Mortgage lenders typically require at least a 20 percent down payment on the purchase of a home to avoid paying for private mortgage insurance. Before January of 2016, these PMI costs ranged from 30 basis points (.30%) to 125 basis points (1.25%) of a borrower’s annual loan balance. With such costly insurance, homebuyers were constantly looking to avoid this mandatory coverage.
According to this month’s Consumer Reports, it is now easier than ever to get a mortgage with a low down payment. More specifically, private mortgage insurers have started dropping their rates to stimulate today’s housing market. This means it’s currently more cost-effective to request loans from private companies, who offer lower PMI rates, than from the Federal Housing Administration, which still requires borrowers to pay a pricey insurance charge upfront. In fact, WalletHub, a consumer finance service, reported that today’s low private insurance rates mean you can now get a loan $50 less per month than one insured by the Federal Housing Administration. The FHA is considering lowering their PMI due to this impact.
For more information on today’s private insurance rates, contact one of our home mortgage specialists.