Does PMI insurance now require you pay 10 percent down.?

Asked by Mike, Overland Park, KS Wed Feb 18, 2009

My son is getting loan pre-approval for a conventional loan. In January they told him he could get a loan for 3-5 percent downpayment. Now when he finally does the paper work to get his pre-approval and the bank now says he has to pay 10 percent because PMI insurance is requiring 10 % down if your loan score is below 700. Is this something PMI has changed or is the bank just trying to get to him.

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9
Lee Sappingf…, Home Seller, Olathe, KS
Tue Jul 30, 2013
It requires at least that usually.
0 votes
Jennifer Rel…, , Olathe, KS
Tue Nov 16, 2010
I would recommend finding a different banker. If he goes with a conventional loan the minimum is 5%, however with an FHA it is only 3.5%. Depending on the price of the house he is wanting to purchase, he could go that route!
0 votes
Isabella Wie…, Agent, Edgerton, WI
Mon Aug 31, 2009
When I meet with my buyers the first question I ask them is where do you bank? sometimes where you do your banking can provided us with in house loans that no other intuitions can provided. Each situation is different and some the financing programs that where mentioned below may not fit your sons situation. I went to may bank with putting 10% down on my first purchase and I was given an in house loan that helped me avoid paying pmi. So many requierments are changing. As the lender with putting more money down vs. how long will it take for the PMI to go away. Typically on FHA laons with 3.5% down it takes up to 7 years vs. your son only having to pay into for two. Best of luck
0 votes
Carl Snyder, Mortgage Broker Or Lender, San Diego, CA
Thu Aug 6, 2009
Mike, The FNMA HomePath program is open to your son without PMI with 3-5% down with a 660 FICO.

Carl Snyder
Mortgage Banker
619.847.4578
AL,AZ,CA,CO,FL,GA,ID,MD,MO,NC,NM,OR,SC,TN,TX,UT,VA
0 votes
Marty S, , Irvine, CA
Mon Mar 16, 2009
Most PMI copmanies are requiring 10%. There are exceptions:

1. Fannie/Freddie Home Possible, which is 5%, or 3% if you have above a 680

2. FHA, which is 3.5% regardless of score

3. VA/USDA, which is 0% down and no PMI.

Sit down with a lender/mortgage broker and discuss all your options.

I am a mortgage broker. If I can be of service, please let me know!

Martin Smith

Precision Funding
877-238-6324 Ext 704
513-536-7184
877-238-6324 FAX
MSmith@PrecisionFundingUSA.com
http://www.PrecisionFundingUSA.com
0 votes
Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Mon Mar 16, 2009
Hi Mike

Conventional loan guidelines permit as low as a 5% down payment, however, very recently the PMI companies changed their guidelines to require a minimum down payment of 10%. So basically the situation is that even if your son can be approved by the lender for a 5% down loan, if the lender cannot obtain PMI for that loan, then yes he needs 10% down.

That is unless he uses an FHA loan, which the minimum down payment is 3.5%. With credit scores under 700 (which today is considered just 'OK') I would think his rate would be better with FHA anyway. Bear in mind however, that with FHA, the property itself is just as important as his qualifications. What I mean by this is that if he is looking at foreclosures, or potentially condos, then he may have a tougher time either getting approved or getting closed.

I would recommend he speak with his lender to discuss FHA loans and whether or not they offer them. If not then he should check around with a lender or two who do offer them and can explain the pros and cons to him
0 votes
Maria Morton, Agent, Kansas City, MO
Mon Mar 16, 2009
It sounds like you are talking about two different loan packages. The 3.4% down would be for an FHA loan; the 10% would be conventional. PMI is usually required for anything less than 20% down. Interest rates are affected by credit scores. The higher the score, the lower the interest rate. The idea is to reward those with higher credit ratings.
0 votes
Luke Allison, , Asheville, NC
Wed Feb 18, 2009
No, the bank is not trying to get him - those are new Mortgage Insurance guidelines. Anything at 95% or above now requires at least a 720 credit score.

However, David is right. If your son is buying a home within FHA loan limits, then he definitely wants an FHA loan. 3.5% down and MUCH cheaper mortgage insurance payments.

If you have any questions, please let me know.
Luke Allison
Flagstar Bank
828-777-8828
Luke.Allison@flagstar.com

Apply Online: flagstarloans.com/lallison
0 votes
David Chambe…, , Saint Petersburg, FL
Wed Feb 18, 2009
If he does an FHA loan he will only have to come up with 3.5% down plus closing cost, did he try to qualify for FHA?
0 votes
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