Mortgage Insurance Changes
We have seen Private Mortgage Insurance rates climb. We just received an announcement that the factors for Monthly PMI (the most common form of PMI) have gone up.
Why? Much like any insurance company, they do not want to pay out... since they have been paying out more in the past year they have raised rates... You see similar issues in states that have had high pay outs on home owners insurance for storm damage, Fl, LA etc.... Even in NJ Home owners insurance is higher near tidal water because of hurricane pay outs in other states.
What does this mean to you? Increased payments of course. here are a few examples for a 200,000 mortgage with 3%, 5%, 10% and 15% down:
- 3% down (not as common) was $138.33/month NOW $175.00/month
- 5% down WAS, $131.67 per month. It is NOW $156.67/month
- 10% down Was $86.67 per month. It is NOW $103.33/month
- 15% down Was $55.00 per month. It is NOW $63.33/month
As you can see the difference is not as bad as you increase the down payment. Historically 15% down loans never go bad so there is less risk, while the lower the down payment the higher the risk, thus higher premiums.
Now more than ever, FHA is more likely to be the way for you to buy a home when mortgage insurance is required (Even with the new changes in FHA MIP )
In the past I would advise that less than 10% down FHA would be the best way to go, now it is something to consider for any down payment lower than 20%. A comparison needs to be done to be sure the right program is picked for YOU. Keep in mind that Conventional loans have interest rate add ons below a 720 credit score.... FHA does not have Interest Rate Add ons for loans at all. There are some lenders that will put their own add ons for loans they feel are risky, (sub 620 credit score is common for add ons).
Now more than ever you need a Loan Officer that understands your needs and will review your scenario to pick the best option for YOU!
I have said it before: What was old is new again. FHA is still one of the BEST ways for some one to buy a home with a low down payment.
Have a great weekend