If you are not going to go all the way and put 20% down, a 10% conventional loan is a real "sweet spot" in the mortgage market right now. Â Why do I think that? Â Because you are putting less than 10% down, but getting very low private mortgage insurance (PMI) rates. Â
10% down with PMI is a much better option than FHA if you can swing it. Â FHA just raised their mortgage insurance premiums and now they require 1.75% up front mortgage insurance and 1.25% monthly mortgage insurance. Â By comparision if you have good credit, 10% down conventional has NO up front mortgage insurance and as low as .44% monthly mortgage insurace. Â On a $350,000 FHA loan, you would have $6,125 up front mortgage insurance and $364 monthly mortgage insurance. Â With 10% a down conventional $350,000 loan you would have NO up front mortgage insurance and as low as $128/mo monthly mortgage insurance. Â Wow that's a huge difference isn't it!
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10% down conventional loans can have tighter underwriting guidelines with regards to credit scores and debt-to-income ratios, this is why some borrowers will still go FHA. Â
I hope this helps you understand private mortgage insurance a little better and feel free to call me at 858-922-7899 or email me at firstname.lastname@example.org if you have any questions.
Sr. Loan Officer