MassHousing has unveiled a new mortgage product that does not require mortgage insurance (MI) but still offers affordable interest rates, low downpayment requirements and local loan servicing.
Like a traditional MassHousing mortgage, the No-MI loan can be used to purchase a 1- to 4-family home, requires a 3% downpayment (5% for 2- to 4-family homes), and may be used for purchase or refinance. And of course, borrowers must be creditworthy and must meet income and loan limit guidelines.
But unlike a traditional MassHousing mortgage, borrowers who make downpayments of less than 20% of the purchase price are not required to have mortgage insurance, though they do pay a higher interest rate. Still, the savings and the expanded buying power are substantial. Compared to an FHA loan, a family purchasing a $200,000 home with a $7,000 downpayment would save $125 per month and $45,000 over the life of the loan.
All of this is not to disparage mortgage insurance, which has enabled countless families to purchase a home with low downpayments. And while traditional mortgage insurance protects only the lender in case of default, MassHousing's traditional mortgage features MI Plus, a unique borrower protection that helps pay the mortgage in cases of job loss. MassHousing will continue to offer borrowers a loan with MI. After all, in addition to the job-loss protection it provides, the lower premiums of MI Plus save a borrower $71/month ($25,560 over the life of the loan) compared to FHA.