When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%. Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 5%, while repeat buyers put down 14% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:
The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.
According to a new study from Lending Tree, Americans who have filed for bankruptcy may be able to rebuild enough credit to qualify for a home loan in as little as 2-3 years.
This is in stark contrast to the belief that many have that they need to wait 7-10 years for their bankruptcies to clear from their credit reports before attempting to apply for either a mortgage or a personal or auto loan.
The study analyzed over one million loan applications for mortgages, personal, and auto loans and compared borrowers who had a bankruptcy on their credit report vs. those who did not to find out the “Cost of Bankruptcy.”
The study found that 43.2% of Americans who filed bankruptcy were able to repair their credit back to a 640 FICO® Score in less than a year. The percentage of those who achieved a 640 FICO® Score increased to nearly 75% after 5 years. The full breakdown of the findings was used to create the chart below.
Americans who were able to repair their credit scores to a range of 720-739 within three years of filing were able to obtain the same financing options as those who had never filed bankruptcy.
According to Ellie Mae’s latest Origination Insights Report, 53.5% of those who were approved for a home loan had FICO® Scores between 600-749 last month. This is great news for Americans who are looking to re-enter the housing market.
Raj Patel, Lending Tree’s Director of Credit Restoration & Debt-Related Services had this to say:
“People may think that filing a bankruptcy would put you out of the loan market for seven to ten years, but this study shows that it is possible to rebuild your credit to a good credit quality.” “LendingTree’s research found that very few bankruptcy filers have a harder time [obtaining a mortgage] than those who have not filed for bankruptcy.”
“People may think that filing a bankruptcy would put you out of the loan market for seven to ten years, but this study shows that it is possible to rebuild your credit to a good credit quality.”
“LendingTree’s research found that very few bankruptcy filers have a harder time [obtaining a mortgage] than those who have not filed for bankruptcy.”
If you are one of the millions of Americans who has filed for bankruptcy and think that you have to wait 7-10 years to make your dream of returning to homeownership a reality, let’s get together to find out if you qualify now.