Is Meridian Home Mortgage Legit?

Meridian Home Mortgage is dedicated to our customers.

Is Meridian Home Mortgage Legit?

You have a lot of questions about us, which is normal. Not many people have heard of Meridian before they do business with us, but we bank on the fact that responsible homeowners like yourself will do the research. And here you are.

So, to answer the question that landed you here, we’d like to share a fact with you: Meridian has funded billions of dollars’ worth of closed loans since opening our doors in 2001.

But, helping to get loans funded isn’t all we do.

How We Help Homeowners

Collectively, we help homeowners shave hundreds off their monthly payments.

We provide thousands in additional cash back for homeowners to use however they please.

After almost two decades of assistance to homeowners, we know the refinance process like the back of our hands. And, there is a pattern to our recipe for successful refinances.

Our teams don’t work on commissions. Instead, our people-first approach to lending keeps us focused on the families we treat like our own. And, we frequently ask customers how we’re doing in this pursuit.

We Encourage Customer Feedback

We actively seek input from our customers through every stage of the refinance process. These surveys and reviews are how we gauge where our team needs to improve. It’s also how we ensure that you are being taken care of.


And, taking care of customers is only the beginning. We’ve come to realize that great customer service is powered by the committed workforce behind it.

We Won the Baltimore Business Journal’s Best Places to Work Contest

Meridian: Winner of BBJ's Best Places to Work, 2017

Meridian Wins BBJ’s Best Places to Work, 2017

How do you create a dedicated workforce that is motivated to fight for customers every day? By taking care of the employees who take care of you. Our company won the Baltimore Business Journal’s Best Places to Work contest because of our dedication to create a great company culture that works to help homeowners achieve successful financial futures.

Check out our company culture for yourself. You can also meet the staff that will be serving you throughout this process.

We Are Here to Help

Our team is always here to answer any questions you may have about our company, the refinance processes, and about refinancing in general.

If you’d like to know how we can help you, call us at 877-878-0100 or visit us at

P.S. – If you received a letter from us in the mail, then we’re already confident we can help you. That’s why we prequalified you! Reach out and see how we can save you hundreds of dollars every month.

Meridian Wins BBJ’s Best Places to Work 2017

Meridian: Winner of BBJ's Best Places to Work, 2017

Meridian Wins BBJ’s Best Places to Work 2017

What do professional massages, BBQ food trucks, omelet waffle bars, crab feasts, and wine paint nites have in common? Together, they are a part of the many events that Meridian Home Mortgage has hosted for employees this year.

This dedication to company culture has contributed to Meridian being named a winner of the Baltimore Business Journal’s Best Places to Work contest for 2017.

Although company-hosted events were considered in the judging, contestants were scored on a long list of criteria by third-party feedback software company, Quantum Workplace.

The Judging

Quantum Workplace analyzed thousands of anonymous employee reviews from hundreds of companies across the Baltimore area. In this initial review process, employees were given free reign to grade everything about their employer – from work environment to management styles, benefits packages, and more.

Quantum Workplace then took those scores and ranked every company based on these employee reviews.

After a months-long nomination process, Meridian emerged as the highest-ranking company and winner of the contest’s Large Business category. And after tallying the company-provided benefits, it’s no wonder why.

The Winning Benefits

Meridian’s benefits are exceptional and hard to beat. Health insurance for employees and their families is 100% paid for by Meridian. Employees even get a pre-paid debit card to cover their deductibles. That means no co-pays, no prescriptions, and no medical expenses of any kind. (Seriously, what company does this with today’s crazy healthcare costs? It’s insanely wonderful).

And this lavish healthcare plan is supplemented by a generous PTO that includes personal days, sick days, and vacation days. Meridian sings the importance of work-life balance from the rooftops, and every manager backs it up.

A few other benefits that employees mentioned in their surveys include:

  • Generous 401k match plans
  • On-site fitness facility for all employees (furnished with showers, the latest exercise equipment, free weight systems, televisions, and more)
  • Newly renovated offices
  • Monthly catered lunches
  • Annual bonuses for all employees
  • Company-paid education courses
  • New computers and upgraded tech
  • Competitive salaries
  • And more!

Did we mention that employees get an hour of paid lunch? It’s a small gesture, but another example of investing in employees, none the less.

Meridian Home Mortgage is dedicated to our customers.

Employees Thrive Here

Meridian co-owners Mike Zgorski and Glenn Belt have designed a workplace culture that centers around taking care of employees. From promoting work-life balance to providing 100%-paid healthcare benefits, Meridian offers a fulfilling and fun work environment where employees are set up to succeed.

“We understood from the beginning that a dedicated and motivated workforce was essential to our business,” co-owner Glenn Belt explained.

With a 97% retention rate and high review scores that speak to Meridian’s outstanding customer service, it’s safe to say that Meridian employees enjoy spending 40 hours a week with their work families.

Mayoral Proclamation

Following the win from the Baltimore Business Journal, Meridian Home Mortgage received a proclamation from the new mayor of our hometown of Westminster, MD. We were greatly honored, and we continue to strive to make a positive impact in our community.

Westminster, Md. Mayoral Proclamation

To find out more about what makes our company great, check out About Us and Careers.

Good Faith Deposits and Other Up Front Fees

Good Faith Deposits and Other Up Front Fees

Don’t Pay Up Front Fees to Your Lender

It’s a Risk You Don’t Have to Take

up front fees

According to Webster’s Dictionary:

de-posit (di-poz-it)

  1. To place for safekeeping, as money in a bank.
  2. To give as partial payment or security
  3. Something entrusted for safe keeping, esp. money in a bank

One of the biggest tricks used by online lenders is the Deposit. At some point, usually in the beginning phases of the loan, you are asked to pay the lender you are talking to a large, non-refundable fee before they will begin processing your loan application. These fees normally average $500-$700 and are said to offset “costs incurred” such as appraisal and credit report. $500? This is at least 10% of the total cost of the transaction. Credit reports cost around $12.50, not $500.00. However if a lender is being honest, they will admit the “deposit” is really a commitment to do business – but a commitment on the borrower’s part, not theirs.

And now the catch. Once you pay the deposit, if you change your mind or go with another lender you will lose your deposit money.

Deposit or Fee?

A deposit, if non-refundable in any way, cannot be called a deposit. It’s a fee. And if there is any security or safekeeping, it is the lender’s security not yours. When you pay any lender, broker or bank any up front fees or deposits you are risking your hard earned dollars and falling into a pre-designed trap. If you are asked for your credit card to make a deposit on a loan transaction you are being set up-plain and simple. There is no reason to collect payments from your banking customers other than reasons which serve the bank, not the customer.

Do you go to the grocery store and pay a 10% “commitment to buy groceries fee” before you shop? What if you went into a restaurant and before you were given your food you were asked to pre-pay 10% of your bill – just in case you changed your mind at the last minute and decided you didn’t want to eat. Would you feel comfortable?

Pay Before You Eat?

Any lender or broker which establishes a policy of charging their customers up front application fees or deposits does this because they have business practices which routinely provide their customers with motivation not to close their loans. In other words, a restaurant which charges 10% of the bill before you see the food is one which knows you may not want the food when you finally see it.

Getting a mortgage is not buying a product, it’s primarily a service; therefore you should choose carefully which service provider has your best interests. Business practices such as non-refundable application fees and deposits are clear evidence those companies do not have their customer’s best interests first in mind.

Keep Your Wallet in Your Pocket

Not all loans close. Sometimes people change their minds. They say “you win some and you lose some” right? Keep your wallet in your pocket – we trust you.

We suggest you choose a lender or broker willing to work with you based on the time honored tradition of trust and good will.

Mortgage Market Update – Harp Expansion

Mortgage Market Update & HARP Expansion

This Week’s Mortgage Rates

Mortgage Market Update & HARP Expansion

Mortgage rates this week have changed slightly from last week’s rates. Freddie Mac said Thursday that the rate on the 30-year fixed mortgage fell to 4.10% from 4.11% last week. Three weeks ago, it dropped to 3.94 percent.

The average rate on the 15-year fixed mortgage was unchanged at 3.38 %. The rate for this loan it hit a record low of 3.26% three weeks ago.

Although overall rates have increased marginally from the record lows we’ve seen in the previous months, the numbers are still very attractive to potential homebuyers and those looking to refinance. Unfortunately high unemployment rates and depressed home values make qualifying for loans much more difficult.

This may not be the case for much longer.

Obama’s Refi Plan- The Saving Grace?

President Obama traveled out west this past Monday to unveil his revamped mortgage refinance plan for troubled homeowners. He delivered his speech in Las Vegas, Nevada, as Nevada is one of the states hit hardest by the housing market crash (along with Florida and California).

The Home Affordable Refinance Program (HARP) was created for homeowners with mortgages owned or backed by Fannie Mae or Freddie Mac, which accounts for about half of all U.S. mortgages.

The program has been modified to reach out to even more homeowners. Since the release of the initial program in 2009, only about 894,000 borrowers have taken advantage of HARP.

HARP currently allows borrowers to refinance up to 125% of their homes’ value. The new rules will remove that limit and allow homeowners who are current on their mortgages to refinance regardless of their value.

The program will be available to borrowers with mortgages currently owned or secured by Fannie Mae or Freddie Mac and originated before May 31, 2009. Borrowers will have the chance to refinance at a lower interest rate as long as they haven’t missed any mortgage payments in the past six months.

The specific details of the new regulations will be officially announced on November 15. According to the Federal Housing Finance Agency, it is estimated that the improved program introduces a variety of options that could double the number of mortgage refinances by the end of 2013.

Other attractive features of the program were highlighted in Obama’s speech. Fannie and Freddie plan to eliminate certain fees for borrowers who refinance into shorter-term mortgages. Because the upfront costs of refinancing may turn potential borrowers away, it is more likely that borrowers will be able to afford reduced fees.

And because the new program won’t rely heavily on the LTV for refinancing anymore, there won’t always be a need for a home appraisal in the loan process. This could cut refinancing costs since the appraisal is typically the borrower’s expense. In addition, skipping the appraisal altogether would certainly speed up the loan process.

Supporters of the program’s modifications believe that the benefits could certainly open the door to new opportunities that were previously unavailable to struggling homeowners.

Critics have far more questions and anticipate the program bringing about more consequences than rewards. For example, they believe that it could hurt the housing market in the long term by not allowing it to naturally hit rock bottom and begin recovering on its own.

Only time will tell the ultimate success of the program’s renovations and its impact on our damaged economy. According to President Obama, “these are important steps that will help more homeowners refinance at lower rates, save consumers money and help get folks spending again.”

Lender Overlays

Lender Overlays

Lender Questions

Underwriting Overlays represent one of the biggest hurdles for mortgage applicants. While lenders understandably defend overlays, their existence disqualies viable borrowers and hinders the housing recovery.

Conventional (Fannie Mae and Freddie Mac), FHA, and VA mortgages have strict underwriting guidelines that lenders must follow if the loan is to be insured or guaranteed.

Overlays are lenders’ self-imposed guidelines that go above and beyond the government requirements.

Lenders with overlays might require higher credit scores, lower debt-to-income ratios (DTI), lower loan-to-values (LTV), and tighter appraisal parameters. This makes it much harder for worthy borrowers to qualify.

The results are devastating.

For example, fewer homes are being refinanced which means fewer homeowners are able to reduce their payments, consolidate debt, or get out of ugly negative-feature mortgages. This increases the chance of more foreclosures.

Also, fewer homes are being bought and sold. In order for our recovery to gain traction, the huge inventory of foreclosed and listed homes must be sold. The longer they sit, the longer the recovery will take.

On the surface it seems nonsensical. Our sole collective purpose should be to find ways to responsibly kick-start the housing market. Instead, homebuyers are being turned away even though they qualify under the already strict government guidelines.

Why Impose Overlays?

Lenders impose underwriting overlays to protect against government forced buy-backs. They claim that the government knit-picks qualified loans to find any reason to force lenders to buy them back.

They see it is an attempt by the government to make up for the billions of dollars in losses that government agencies have incurred since the mortgage meltdown began in 2007.

Many observers think it’s an over-correction by the government. After all, basic guidelines were already tightened for all government backed mortgages after the meltdown began.

In many instances lenders are being held accountable for consumer fraud and other items that they had no way of preventing or detecting.

Even “flawed paperwork can lead to pressure from Fannie Mae and Freddie Mac” to buy-back loans “even on performing mortgages,” according to a recent Bloomberg Government article.

Lenders simply don’t trust the subjective nature of these government challenges. Even if they follow the rules they can be forced to buy-back loans.

Enough Already

The housing market is currently battling against a slew of other well-intentioned but crippling government actions. The HVCC appraisal rule, lower county loan limits, higher mortgage insurance rates and overall tighter guidelines have all contributed to the lack-luster recovery.

The forced buy-back of qualified loans is simply another unnecessary barrier.

Luckily, there have been hints that the Obama administration will address the government’s buy-back demands when it rolls out its expansion of HARP.

The goal of this expansion plan is to help qualified borrowers obtain new loans. And while certainly not a cure-all, the elimination of these absurd buy-back demands should reduce the need for lender overlays.

Then, just maybe, the government chokehold on the housing market will loosen and an honest recovery effort can begin.

Meridian Home Mortgage Blog will continue to update our readers on the proposed HARP expansion and its effect on lender overlays.


Consumer Credit Lending Guidelines

Consumer Credit Lending Guidelines

credit cards

There are some consumer credit guidelines that may affect you towards the end of your mortgage application.

Closing Out Credit Cards

If you are applying for a cash-out refinance, it may be necessary to close out the credit cards that you are paying off at closing.

If the monthly payments make your debt-to-income (DTI) ratio go above the max qualifying ratio, the Underwriter will require that you close the credit cards so that they can no longer be used.

One fast way to provide proof to the Underwriter that your credit cards have been closed is to perform a credit supplement. A credit supplement is a report ordered by your loan processor. It is issued by the credit agency that is used to verify information.

Credit supplements require a third party to be on the phone with you and the credit card company at the same time so that information can be verified and relayed back to the Underwriter in a confidential and reliable manner.

Verifying No New Debts

Underwriters must also verify that no new debt has been acquired since you applied for your loan.

The day that you call to apply for a mortgage application is generally the date your credit is pulled. There is a gap between the date your credit report is pulled and the date your loan closes. Underwriters need to verify that no new debts have been opened since your credit report was pulled.

Underwriters may ask you for a Letter of Explanation (LOE) to affirm that no new debts have been opened since your credit report was issued. Some Underwriters have a specific form they will ask you to complete. If new accounts have been opened, your credit report may be re-pulled before your loan is cleared to close.

Another way Underwriters verify that no new debts have been opened is by pulling a new credit report after your loan closes, but before it funds.

Consumers need to be aware that any new debts or late payments may make them ineligible for the closing or the funding of the loan, even if they initially qualified.

Word to the Wise

Meridian Home Mortgage recommends that while pursuing a mortgage you do not open any new debts and that you continue to pay all of your bills on time. This will ensure that your mortgage application goes as smoothly as possible.

As always, our Personal Advisors are here to answer any questions you may have about the mortgage process.

Spousal States and Community Property States

Spousal States and Community Property States: What You Need to Know Before Closing

Spousal States and Community Property States

If you are refinancing or buying a new home, your spouse may have to be involved even if you are the only person on the mortgage.

Depending on what state you live in, your spouse may have to sign the legal documents at closing, even if they are not on the loan.

Spousal States

If you are a married homeowner in a Spousal State, your spouse has to sign certain documents to attest that he or she knows about the new loan.

Typically, the spouse will need to sign the Deed of Trust, the Right to Cancel, the Truth-In-Lending (TIL), and various title and settlement documents.

Your spouse is not financially responsible for the mortgage by signing these documents as long as they are not on the note (the note is the legal-binding document that defines the terms of the loan and who is responsible). They are simply acknowledging that a new mortgage is being taken out against the property.

It’s also important to mention that anyone on the deed to your home must sign the spousal documents, whether or not you live in a spousal state. All owners of the home must acknowledge that you are borrowing money against the home.

Community Property States

In Community Property States, not only does your spouse have to sign the legal docs, but they are also financially responsible for the mortgage regardless of whether or not they are on the loan.

In Community Property States, all liabilities are considered 50% responsibility of both spouses. Therefore, your spouse’s debts may negatively affect your mortgage application.

For example, if you are applying for a government loan insured by the Federal Housing Administration (FHA) or the Veteran’s Affairs (VA), your spouse’s credit will need to be pulled and their debts added to your debt to income ratio (DTI).

Also, if your spouse has any business losses on your jointly filed tax returns, they will be counted against you.

Be sure to consider how your spouse might affect your mortgage application and be prepared to include them in the closing process, if needed.

If you have any questions about how your spouse or anyone on the deed to your home will affect your mortgage application, please do not hesitate to contact one of our Personal Advisors.

Below is a List of Spousal States and Community Property States:

Spousal States

  • Alabama
  • Alaska
  • Arkansas
  • Colorado
  • Florida
  • Illinois
  • Iowa
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • New Hampshire
  • New Jersey
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • South Dakota
  • Tennessee
  • Vermont
  • West Virginia
  • Wyoming

Community Property States

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Lender Paid Mortgage Insurance

Lender Paid Mortgage Insurance (LPMI)

The PMI Alternative

Lender Paid Mortgage Insurance

Lender Paid Mortgage Insurance (LPMI) may be a good alternative for borrowers who do not want to pay Private Mortgage Insurance (PMI).

Both PMI and LPMI insure the lender against default on conventional loans greater than 80% loan to value (LTV). The biggest difference in the two options is who pays the premium.

The insurance premium on the PMI option is added to the total monthly mortgage payment and paid by the homeowner. The lender then forwards it to a third-party insurance company.

The insurance premium on the LPMI option is paid directly by the lender to a third-party insurance company. The homeowner does not pay the premium. Instead, the lender charges a higher interest rate on the mortgage to offset the cost of the insurance.

Other Differences

Mortgage with PMI:

  • Lower interest rate but typically a higher payment (after adding on the PMI premium)
  • Not tax deductible (on loans that closed after 12/31/11)
  • Can possibly be cancelled once the loan dips below 80% LTV (contact specific lender to learn about their process canceling PMI)

Mortgage with LPMI:

  • Higher interest rate but typically a lower payment (no PMI premium added)
  • Potentially larger tax deduction (a higher rate can equal a higher tax deduction. Please consult an accountant)
  • Cannot be cancelled

Is LPMI Right for You?

There is no universal correct answer when choosing between if PMI and LPMI. What is right for some may not be right for others.

LPMI might be right for you if you:

  • Have a mortgage term under 15 years
  • Might refinance or sell your home within 10 years of obtaining new mortgage
  • Are borrowing over 85% LTV
  • Want a higher tax deduction (Please consult your accountant)

Paying LPMI might not make sense if you are planning to hold onto your mortgage for a longer period of time. Remember, with LPMI you will be paying the higher rate for the life of the loan.

On the other hand, PMI is temporary and can be terminated once the loan balance drops below 80% LTV. At that point you will be left just your regular mortgage payment that is based on the lower interest rate.

Mortgage insurance provides millions of people with the opportunity to buy a home or refinance into today’s historically low rates, despite decreasing home values. While having to pay it is not ideal, having a choice of how to pay it certainly helps.

Meridian Home Mortgage has a team of dedicated professionals who can answer your questions and help you compare all of your mortgage options. Call today to speak with a Personal Advisor.

Debunking Mortgage Myths

Debunking Mortgage Myths

Debunking Mortgage Myths

There are many myths circulating about mortgages today. A lot of them are perpetuated by Loan Officers eager to win business or friends and family members unknowingly offering false advice. But whether these myths are spread out of greed or ignorance is irrelevant because the result is the same; applicants are left misinformed.

People should be given every possible tool when deciding whether or not to take out a new mortgage. Myths and falsehoods create confusion. And they can have dire repercussions. For example, they can steer someone away from a good program, lead them into a bad program, and even wrongly convince them to refinance or not refinance.

Meridian Home Mortgage is dedicated to debunking these mortgage myths. Today we address three of the most common myths.

Myth #1: All Mortgage Insurance is Tax Deductable

Generally speaking, mortgage insurance has been tax deductible since 2007. Lawmakers have extended this tax break again through 2011 due to the still-sputtering economy.

This is important as more loans than ever are now carrying mortgage insurance. Values are lower and Loan-to-values (LTV) are higher. If a loan amount is more than 80% on conventional loans, the borrower is required to pay mortgage insurance. And, almost all FHA loans require monthly mortgage insurance. Unlike years past, paying mortgage insurance actually makes sense in a lot of scenarios today.

Borrowers who might be reluctant to pay mortgage insurance may be enticed to move forward knowing that it is tax deductible. But they should know that not all mortgage insurance is tax deductible. It all depends on their income.

Homeowners whose household Adjusted Gross Income (AGI) is between $100,000 and $109,000 or $50,000 and $54,000 for married borrowers filing separately will be able to deduct only a fraction of their MI. And a Homeowner whose AGI is $109,000 or $54,000 for married borrowers filing separately will not be able to deduct any of it.

Also, the tax break only affects loans originated between 2007 and 2011. If the tax break is not extended after 2011, those loans originated afterwards will not be able to deduct mortgage insurance at all.

Myth #2: APR is Always the Best Way to Compare Loan Offers

Annual Percentage Rate (APR)is a number that the government created to help borrowers make an “apples-to-apples” comparison between competing loan offers. APR is supposed to represent the total cost of a loan including loan size, costs, and interest. It calculates the total cost over the life of the loan.

A lower APR is supposed to equate to a better loan. But there are a few holes in this theory.

First, APR can easily be manipulated. Lenders can low-ball their fees in order to win business. They can also unintentionally misrepresent third-party fees. For example, estimated title fees and title insurance can often be inexact in the beginning of the process. This can lead to borrowers making decisions based off of inaccurate APRs.

APR also assumes that a borrower will never refinance or sell their house. This is often a false assumption because the average life of a mortgage is under 10 years.

Unless the loan is carried for it’s full term, the APR is skewed. Consider this scenario:

A borrower chooses a higher-fee/lower-rate loan over one that has a lower-fee/slightly higher-rate because the APR is lower. But if they don’t carry the loan for a specific period of time, they might not break-even on the higher fees they will pay. It might actually be cheaper to take the slightly higher rate and pay lower fees even though the APR is higher on that option.

Finally, the new mortgage compensation law that began April 2011 can seriously warp an APR calculation. The law basically states that a broker can only earn their fee from either the borrower (borrower-paid) or from the lender (lender-paid) not both.

There is typically money built into a mortgage interest rate. This is what lenders use to pay brokers on lender-paid loans. On borrower-paid loans, any money built into the rate has to be credited back to the borrower.

While the APR calculates the total origination fee charged to the borrower, it doesn’t calculate the credit that the lender pays back to the borrower. Therefore, the APR on borrower-paid loans can reflect higher costs than what the borrower is actually paying.

Myth #3: Do Not Refinance Unless Your Rate Drops by a Certain Percentage

A very popular myth is that a homeowner should never refinance unless they lower their rate by at least 2 percent. This statement is false on many levels. Here are just some of the many cases where this theory doesn’t always apply:

  • When the purpose of the loan is to cash-out
    • Debt consolidation
    • Home Improvement
    • Cash-in-hand
  • When the purpose of the loan is to change the term
    • Increase to a larger term to reduce payments
    • Decrease to a lower term to pay-off the loan quicker
    • Fix an Adjustable rate mortgage (ARM)
  • When the purpose of the loan is to eliminate Mortgage Insurance
  • When the purpose of the loan is to remove or add a borrower to the mortgage (e.g. divorce)

It’s smart to seek advice when thinking about obtaining a new mortgage. Validating that advice can be tricky, though. The Meridian Home Mortgage Blog will continue to address the many myths that continue to circulate today. Be sure to check back often.

The Truth About Private Mortgage Insurance

The Truth About Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI) is required on most conventional loans that exceed 80% loan to value (LTV). It is typically a monthly expense paid by the borrower on top of their mortgage payment. It is collected by the lender and paid to a third party insurance company.

Why the Bad Rap?

PMI has gotten a bad rap over the years, and for good reason.

First, it only protects the lender – even though the borrower pays it. Second, it is not always tax deductible. And finally, the market used to be flooded with better option portoflio programs that did not require PMI.

Most of these portfolio programs are now extinct – victims of the recent mortgage crisis that they undoubtedly helped to perpetuate. But when they were available they helped to bolster the idea that paying PMI is bad, no matter the scenario.

Why Pay It?

Lenders require PMI on loans that exceed 80% LTV.

Paying it does serve a useful purpose. It allows borrowers to borrower over 80% of the value of their home without paying a higher rate. It is needed more than ever in today’s market of declining home values.

Keep in mind that lenders look at worst case scenario when determining risk. Worst case is that the borrower defaults on the mortgage. And most homes that fall into foreclosure will be sold for less than 80% of their value. Therefore, covering themselves against default makes all the sense in the world.

So, while no one enjoys paying it, PMI is not the unnecessary evil that many of us have been programmed to think. It is simply a third-party tool used by lenders to offset risk.

PMI Myths

There are a few PMI myths that simply are not true:

  1. PMI is a fee charged by lenders – PMI is collected by the lender and paid to a third-party mortgage insurance company.
  2. PMI is tax-deductible – This tax deduction expired at the end of 2011. Loans originated after 2011 cannot deduct PMI. There is some hope that Congress still might extend it through 2012. If they do extend it, the usual limitations will apply.
  3. PMI is permanent – Typically, PMI can be removed once the loan is paid down to 80% LTV. Homeowner’s should contact their lender to find out their PMI removal procedure.
  4. Conventional PMI is the same as FHA MIP -PMI is paid to a private 3rd party insurer while MIP is paid to the government to insure the loan. FHA has different rules about when MIP can be dropped. FHA also requires MIP to be paid on almost all loans with terms over 15 years for a minimum of 5 years, regardless of LTV.

The time of vilifying PMI is long gone. PMI is a necessary tool utilized by lenders and borrowers alike. Its existence has helped millions of people obtain financing who otherwise would not qualify.

Meridian Home Mortgage is dedicated to educating our clients about all of their loan options. If possible, we will provide alternative options like Lender Paid Mortgage Insurance (LPMI) or HARP. Call today to speak to a Personal Advisor.