12-01-2009 11:19 AM
Can anyone help me estimate my loan PMI insurance when I purchase. Here are my assumptions:
Credit score: 750
Loan amount: $495,000
I believe that PMI is basically the same as mortgage insurance. Am I wrong? Is there a better option to a conventional loan from a borrower's perspective? I already have a FHA loan and I plan to keep that loan when I purchase. Since you can only have one FHA loan, I don't think FHA loans are an option.
Any insight is appreciated.
12-01-2009 12:46 PM
Yes, PMI is basically mortgage insurance, required by your lender when you put less than 20% down. It's an insurance policy that offers no protection to you; it protects your lender against losses incurred in the event of default, and they pass the premium for this along to you. In some cases, it can be removed after a couple year's time if you can prove your equity position in the property exceeds 20%.
There are some other variables in addition to the criteria you listed that might factor in to the exact amount, but to give you a general idea, you'd probably be looking at a monthly payment in the ballpark of $358 for mortgage insurance on a conventional 30-year fixed loan of $495,000 in which you're borrowing 90% of the property's overall value/purchase price. A 15-year loan would offer a substantially lower premium.
You are correct that in general, a borrower is not allowed to have more than one FHA loan simultaneously. However, there are some exceptions to this in the case of relocation for work, and sometimes in the case of proving an increase in legal dependents such that the present house no longer meets the family's needs. There are strict guidelines and criteria that must be met in order to take advantage of these exceptions. FHA's mortgage insurance premiums are lower on a monthly basis - a 30-year loan of $495,000 (assuming this loan amount is within FHA's limits in the county in which you are buying) at 90% LTV would have a monthly premium of $206. This is $152 less than the MI on a conventional loan. However, FHA also has an up-front mortgage insurance premium that gets financed into the loan amount. This would add 1.75% to your loan, meaning you would owe $503,662 instead of $495,000, so you'd have $8,600 less equity in the home. The increased loan amount is probably going to eat into about $45 of that savings (your principle & interest payment will be that much higher due to the larger loan), and the remaining $107 monthly savings with FHA's lower mortgage insurance would take over 6 years to payoff to the degree of the equity that was lost with the up-front mortgage insurance, if that makes sense. But, many would be willing to trade that $8,600 in equity (a non-liquid asset) in exchange for the more liquid increased monthly cashflow of $100+ per month, so it all depends on each individual borrower's goals and needs.
For future reference, here's a link to a couple different MI companies' rate quote tools (for conventional lending). Not endorsing either company per se', but they both have pretty user-friendly rate-finder tools to give you an estimate:
Hope that helps some.