Insurance is a necessary yet also a hard part of loans, including mortgage loans. It gives extra sense of security, especially for lenders or fund providers. However for borrowers (who are responsible for paying), it is an extra burden that they have to shoulder in addition to interest rates and other service costs. Bank of America mortgage insurance regulations allow this type of insurance not to be applied onto loan programs.
Important Things about Mortgage Insurance
Bank of America mortgage insurance is a type of insurance that is known as private mortgage insurance. This type of insurance is considered as security measure taken by mortgage lenders. This is mostly to protect lender’s investment in the cases of borrowers’ defaults. There are instances when lender will not be able to regain the fund they have extracted for loans after foreclosures and property sale. This insurance makes sure that lenders can recover those gaps.
There are some factors affecting the cost of Bank of America mortgage insurance. The first factor is borrower’s credit scores. When borrower owns high credit scores, it means that they are reliable in terms of following loan agreement such as making payment on time. Borrower who owns higher credit scores will be charged with lower mortgage insurance than the one who has lower credit scores. Another influential factor affecting mortgage insurance’s cost is the amount of down payment. When borrower is unable to put down a down payment 20% or more from total value, they will be charged with mortgage insurance.
Another factor affecting the cost of Bank of America mortgage insurance is occupancy of a property. If the property is used as a primary residence, mortgage insurance is usually going to be lower than when it is utilized as an investment. The type of loan is also affecting mortgage insurance’s cost. Borrower who is taking fixed-rate mortgage is usually required to pay lower insurance than the one who is taking adjustable-rate mortgage.
Bank of America mortgage insurance cost varies from 0.3 to 1.5 percent from the initial amount of loan annually. Borrower may opt to pay it fully during loan closing if they have sufficient fund. There is also an option to pay monthly insurance premium in addition to monthly principal payment. Depending on the bank and type of loan, borrower may be expected to do both.
As stated previously, those who are required to get Bank of America mortgage insurance are homeowners who take conventional mortgage but unable to meet the criterion of making 20% down payment. Homeowners who are taking FHA loans are also expected to pay mortgage insurance premiums in addition to payment at closing. In the case of FHA loans, the premium is paid to United States Department of Housing and Urban Development monthly.
When borrower is unable to make 20% down payment but does not want Bank of America mortgage insurance to be applied, they can discuss another alternative with a mortgage specialist. This bank offers Affordable Loan Solutions mortgage program to solve this case. Borrower can make a down payment as low as 3% from original mortgage amount with no mortgage insurance required.