Types of Insurance
There are 3 main types of insurance included as part of the mortgage process. One of them is mandatory all of the time while the other two are mandatory only under certain circumstances. All three of them protect you and Pivot Lending Group from losses that could result from damage to your home or as a result of circumstances that hinder your ability to repay the debt.
Homeowners or Hazard Insurance (this one is mandatory)
Homeowners insurance protects both you and the lender from losses that result from things like theft, natural disasters, fire and hail. Pivot Lending Group and any subsequent owners of your mortgage want to be protected from anything that can damage the structure, and therefore the value, of the home itself. There are many providers available so it is important to consider all of your options and the cost associated with the protection you desire. Hazard insurance providers handle coverage’s and claims in different ways, so it is important to ask about these processes as well. We recommend getting at least three quotes from different providers prior to making a decision..
Flood insurance is provided by several different sources, the main source being the Federal Emergency Management Agency (FEMA). This type of coverage is ONLY applicable if your home is declared by FEMA to exist within a flood plain. As you can imagine, the updating of information and flood maps can be a very large task. As such, FEMA uses 3 different methods to insure that all the maps relied upon for declaring whether or not a home is in a flood plain are updated as often as possible. Pivot Lending Group will check if the home your are seeking to buy or refinance is in a flood plain during the process of your transaction. If it is found that your home IS in a flood plain, we will ask that you procure a flood insurance policy through your hazard Insurance provider. The cost of this additional policy will vary, and depend on the frequency of a possible flood in that area your home is located. This frequency rating is shown below.
Mortgage insurance is a type of insurance that protects Pivot Lending Group from losses due to a borrower becoming unable to make payments to the point of foreclosure.
- Conventional loans- For conventional loans, it is only applicable if you have less than 20% equity, via down payment or appraised value, associated with the transaction. The cost of mortgage insurance will vary based on how much equity or down payment you have, your credit score and the type of transaction. You are also able to choose if you’d like to pay it monthly, one time up front or a combination of those 2 options. Mortgage insurance for conventional loans is offered by Pivot Lending Group at a discount for those who qualify. Make sure you ask your loan representative if you are able to qualify.
- FHA loans- FHA loans currently mandate that mortgage insurance be included on all FHA loans, for the life of the loan in most cases. If you have at least 10% equity or down payment, the mortgage insurance premium is limited to 11 years. This is subject to change via mandate of the Department of Housing and Urban Development.(HUD) Most new FHA loans also require a, upfront mortgage insurance premium of 1.75% of the loan amount, which is financed into the loan.
- USDA loans- Similar to FHA loans, USDA loans require both an up front fee and an annual fee. The annual fee is paid monthly and is included with your payment. The up front fee is currently 1%, which financed into your total mortgage balance. Ex. If you have a $200,000.00 loan, the fee would be $2000.00 and your total loan amount would then be $202,000.00. The annual fee is .35% paid monthly.