By Scott Hevel, CCAR’s REALTOR®/Lender Committee
The business of mortgage insurance has been changing. Although most private mortgage insurance companies adhere to a fairly standard pricing model, you might see a difference here and there.
Starting in April of this year, most PMI companies made some pretty big changes to mortgage insurance premiums to make mortgage insurance more attractive for some buyers. This change has lowered the monthly payment for some higher credit score consumers. You might have buyers who now qualify for a more expensive home than they would have earlier in the year. Unfortunately, you might also have buyers who see higher premiums.
Mortgage insurance for lower credit score buyers has increased. In fact, those who may have qualified for a conventional loan earlier in the year, might be advised to change loan programs from conventional to FHA because the increased PMI premium is so pronounced. Here are some bullet points of the general changes:
- Most PMI companies have changed from four scoring tiers to eight tiers. Instead of a premium changing every 40-60 points of credit score, every 20 points of score now matters.
- Borrowers with 740+ FICOs had PMI rates drop substantially. The highest scores drop rates more than 20%.
- For fixed rate loans of 20 years or less, PMI rates have dropped for all borrowers with scores of 680 and above. PMI dropped substantially for some in this bucket.
- Borrowers below 700 FICO will see an increase in premiums. For those below 680, it is now much more expensive.
Here are some of the bigger changes to monthly premiums:
The percentages listed in the boxes above, are based on how much of the loan amount the buyer must pay each year the policy is in effect. So, a $100,000 loan amount with a 1.00% premium means a borrower would have to pay $1,000 a year for mortgage insurance. As you can see, some of these changes can be a big deal. This also points to why it’s important to get qualified up-front.
A good lender can give you tips on how to improve your buyer’s credit. Just a few points of increase could save thousands. In the meantime, if you have any questions about mortgage insurance or any other mortgage topic, contact your REALTOR®/Lender Committee at firstname.lastname@example.org.