information is found here.

When Saving Money Can Cost You Your Home

As we continue in our Loan Mechanics: The Inner Workings of a Mortgage series, next up is new credit offers. 

We’ve all seen the offers: Save $10! Save 20%! Sign up now and receive special discounts! Buy now and join our VIP club!

We may have even taken advantage of them. Or have they taken advantage of us?

When buying a home or refinancing your existing loan, there’s only one thing to do when you see these offers:


STOP. Do NOT go forward. Do NOT pass “Go.” Do NOT apply for any new credit.

STOP. Do NOT go forward. Do NOT pass “Go.” Do NOT apply for any new credit.

With Fannie Mae’s Loan Quality Initiative (LQI), your credit report might be re-pulled just prior to closing. Any new debts or inquiries must be fully documented, and you may have to be re-qualified and re-approved by the underwriter.

A last minute credit-pull may be no more than an annoyance for some or an untimely delay for others. It could also be a major disaster for those who no longer qualify because of additional debt or a small dip in credit score.

Even in general, picking up your favorite store’s charge card to save 10% on a single purchase can actually cost you far more in the long run. Each new credit account can alter your credit score, which can impact everything from your mortgage rate to the cost of insurance and even your ability to get a job.

So always think twice about new credit. In particular, if you’re in (or soon to be in) the mortgage application process, understand that your decision “to save” could actually cost you dearly instead.

If you have questions about how credit actions may impact your mortgage costs, please give me a call. I’m here to help.