Which is what we’ll being doing this fall. And although we are fortunate enough to have the option to make a down payment of more than 20%, we’ll be using private mortgage insurance (MI). If that seems unusual, it may be time to rethink your MI strategy.
Throughout our most recent homebuying experience, I was able to show both our real estate agent and loan officer a few ways to use private MI as a strategy to overcome the challenges of today’s market as well as expand our cash flow options.
Overcoming a low appraisalIt took us a while to find a home on which we were willing to put an offer. Knowing that 2021 was a strong seller's market, we realized we’d have to go beyond the listing price if we wanted to buy the home. Which led to a discussion with our real estate agent about the appraisal and how it could come in lower than our offer.
I have no idea how many times she has patiently explained this scenario to her clients, however based on her reaction, I’m guessing it was the first time she had a client respond, “Yeah, we don’t need to worry about that. It’ll be fine either way."
Don’t get me wrong: I wasn’t hoping for a low appraisal. But I knew private MI could help us solve the problem if it arose, having spent the summer conducting webinars with my co-worker and friend Kevin Hearden, MGIC Product Development Director, showing mortgage professionals how to overcome a low appraisal.
As I explained this MI solution to our real estate agent it became very clear it was a new idea to her – one that could solve an issue her clients were facing a lot lately. So, if you are looking for a way to stand out with your referral partners, this MI Solution may be one to consider sharing with them.
Expanding our cash flow options
I don’t know if that first appraisal came in low or not. Like many homebuyers in 2021, our offer wasn’t selected on the first home we tried to purchase. But eventually we found the home for us and our offer was chosen over 7 competing offers.
Once again, we found ourselves taking advantage of an MI strategy that seemed new to the professional helping us. This time it was our loan officer, who was surprised we weren’t putting 20% down or planning to use the proceeds from the sale of our current home to pay down the loan to get to 80% LTV.
I explained to our loan officer how MGIC MI could provide cash flow options to allow us to make some immediate improvements to our new home. We want to convert the fireplace from natural to gas, retile the shower and do some landscaping. Rather than add these projects to a “someday” list, private MI Solutions will help us tackle them immediately.
True, our monthly mortgage payment will be higher than if we put 20% down or paid down the loan. But as I showed our loan officer, using the difference in that monthly payment, it would take us 15 years to save up the extra money we were able to access today, thanks to MGIC MI. (Learn more about how putting down 15% instead of 20% may have advantages for borrowers.)
“I’m not just the owner, I’m a client!”
Has everyone seen that classic Hair Club commercial? Perhaps it’s because I work for MGIC, founder of today’s private mortgage insurance industry, that I understand these purchase strategies. Here at MGIC, we know first-hand that private MI offers solutions for all kinds of borrowers and all kinds of challenges. MI helped many of us buy our first homes – and our second, third or fourth homes.
And all those borrowers out there who don’t work for MI companies (so, most of them)? They need your expertise to find the right loan solution for their specific situation. So, make sure MI Solutions are part of your strategy!