United Mortgage Loan (UWM) rolled out a new purchasing product that will forgo mortgage insurance payments if a borrower opts for a down payment of 10.01% or more. But borrowers would be advised to note that they will be affected by higher interest rates.
The product, dubbed “MI Buster”, will be available for conventional purchase loans starting at $ 200,000, as well as high balance loans with a loan-to-value ratio between 80.01% and 89.99%. , according to a press release issued by the Pontiac, Michigan-based lender on Wednesday.
Typically, if a borrower takes a conventional loan and deposits less than 20%, they must pay mortgage insurance until they accumulate 20% of the equity in their home, a condition usually set for the loan to be eligible for. be sold in the secondary market. Once this happens, mortgage insurance is usually canceled. The new wholesale lender product allows a borrower to forgo this step.
UWM, which will not sell loans with “MI Buster” to Fannie Mae Where Freddie mac and will retain their service, said in a statement that this product “offers a competitive advantage to independent mortgage brokers, saving their borrowers money on their monthly mortgage payments.”
“With mortgage rates rising, eliminating MI can also help borrowers, including first-time homebuyers, get more for their money, along with a more manageable monthly payment,” he said. the main wholesale lender said in a statement.
However, UWM’s “MI Buster” program raises questions as to whether the interest rate for this product will be significantly higher than that of a conventional 30-year mortgage.
Alex Naumovych, personal loan officer at Draper & Kramer Mortgage Company, said that the product launch appears to be a marketing initiative by UWM to launch a buying activity.
“Customers hear that you don’t have to pay MI and they are excited, but they don’t realize that they will have a higher mortgage payment for the life of the loan,” Naumovych said. “It is very likely that [this product] will have a higher interest and maybe it won’t be half a percent higher, because people have already put in 10% more, but it can be at least a quarter percent higher. “
In response to HousingWire’s inquiries, a spokesperson for UWM noted that “interest rates could be higher compared to a program with MI, however, the overall rate / payment is lower in almost all. the situations, in relation to [borrower paid mortgage insurance] Where [lender paid mortgage insurance]. “
Naumovych noted that by offering this product, the lender is not necessarily taking risks as the market appreciates and properties will continue to appreciate in value. “Also, they require a 10% deposit, so it’s unlikely that a person will leave the house,” he noted.
Earlier in November, UWM also introduced Jumbo ARMs for its broker partners, claiming that their main Jumbo ARMSs allow brokers to offer “competitive rates” on five, seven and 10 year variable rate mortgages.