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CRNA Mortgages Costing More Than Conventional Home Loans

Conventional Home Loans

Alright, so we know with a CRNA loan you can get into your home faster. Because it requires less money down, you can close on an employment contract, and it has more liberal underwriting or accommodating guidelines. Great but is it going to cost more? And that’s a question that we get all the time and is very important and one of the other incredible benefits of a CRNA loan, very similar to the physician or doctor mortgage, we can finance this higher loan to values with as little as 3% down on conventional loan amounts. Which is generally in the $400,000 or below range and as little as 5% down way up into the jumbo purchase price range and if you were to finance greater than 80%or less than 20% down payment with conventional mortgages, they would charge you mortgage insurance. What is mortgage insurance? We hear this term, but what is mortgage insurance? Mortgage insurance is an insurance premium that you pay for as the consumer.

But it doesn’t do you any benefit. It only protects the bank. I guess it does you some benefit because it allows you to finance greater than 80% loan to value, so you can put less money down. But this insurance on conventional loans is very costly. Typically mortgage insurance costs between .5% and 1%, in some cases it can be up to 2% of the loan amount. So if you buy a $400,000 house with a conventional loan, you put 5% down and let’s say you get a 4% interest rate. Well, on top of that 4% interest rate, you’re going to have a 1% mortgage insurance fee. So you’re all in cost was somewhere closer to5%. Now, the other negative on mortgage insurance, if you have a certain income bracket, which most CRNAs do, you cannot write off the mortgage insurance the same way you can write off the mortgage interest.

Mortgage interest, tax deductible, mortgage insurance generally is not. So it’s advantageous to avoid mortgage insurance- (A) because it’s costly and (B) because it’s not very tax efficient. So, back to the CRNA loan, the CRNA loan will allow you to do as little as 3% down. You’ll notice a slightly higher interest rate, maybe a quarter or 0.3% higher than the conventional loan. But you have no mortgage insurance. So instead of a 5% all-in cost, we’re comparing that to a 4.2% or 4.3% cost with a CRNA loan and that 4.2% or 4.3% in its entirety is tax-deductible. So, it’s more tax efficient, you have a lower monthly payment, and the overall cost is less in almost every scenario unless you plan to be in that home and in that mortgage for greater than about 15 years and, very few of our clients are in their homes greater than 15 years without refinancing or moving to another home.

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