Private Mortgage Insurance (PMI)

[ricardocobos]

Originally Posted by 7th Direction

Ugh. I hate my PMI!!!!

We were originally told that it was going to be $100-$200 a month, but when we went to settlement, because we settled right as companies stopped lending as easily, it jumped to $600 a month!!!! I would LOVE to refinance, but we don't have the $$$ to refinance (we don't have any equity in the house to use towards any closing costs).

It was an unforseen cost that blindsided us and now we are housebroke!

the FHA has an over 100% Loan to Value Option that may be a lifesaver for you if you can qualify for it....call your lender and see if they offer it, what the qualifications are and if you think you can qualify, if they dont offer it then find another lender who will.

[trying2moveup]

I personally think it is very hard no matter what to buy in this market, at least hard mentally. We closed on a house at the beginning of December 2008. We will be in almost a month here in a few days. Even though we bought for 10K less than list and it appraised for 10K higher than list, we are "underwater" b/c we used a VA loan and in this market, values are continuing to tank. However, we used our VA eligibility because we did not have the full 20% to put down. But even if we did, I don't think we would have put 20% down because once your cash is in the house, it is automatically illiquid. You cannot re-fi and pull out cash in this market, with declining property values. To me, it is better to have the cash in savings where I can get to it in a true emergency than to try to have equity that I may have today, but in 4 weeks it may be gone b/c property values have declined that much futher since purchase. . .

and that is what I mean about it being a hard pill to swallow. I don't even want to know what our house is worth now, one month later, because I know it will be worth less than what we paid. So, no matter when you buy or how "cheap" you buy, in this current market, you are always going to end up paying more than the market is dictating.

[trying2moveup]

Originally Posted by ricardocobos

the FHA has an over 100% Loan to Value Option that may be a lifesaver for you if you can qualify for it....call your lender and see if they offer it, what the qualifications are and if you think you can qualify, if they dont offer it then find another lender who will.

Though you may not have cash on hand right now, to me, this sounds like predatory practice whereby your Good Faith Estimate was completely off the mark and you need to get a lawyer or some sort of representation to get this corrected immediately. . . or at least complain to your lender and assure them that you will complain to the state regulatory board about what happened here with your closing.

From what I understand, PMI is a percentage of the loan amount that you are borrowing. I don't know all the ins and outs, but say if your loan amount is 100,000 you may have to pay .2% of that a month in PMI, but if your loan amount is 400,000 you would pay .5% of that a month in PMI.

Again, these are just random numbers for example, not the absolute formula but I DO know that it is an escalating number (i.e., the more you borrow, the more your PMI).

So, it seems that the fact that banks were tightening up on the lending, well that's just fine and dandy but that shouldn't have ANYTHING to do with a loan that was in process and ready to close _ assuming that nothing else changed right prior to your closing (i.e., you acquired debt - a big NO NO - right before closing that changed your FICO score).

I really think you need to look into this - $200 to $600 in PMI is crazy. . . I mean, $200 to $225 or $250, o.k. MAYBE. . . but a $400 A MONTH HIKE???

I feel for you!

[mbieber1029]

Interesting theory about putting more money into a slowly declining market. I guess its similar to buying extra stock knowing it is going to decrease in value. I guess I pretty much need to weigh the pros and cons of putting down various amounts at the time of the house purchase and discuss it all with my lender/realtor/etc.

[tonyc]

I would wait until 2010 to buy if I were looking...

On Saturday I saw a house that was reduced to 1.4M, sadly the neighbors 2 house over paid 1.9M less than a year ago. The agent showing the house selling point was that whoever buys will have instant equity. Yeah right~~ values will continue to drop through 2009.

[ricardocobos]

Originally Posted by 7th Direction

Ugh. I hate my PMI!!!!

We were originally told that it was going to be $100-$200 a month, but when we went to settlement, because we settled right as companies stopped lending as easily, it jumped to $600 a month!!!! I would LOVE to refinance, but we don't have the $$$ to refinance (we don't have any equity in the house to use towards any closing costs).

It was an unforseen cost that blindsided us and now we are housebroke!

Because PMI is was required on your loan by your lender and because Reg-Z aka Truth in Lending calculates PMI as finance charges in the APR then to be in compliance with Reg-Z your lender was required to re disclose the change in PMI no fewer than three days prior to closing; anything less is deceptive practices. You may want to consult an attorney or at the very least your states attorney general to file a complaint.

Finally; you should seriously consider an FHA loan, it could probalby save you hundreds of dollars a month just in PMI charges!

[mbieber1029]

Since this PMI thread has gone on such a roll and people seem to continue to reference the FHA loan I was wondering if anyone has additional information about the FHA loan. Is it for everyone? Is it most beneficial for first-time home buyers? What are the real benefits of that over another lender? Are there any strict requirements? And what is the deal with the $7500 back/tax break/whatever they call it for homebuyers?

[ricardocobos]

An FHA loan is a loan that is insured by Housing Urban Development Agency (HUD). It is important to understand the distinction between a Lender and an Insurer. The Lender in this case is not HUD, it is whoever makes the loan for you i.e.; XYZ Bank & Trust or Americas Super Big Mortgage Giant Co. Obviously these are examples of lenders who if they were real could make you an FHA loan if they were licensed and approved by HUD to do so. The Insurer in this case is HUD or the Federal Government or more accurately the US Tax Payer.

HUD has created guidelines on what type of loan they will insure. The guidelines are the same for ALL lenders but every lender can and in these market conditions will enhance those requirements. For example in the case of credit scores; HUD does not have a minimum credit score requirements but the bank I work for has instituted a minimum credit requirement for FHA loans of 580 and I have heard of other banks and lenders requiring at least a 600 to 620.

HUD requires a borrower occupy the home as their primary residence and to be able to demonstrate stability of income. Generally the proposed house payment as it relates to their debt to income (DTI) ratio shouldn’t exceed 31% of their gross monthly income and no more than 43% when considering all other types of debt obligations like car payments, credit cards, student loans, child support, alimony and separate maintenance. Exceptions to this rule are made all the time when the loan is approved using Fannie Mae’s Desktop Underwriter (DU) Automated Underwriting System (AUS) or Freddie Mac’s Loan Prospector (LP) and generally both AUS will allow ratios well in excess of HUD’s 31/43 guideline for people with good credit, cash reserves and other mitigating factors. In addition HUD grants broad latitude to Direct Endorses (DE) Underwriters to make judgment calls for loans who have compensating factors such as; trailing spouses who may not be working yet but have a history of gainful employment, large down payments, a borrower who has a good history of either paying more in rent or housing expense and too many more to list here.

One of the most unique feature of an FHA insured mortgage loan and what sets it apart from any other mortgage loan product in the market today is they allow for a non-occupant co-mortgagor. In laymen’s terms you can have a parent co-sign and not live in the house that is being financed.
HUD doesn’t have income restrictions but they do impose property and loan limits and many lenders add to those restrictions as well you can check loan limits at https://entp.hud.gov/idapp/html/hicostlook.cfm And you can check to find HUD Approved lenders at; Lender List - HUD.

One last thing to remember is that your lender may have additionally imposed restrictions that HUD doesn’t require but it is the lenders right to do so as long as they are complying with Fair Lending laws in the application of those rules. For example; a common occurrence that I see is where lenders will not make an FHA loan to purchase a manufactured home yet HUD will insure the loan. In this case you need to find a lender who will make that loan for you. Finally; when in doubt check the HUD website; HUD - Why Ask For FHA Loan (http://www.hud.gov/fha/choosefha.cfm - broken link)