The American Dream of homeownership is out of reach for the majority of first-time homebuyers. The hurdles they face are higher now than at any point in recent history. High interest rates and lender risk-aversion continue to block the path for millions of Gen Z and Mellennial first-time buyers who must rely on traditional mortgage programs for financing.

Home Diversification Mortgage Insurance can open the door to homeownership by offering risk-free first-time home buyer financing with zero down payments and no Private Mortgage Insurance.

PMI is a type of mortgage insurance that’s usually required with a conventional loan when the buyer makes a down payment of less than 20% of the home’s value. PMI protects the lender if the buyer stops making loan payments since it’s riskier for a lender to give a mortgage with less than a 20% down payment from the buyer.

Cost Factors

PMI is calculated as a percentage of your mortgage loan amount — depending upon your credit score and downpayment, in 2024 it typically ranged from 0.6% to 2% annually and are paid in a combination of Up-front and Monthly Fees. FHA mortgage insurance, known as MIP, generally costs more than conventional mortgage insurance (PMI). FHA loans require an upfront MIP payment and ongoing annual MIP, while conventional loans only require PMI if the down payment is less than 20%, and it can be canceled once the loan-to-value ratio reaches 78-80%. The cost of PMI can also be lower for borrowers with strong qualifications.

Example:

For a $400,000 loan, 3% Down Payment of $12,000, the upfront MIP for an FHA loan would be $7,000. The annual MIP could range from $600 to $3,000. For a conventional loan, the annual PMI could range from $2,000 to $6,000.

The ability to cancel

Generally, PMI can be removed from your monthly mortgage payment when you’ve reached 20% equity in your home or have paid your loan balance low enough. FHA mortgage insurance is more complicated and may involve refinancing.

HomeDiv is a revolutionary Mortgage Insurance product that can open the door to millions more potential first-time homebuyers, by providing lenders with ZERO Credit Risk, and deferring the bulk of the fees to the end of the life of the loan, substantially lowering overall costs to the borrower.

Cost Factors

Most of the financial burden of homeownership comes in the first few years - particularly at the time of purchase. HomeDiv's innovative model defers the bulk of the costs to the end of the loan life, allowing more first-time homebuyers to qualify and build equity.

Example:

For the same $400,000 loan, the HomeDiv upfront MIP would be $495 - a colossal savings of $6500 over FHA! The annual MIP would be approximately $550 - another potential savings of thousands of dollars annually. On the event of a refinance or sale of the home, HomeDiv receives an additional fee of 5% of the increase in the home's value, minus credits for home improvements.

The Savings

Using the same $400,000 example, over a ten-year life span with the home's value growing at a statistical 3.7% annually:

• PMI Costs: ~$27,000-$30,000 - $19,000 Upfront Costs
• HomeDiv Costs: ~$15,000-$20,000 - $495 Upfront Costs

A clear savings, on average, of $10,000-$12,000 for the median home purchase price with minimal upfront costs.