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Got PMI? It Might Be Harder Than You Expect

By
Real Estate Agent with Bandy Homes

photo by Meg Marco by CC license on flickr.comIf you're a buyer in the Denver area home market, not financing through FHA, but don't have enough cash for a 20% down payment, you may have a challenge ahead of you to find a lender.  Lately banks have tightened their lending practices for home mortgages, but there are still some who will offer a loan to buyers with less than the traditional 20% down.  The problem is, once the buyer is able to find a lender, they still have to obtain private mortgage insurance (PMI), which protects lenders by paying off your loan if you default.  And that is proving harder than most expect.

Over the past several years, when lenders were willing to take more risks and offered loans much more liberally, it was common for mortgage insurers to approve someone for PMI simply because the bank was willing to finance them.  Today, however, a record number of those low down payment mortgages are now in default and the insurance companies are losing billions of dollars.  They've decided it's time to make some changes. 

Now, insurers have enacted tighter standards than most banks, which has resulted in them insuring fewer loans.  Once very uncommon, borrowers are now being turned down for PMI even though they have been approved for a mortgage because of a low credit score or high debt-to-income ratios.  There are also some other restrictions insurers apply that are related to the property as well as the loan type.

If you are looking for a Denver area home and will require PMI, avoid these disqualifying factors:

  • low credit score - insurers are typically requiring a score over 720
  • a down payment less than 10% of the loan amount for a single family home/15% for a condo
  • a debt-to-income ratio above 45%


Even if you cannot qualify for PMI because you don’t have enough of a down payment, you might still be able to qualify for a mortgage through the federal government.  FHA loans are offered to borrowers with a higher debt-to-income ratio and credit scores as low as 620, and VA loans are available to veterans.

Are you ready to start looking for a Denver house? Whether or not you've been pre-approved for your mortgage, give the Bandy Team a call!  If you're hoping to buy a home in the Denver metro area, or in some of the other beautiful towns along the Colorado front range, like Parker, Franktown, or Castle Rock, we are your local real estate experts.  We can help you navigate the Denver real estate market to find your perfect home!

Marianne Bandy
Tips for Denver Area Home Buyers

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