Reduced Costs Seen for Private Mortgage Insurance
In a period of rising mortgage interest rates, some good news has recently arrived from the Private Mortgage Insurance (PMI) industry ...
Most of the predominant PMI companies have reduced rates charged to borrowers 
that finance a home and have less than 20% to place as a down payment.
As the entire mortgage/lending industry seems to be adopting a "specific risk-based pricing", mortgage insurance companies are taking that approach as well. In addition to "reduced rates/lower premiums", mortgage insurance companies have tracked and now built-in adjustments for specific variables on a case-by-case basis.
Statistics show that two-borrower loans perform better than one. As a result, mortgage insurance becomes less expensive for two or more borrowers, but more expensive if the file's Debt-to-Income Ratio (DTI) is greater than 45% of the Income Verified.
While this creates more layers for consideration by Mortgage Originators, these new adjustments for calculating Private Mortgage Insurance premiums allow for greater flexibility and lower costs for Qualifying Borrowers.
As a Mortgage Originator, I continue to see some reluctance and resistance from my Borrowers regarding mortgage insurance ...
As a result of their concerns, borrowers often decide to take one of two routes forward. They either:
- Defer their purchase to save the 20% down (see my blog post on this topic)
or they look to ...
- Minimize the costs via other financing options. (Those options can include "Piggyback Second Mortgages", Lender-Paid Mortgage Insurance, or single-premium mortgage insurance payments that are paid in one lump sum at the time of Closing.)
As costs for borrowing rise, Lenders, Title Insurers, and Third-Party Vendors incur higher operating and production costs. In many cases, those costs get passed along to Borrowers. As a result, any changes that allow for a reduction in borrower financing costs are a celebrated and much-welcomed thing.
Every borrower and their Mortgage Originator should seek all the mortgage insurance options available and then work together towards securing the best PMI product for the borrower's personal budget and individual needs.
* Hoping to Buy or Refinance a Condo or Home in New Lenox, Will County, or elsewhere in the Chicago - Chicagoland area, IL or WI?
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