Lancaster County PA Realty Check: Pennsylvania

Mortgage Insurance Underwriting Change

Mortgage insurance will be harder to get after June 1, 2008, now that MGIC, the Mortgage Guarantee Insurance Corporation, will stop insuring certain classes of loans.

Underwriting changes mean that the following classes of applications will no longer be eligible for mortgage insurance after June 1:

Reduced Documentation/No Documentation loans

Investment properties

Cash-out refinances

3- to 4-unit properties

Loans with potential negative amortization

What is the likely result of this underwriting change? 

Home loans for owner occupants with good credit and documented income will not be affected.

Since MGIC is the most influential mortgage insurance institution, other mortgage insurance companies are likely to be affected by this ruling.  Loans without mortgage insurance will still be available, but rates or fees may be somewhat higher on such loans.

Self-employed persons will have to provide more documentation of their incomes. 

FHA, which has an independent mortgage insurance system, will become a more popular source of mortgages.

Refinancing to pull cash out of a property will become more difficult.

Interest rates and/or fees on 3- and 4-unit properties will likely increase.

The good news on loans with negative amortization: they were a very risky idea in the first place.  It's probably just as well that loans with monthly payments so low that the principal balance owed actually increases, may no longer be easy to get.



Brian Schulman offers expert real estate representation for buyers and sellers of homes in Lancaster County, PA.  To learn more, visit

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Comment balloon 0 commentsBrian Schulman • May 30 2008 02:38PM
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