Private Mortgage Insurance Tougher To Get On Condos

Is Private Mortgage Insurance tougher to get on condos? I almost feel like there is no more PMI (Private Mortgage Insurance) on condos! But that is not true, there is PMI availability for condos, but it is getting harder to get. Most people know by now that PMI is needed on a Conventional loan if you have less than 20% down payment.

Declining markets

I recently had a client who wanted to put 10% down on the purchase of a $600,000 condo. I first found out that on a loan that size ($540,000), which is a Conforming-Jumbo loan, that you cannot do a maximum LTV (loan-to-value) loan in a “declining market”, which most banks are still defining DC and most of Northern VA as. So the buyers have to put another 5% down, and do a 15% down payment, or 85% LTV. This loan size ($510,000) is still a Conforming-Jumbo loan (which is defined as all loans from $417,001 to $729,250), and I found that no one will do PMI on condos that have Conforming-Jumbo loan amounts.

What does this mean?

It seems you can only get PMI on condos that have Conforming loans (those which are $417,000 or less), and if those loans are in a declining market you cannot do maximum LTV financing (which is 95% LTV), so you’d need 10% down (or 90% LTV).

So it seems if you want to buy a condo in DC or Northern VA (or any market defined as a declining market) and need to borrow between $417,001 and $729,250, the only loan you can get is a 20% down payment Conventional loan or possibly an FHA loan.

And if you want to buy a condo and borrow $417,000 or less, you need a 10% down payment Conventional loan, or you can possibly go with an FHA loan for this too.

Conclusion

I am sure this will be changing moving forward, but it may take a while for the banks and PMI companies to loosen up.