Mortgage Insurers Changing Their Terms

Mar 27th, 2008 @ 1:30 PM by MortgageMentor

The media has made a really big deal in recent weeks about mortgage insurers flagging certain ZIP codes and refusing to inshore home loans in those areas. This decision affects homes in at least 34 states, about 9600 of them. But when you take a closer look, you can see why these particular loans might be risky.

The home loans that mortgage insurers don’t want to cover are as follows:

• Investment loans.
• Loans for second homes.
• Adjustable-rate mortgages.
• Interest-only mortgages.
• Loans with a down payment of less than 3%.

In fact, many of these insurers won’t even be in business a year from now. They are facing billions in claims from lenders due to mortgage holders not making their payments. So, although it may be a little late, they’re trying to protect their business.

Why this will really mean for homebuyers, or people who want to refinance, is probably that they will have to make higher down payments. There will also be a higher requirement for credit scores. And those who were considering subprime loans may find that they no longer exist.

The bottom line is, if you’re trying to get alone for a home that is in a potentially declining market, the lender may require more money — if he’ll make a loan at all. Some people who are trying to get a second mortgage find that it’s no longer possible, as are some who wish to borrow more than $650,000.