3 Questions To Ask You Mortgage Insurance Agency

When you purchase a home, with a down payment less than the standard 20% that is normally required, you will be required to purchase personal mortgage insurance (or lender mortgage insurance); usually, the lender chooses the mortgage insurance agency and deals directly with them. Your only involvement will come when it is time for you to pay for the personal mortgage insurance.

In many instances, the home buyer is never aware of which mortgage insurance agency is actually being used, until all the paperwork has already been completed. For the most part, you will only know who insurance the actual mortgage insurance agency is when you receive your copy of the personal mortgage insurance policy. However, you can (and should) ask the lender to provide you that information - before you finalize our close your home loan.

Once you have all the pertinent information regarding the proposed mortgage insurance agency, you should try to find out as much about the agency as you possibly can. Here are a few questions to ask your mortgage insurance agency:

What Is the Actual Cost of the Private Mortgage Insurance Policy?

While not all lenders will do this, some lenders will attempt to pad, or inflate, the costs of private mortgage insurance - especially if you are including the costs into your loan balance and not paying the insurance premium up front. Therefore, knowing the actual cost of the personal mortgage insurance is not only essential - it’s prudent.

In order for the mortgage insurance agency to accurately quote the price for your personal mortgage insurance policy, they will need to know a few things like: the appraised value of the home, the purchase price and the amount of the down payment you will be making. Once the mortgage insurance agency has this information, they can accurately quote the cost of the policy. Needless to say, if your lender tries to charge you more than this amount, you should consider another source for your home loan.

How Is Your Company Associated with the Lender?

While this may seem like a bizarre question, it is one you should definitely ask; sometimes, the mortgage insurance agency is actually a sister company or another division of the lending company. If this is the case, you should strongly consider asking your lender to choose another mortgage insurance agency. The obvious conflicts will usually only cost you more money.

If I Pay You Directly, Can I Receive a Discount?

If the mortgage insurance agency that your lender wishes to use for issuance of the personal mortgage insurance policy -- is not too closely tied to the lender -- then you may very well be able to negotiate a discount with the mortgage insurance agency, especially if you will be making a one-time payment via check or cash. If the mortgage insurance agency declines, you have lost nothing. But, if they accept and give you a discount -- well, that’s less money you will need to spend.

These are only a few of the questions you might consider asking a potential mortgage insurance agency; the most important thing to keep in mind - find out which mortgage insurance agency will be underwriting your personal mortgage insurance policy. If this accomplishes nothing else, this will make your lender think twice about inflating the costs and fees associated with your personal mortgage insurance policy.