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A Side-Effect of the Subprime Mess: Rising PMI Rates
By JLP | December 11, 2007
It looks like (some) private mortgage insurance (PMI) rates are on the increase:
PMI Group Inc., a Walnut Creek, Calif., mortgage insurer, this fall stopped writing mortgage insurance for borrowers with credit scores below 620 who are financing more than 95% of their home’s value. PMI also has boosted prices for most borrowers who have credit scores of 620 and higher with loan-to-value ratios above 95%. Borrowers with credit scores between 620 and 659 who are financing more than 97% of their home’s value face the biggest increase. The monthly premium for a $200,000 mortgage will increase by $123 to $283.
Source: WSJ - Mortgage Pain Hits Prudent Borrowers ($)
Granted that’s on a mortgage that is 97% of the value of the home’s value, but it’s still a significant increase! I would think a monthly PMI premium of $283 would price a lot of people out of the market.
The way around PMI is to have at least a 20% downpayment or have 20% equity in your home. A good credit score can also help lower your PMI premiums. Also, if you currently have 20% equity in your home, you can get PMI dropped. It might involve paying for an appraisal on your home to prove your 20% equity position. I remember reading somewhere that some states require lenders to automatically drop PMI once a borrower reaches a certain point in paying down their mortgage.
No matter how you look at it, borrowing to buy a house is getting more expensive.
Topics: Housing Market |
