Private Mortgage Insurance Confusion

October 12th, 2009

 

Getting a Conventional loan with less than a 20% down payment means paying Private Mortgage Insurance (PMI). And you should be aware that getting PMI has become much more complicated and more difficult.

It is almost impossible to get PMI for a 95% loan is most of the Washington DC Metro area, since most of DC is considered a “declining market”. You would likely have to have 10% down payment in the Washington DC area for a mortgage loan.

Beyond having a larger down payment, the credit score requirements, property limitations and underwriting changes are numerous and hard to keep up with. Below is one email, from one bank, related to an underwriting update on PMI. I can barely follow it, and I have been in the mortgage business for 23+ years! Read it and see if it confuses you:

“Good Afternoon,

Please Note the advantages below for each of our different Mortgage Insurance partners.

1. MGIC — 95 LTV Purchase at 700 score for FIRST TIME HOME BUYERS. Please refer to the Tier One Restricted Market page of the attached Guideline Summary. The 95 LTV does NOT apply to Condos. Call MGIC in their Philadelphia Office for submission instructions.

2. Radian — 95 LTV Purchase at 680 score. Does NOT need to be a First Time Home Buyer. Applies to Single Family DETACHED Homes OR an Attached Home that is NOT a PUD. Call Radian’s Service Center for submission instructions.

3. RMIC — Single Premium Pricing is very aggressive. Max LTV is 90 on a purchase or rate/term, and a 740 score is required. Refer to Standard Declining Market Guidelines for Non Retail Loans on the attached. Single Premium is 1.30% for score of 740 – 759, and 1.25% for 760 and higher score. The premium can be paid in a lump sum at closing (great when receiving a Seller Concession) OR financed into the loan amount. Compare this ONE TIME premium to FHA/VA.

There are 6 attachments to this email. 3 MI Rate Cards, and 3 Guideline Summaries (for each of our 3 MI Partners).”

Wow. I had to re-read this email, and study all of its attachments and charts, three times; before I began to absorb its meaning and benefit or detriment to my clients.

Imagine dealing with 60 banks, and dozens of email updates, and numerous different PMI companies, all changing their rules constantly. If you multiply the confusion the above email causes by 100, you’ll have an idea of what it is like to keep up with today’s underwriting challenges. And this is just one more reason why a homebuyer needs to talk to the most qualified and seasoned mortgage professional they can find to assist them in getting pre-approved, and in formalizing their loan application when they get a ratified contract on a new home.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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