Mortgage Insurance on Conventional Financing in California--Update

By
Mortgage and Lending with WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 NMLS 244226

The short answer is don't try this!

A loan file that should be approved is stuck in an underwriting "black hole" in which all communication is cutoff and cannot get an answer yeah or nay, weather they will approve the mortgage insurance or not.  A borrowers loan (with many migitating risk factors) is basically being held hostage by the underwriter for well over a week when a decision should have been made within 24 hours. 

If you don't want to add any additional stress to your financed purchase transactions go with FHA financing if you're client cannot put at least 20% down! UPDATE--FHA will allow income from a non-occupant coborrower for loan qualification.  Some MI companies, however, will not and will not provide MI.  Yet another reason to use FHA and avoid the private MI issue altogether!

Comments (10)

Joel Prince
The Principle Group, Inc - Hixson, TN
Hixson/Soddy Real Estate Broker

Ed -

This is consistent with what I have heard from others sources.  The conventional market at more the 80% LTV seems nearly dysfunctional.

Dec 19, 2009 07:32 AM
Ed Gillespie
WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 - Folsom, CA

Thanks for your comment Joel.  I would add "non-functional" to dysfunctional.  The time lost waiting for the MI underwriters to approve MI could be used to submit to FHA.  Asking for an extended escrow and trying to explain this to sellers is no fun at all.

Dec 19, 2009 07:42 AM
Randy Filbert
The Filbert Real Estate Group At Skyline Realty-Boise Idaho - Boise, ID
The Filbert Real Estate Team-Boise Idaho

I wholehartedly concur!  MI is a bust these days.  Even if you can get a borrower approved under loan program guidelines, you still need to have them underwritten by the MI company.  This process has proven to be dysfunctional at best and IMPOSSIBLE at worst.  My advice, stick to FHA, RD, and VA if at all possible. 

Dec 19, 2009 07:47 AM
Deena Cottingham
GreenApple Staging & Images, Calgary Staging & Photography - Calgary, AB
Home Stager & Photographer

That's probably a great and timely tip for somebody, Ed. Wishing you a wonderful holiday season!

Deena

 

Dec 24, 2009 04:16 AM
Ed Gillespie
WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 - Folsom, CA

Thanks Deena! Wishing you a Merry Christmas!

Dec 24, 2009 07:42 AM
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

When loan get into that abyss you are talking about, the deal gets so super stressful, huh?

Jan 01, 2010 01:10 AM
Ed Gillespie
WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 - Folsom, CA

Yes! on a recent transaction, I was told MI underwriting would take about 24 hours. After more conditions and additional "letters of explanation" I needed to provide the MI underwriter with, they finally signed off and approved the MI insurance about 10 days later!  Of course I then needed to get a signed extension to escrow and pay a rate lock extension fee.  Some lenders have delegated MI underwriting (in-house) and others don't. I would avoid using MI on conventional if at all possible, but if it's your only option, pick a lender with delegated MI underwriting.  Also, take note that they are very strict on guidelines (no-exceptions).  I always prefer FHA for any loan with less than 20% down.

Happy New Year Melissa!

Jan 01, 2010 07:54 AM
Cheryl Clayton
Westlake Village home buyers and sellers Thousand Oaks homes - Westlake Village, CA
Conejo Valley and Simi Valley Realtor

Ed, this is great info. I have been lucky enough to either have 20+% down buyers or FHA approved buyers. But this is great info for the future. Thanks for sharing.

Jan 05, 2010 05:08 AM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Great advice Ed!  We are not living in the same era we were a few years back!  And you are so right about adding stress to a transaction while trying to perform the near impossible!

Jan 15, 2010 11:20 AM
Ann Allen Hoover
RE/MAX Advantage South - Hoover, AL
CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL

Thanks for the info......I am glad that you are sharing your insights.  Everyone I have worked with recently has gone with the FHA loan.

Best wishes!

Ann

Jan 21, 2010 01:35 AM