Home Buying in Sacramento>Question Details

Jane Dough, Other/Just Looking in Sacramento, CA

How much should I budget for PMI?

Asked by Jane Dough, Sacramento, CA Thu Dec 6, 2007

It looks like we are going to have to pay PMI, since we are probably getting a 95% LTV loan. On a $300K purchase, how much should I budget for PMI? Does it vary by the lender?

Help the community by answering this question:

Answers

5
Jane, Congratulations for taking advantage of a great time to buy. It is a true buyers market. Both Jim and Peter gave you great advice. As Peter stated it depends on your program and credit score. I have seen High Loan-to-Values such as yours and because of the persons credit score they MI companies would not offer them insurance. You should speak with your Mortgage Professional about your options.
0 votes Thank Flag Link Fri Dec 7, 2007
PMI (Private Mortgage Insurance) compensates the lender if the loan goes into default.

PMI provides no coverage WHATSOEVER to the buyer to keep their house in case of financial hardship that leads to the default.. But still the buyer has to pay the premium either directly, or in the case of "lender paid PMI - though a higher interest rate.

PMI adds very high additional fees to the borrowing costs when you have a meager down payment.

There are also additional underwriting requirements that the PMI company will impose on the loan.
This is the complicated part of the problem that some loan officers do not understand: The FUNDING lender can "approve' the loan, (subject to funding conditions) only to have the PMI company refuse to insure the loan against default. Since PMI is a funding condition, the loan does not fund.

I bring up this uncommon (but not rare) scenario because PMI companies are increasingly wary of stated income loans these days. Make sure your loan officer checks the stated income application with the PMI company underwriting criteria as well as the funding lender underwriter, early in the process
0 votes Thank Flag Link Fri Dec 7, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
It does depend on the loan program as well as your credit score. There are some loan programs geared toward first time home buyers which have reduced PMI, but there are income restrictions and often property value restrictions that apply.

The credit score is another big factor. You may be approved for the mortgage, but if your credit score is lower you may end up paying a much higher rate of PMI. Another thing to look into is lender paid PMI. This means the PMI is built into the interest rate instead of as a seperate payment. This can often save you money.

The best thing you can do is talk with a qualified loan officer. That way you know the answer fits your situation, not a generality.
0 votes Thank Flag Link Fri Dec 7, 2007
Hi Jane,

That varies on your lender and loan program. I have a client who just obtained a 100% loan, and her PMI was about $5 per month...this was via a special first time buyer program for a loan amount of $195k. Your loan officer should provide you with a "Good Faith Estimate" that itemizes all of your up front costs, and your monthly payment breakdown. If he/she has not already provided you one, you should definitely ask.
Web Reference: http://www.erinattardi.com
0 votes Thank Flag Link Fri Dec 7, 2007
Erin Stumpf, Real Estate Pro in Sacramento, CA
MVP'08
Contact
Jane, You should budget around $212. The lender should be able to give you an estimated cost after you have been approved.

Michael
http://www.MichaelRobertsHomes.com
0 votes Thank Flag Link Thu Dec 6, 2007
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer