Private Mortgage Insurance (PMI) companies have adopted a more serious stance on risk-based pricing. PMI companies are cherry-picking borrowers above a 760 credit score, and they are not that keen on insuring borrowers below 700. Looking at the typical PMI pricing for a 3% down loan, you will see that a monthly PMI rate for a 760+ borrower may be only .55%, while a 660 score will be 1.90%, nearly 4 times as much. The monthly payment difference is substantial. On a $400,000 loan, the PMI cost is $183/month for 760, while at 660 it’s $663/month.
This will make the FHA loan more appealing for a “less than prime” borrower. FHA underwriting and mortgage insurance is more liberal. The downside with FHA loans is the large upfront mortgage insurance (which can be financed) not applicable with a conforming loan, and you can’t eliminate the mortgage insurance, regardless of the loan to value.
If you are in the Los Angeles region, have any questions or real estate sales or financing needs, feel free in contacting:
Ron Henderson GRI, RECS, CIAS
Multi Real Estate Services, Inc
Gov’t Affairs Chair – California Association of Mortgage Professionals
Real Estate market, Mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley