There is a lot of available information on home mortgage loan rates and terms, but we often hear our customers wanting guidance beyond just what mortgage products are available. They frequently seek advice on things like Private Mortgage Insurance, how to finance the construction of a house, and any “do’s and don’ts” to be mindful of during the financing process. We are often asked these questions:

What are the advantages of Private Mortgage Insurance (PMI)?

Mortgage insurance for conventional loans is typically a hot topic for borrowers as they often focus on its cost rather than understanding the benefits. Mortgage insurance is required on all conventional loans where the loan to value is above 80% to provide additional security for the lender. For the borrower, PMI is an excellent tool to help purchase a house with less than a 20% down payment. A good mortgage lender can help a borrower compare the cost and benefits of utilizing PMI rather than using a second mortgage loan and can determine the best way to pay the PMI premium.

We help our borrowers analyze three ways of using mortgage insurance to determine the best solution. The most common approach is Monthly Mortgage Insurance which is simply a monthly premium added to your payment, and it drops off once the loan is paid down to 78% of the value. The second option is Lender Paid Mortgage Insurance in which the borrower opts for a slightly higher interest rate, and in turn the lender pays on behalf of the borrower a one-time mortgage insurance premium. The third option is a Borrower Paid Upfront premium whereby the borrower will prepay the mortgage insurance premium at closing and will never pay monthly for mortgage insurance.

What options do I have to finance the construction of a new house and then transition into a permanent mortgage loan?

Home construction is generally a two-step process of first arranging a construction loan and then transitioning into a fixed rate mortgage loan once the house is complete. We provide both of these steps which is a great convenience to the borrower, and provides cost savings as well. Additionally, there are options for a one-time closing construction/permanent loan. Each of the two approaches to financing your home construction has unique advantages, and River Bank can help you determine your best path.

What are things I need to be aware of while in the process of financing a house?

This is important: a loan decision is based upon information provided at the time of application. If financial circumstances change after the application is created, it can affect your loan. Once the mortgage process begins it is important to avoid incurring new debts when possible (for example: a car, a boat, maybe even appliances), co-signing on a loan for another person, or a job change with a change in income, as these can delay a closing. Similarly, it is smart to keep your lender informed if your income changes, if you make a large bank deposit or sell investment assets, and we encourage you to maintain a paper trail of financial activities in case they create any questions.

Buying or refinancing a house is a major financial decision, and an experienced mortgage banker will add value to the process. It is time well spent to draw upon their knowledge and use them as a sounding board for ideas or questions you have on the best way to structure your loan. This added value cannot be found when borrowing money through the internet. If home buying, building, or refinancing is on your mind, let the experienced team of bankers at River Bank help you get started.

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