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Why is PMI so damn high?
Posted on 1/14/12 at 11:06 pm
Posted on 1/14/12 at 11:06 pm
I owned a home previously, but have been renting since moving to TX. We are looking to buy soon and PMI on an FHA loan is just insane. They charge you 1% up front and 1.15% of the loan amount a year. Yes I'm OT poor and we are only putting up about 13%.
8
Posted on 1/15/12 at 7:03 am to LSUSUPERSTAR
I'd either buy less house or wait till I had the full 20% to put down.
Posted on 1/15/12 at 7:47 am to guttata
That wasn't the question, but thank you for your opinion.
Posted on 1/15/12 at 8:26 am to LSUSUPERSTAR
It's high because the odds of your getting underwater and defaulting are high.
Posted on 1/15/12 at 8:30 am to LSUSUPERSTAR
At it's last adjustment, FHA dropped their upfront fee to 1% and increased the pmi to current levels. It's higher than any conventional monthly pmi that you will see.
Posted on 1/15/12 at 9:19 am to Layabout
quote:
It's high because the odds of your getting underwater and defaulting are high.
And you base this how?
Posted on 1/15/12 at 9:22 am to ds1tiger
quote:
At it's last adjustment, FHA dropped their upfront fee to 1% and increased the pmi to current levels. It's higher than any conventional monthly pmi that you will see.
I know how to calculate it, I was wondering why it is so high. You think they would have a staggered PMI based on how much you put down. And it isn't like there is no collateral in the case we were to default. Seems we are getting screwed because of other irresponsible people.
Posted on 1/15/12 at 10:59 am to LSUSUPERSTAR
quote:
And you base this how?
I didn't mean you personally. The insurer's loss experience determines the rates and that hasn't been favorable in recent years.
Posted on 1/15/12 at 11:36 am to LSUSUPERSTAR
quote:
And you base this how?
Statistics. The less a person puts down on a house the more apt they are to walk away from it if things get tough or the mortgage goes underwater.
Posted on 1/15/12 at 2:30 pm to Layabout
quote:
Layabout
quote:
VABuckeye
Gotcha.
Posted on 1/15/12 at 3:24 pm to LSUSUPERSTAR
quote:
I owned a home previously, but have been renting since moving to TX. We are looking to buy soon and PMI on an FHA loan is just insane. They charge you 1% up front and 1.15% of the loan amount a year. Yes I'm OT poor and we are only putting up about 13%.
If you are putting that much down, get them to give you a quote for PMI on a conventional loan, it should be about .65% and no up front. Conventional PMI has actually gotten cheaper in recent months.
Posted on 1/15/12 at 3:26 pm to LSUSUPERSTAR
quote:
I know how to calculate it, I was wondering why it is so high. You think they would have a staggered PMI based on how much you put down. And it isn't like there is no collateral in the case we were to default. Seems we are getting screwed because of other irresponsible people.
It has to do with FHA's mission. They take the money from MMI and do other things with it, depleting the account, then claim then need to raise the premium to keep the program solvent. There is also the mantra of never letting a crisis go to waste.
Posted on 1/15/12 at 5:11 pm to novabill
Our credit scores aren't quite high enough for the best rate. Hopefully when we go to get a rate lock, the credit card we paid off will raise our scores.
Posted on 1/15/12 at 7:51 pm to LSUSUPERSTAR
I'm a mortgage broker and if you have 10% to put down why are you doing a FHA loan? If your credit score is above 620 you could get a conventional loan and the PMI should be lower plus you won't have to pay the 1% upfront MI fee. Also you say you're putting down 13%? Why this number? FHA only requires 3.5% and if you did a conventional loan you should only put down 5 or 10% since PMI rates change for every 5% increment. If you want to just put down more than you need to put down 10% and keep the extra 3%. You're going to need that cash after you move in for furniture, etc.
FYI if you do a 15yr loan PMI is reduced by roughly 80%, but your payment will be somewhat higher than a 30yr loan
FYI if you do a 15yr loan PMI is reduced by roughly 80%, but your payment will be somewhat higher than a 30yr loan
Posted on 1/15/12 at 7:54 pm to LakeviewSaint
quote:
the credit card we paid off will raise our scores.
FYI if you only have 1-4 credit cards you should NEVER pay them completely off to help your scores. You should pay it down to less than 30% to get the best result credit score wise and just make the minimum payments. 10 years in the business, trust me.
Posted on 1/15/12 at 8:30 pm to LakeviewSaint
quote:
FYI if you only have 1-4 credit cards you should NEVER pay them completely off to help your scores. You should pay it down to less than 30% to get the best result credit score wise and just make the minimum payments. 10 years in the business, trust me.
This. I had a client pay off a credit card only to have their scores fall.
Posted on 1/15/12 at 11:28 pm to Layabout
quote:
It's high because the odds of your getting underwater and defaulting are high.
I find it odd that mortgage companies base odds of defaulting on downpayment amount. To me, the odds of someone defaulting go up when the amount of money they have in the bank goes down. If someone spends his life savings to put down 20%, then loses his job the next year, he'd be much more likely to default than if he'd have put down 10% and had the other 10% to pay his house note while looking for another job.
Posted on 1/15/12 at 11:58 pm to LSUSUPERSTAR
Why not take out a loan at another institution to fill in the 7%?
My wife and I did this on the first house we purchased and it worked like a charm.
Though I believe you may be able to just get 2 mortgages as well, one for 80%, the other for 7%.
My wife and I did this on the first house we purchased and it worked like a charm.
Though I believe you may be able to just get 2 mortgages as well, one for 80%, the other for 7%.
Posted on 1/16/12 at 12:45 am to TJG210
Thread title reminds me of:
Posted on 1/16/12 at 6:43 am to LakeviewSaint
We are currently renting a house and owned one before, so we have all of our furniture. Here are some real numbers, so that I may get some better advice.
First, how do you calculate monthly PMI with a conventional loan (I know how to do it with the FHA)?
The loan originator says that our credit scores are too low to get the best rate on a Conv. loan (both in the low 700s, ie 704 - 710), so our rate with the Conv is 4.375 vs FHA which is 3.875.
The sale price would be $207865, putting down about $28000. I just ran a calculator and got a PMI of ~$80/mth. Do these numbers seem right? MY original quote had a lower down payment and I was trying to do a direct pmi rate exchange, since that is how it works with FHA.
Sorry if this is confusing right now.
First, how do you calculate monthly PMI with a conventional loan (I know how to do it with the FHA)?
The loan originator says that our credit scores are too low to get the best rate on a Conv. loan (both in the low 700s, ie 704 - 710), so our rate with the Conv is 4.375 vs FHA which is 3.875.
The sale price would be $207865, putting down about $28000. I just ran a calculator and got a PMI of ~$80/mth. Do these numbers seem right? MY original quote had a lower down payment and I was trying to do a direct pmi rate exchange, since that is how it works with FHA.
Sorry if this is confusing right now.
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