Monthly or Upfront PMI

Anonymous · ‎06-17-2015

We are beginning the search for our home and keeping a close eye on monthly payments (taxes range from $3,400 - $6,500). While talking to someone, they said they paid PMI upfront. I had never heard of that until now.

How is PMI determined, both monthly and upfront? My middle mortgage score is 664 and we are putting 5% down. The highest purchase price we would do is $200k, live in Illinois (Chicago suburbs).

We have money left after closing and downpayment so this could be an option if it's going to lower our monthly payments and put us in a better neighborhood and more house. We will be in the house 5-10 years.

Thanks.

mynameainttracy · ‎06-17-2015

I remember in another one of your posts you mentioned your husband had been in the army. Is a VA loan not an option for you?

Anonymous · ‎06-17-2015

@mynameainttracy wrote:
I remember in another one of your posts you mentioned your husband had been in the army. Is a VA loan not an option for you?

No, his credit score isn't good enough and unless we wait at least a couple of years I don't think his score will go up. Most of his issue is he defaulted on student loans, they are too high to pay off and that default status will always be there.

CH-7-Mission-Accomplished · ‎06-17-2015

Single premium (one time) rate schedule:

https://www.mgic.com/pdfs/71-6768_bpmi_noref_singles.pdf

Montly premium schedule

https://www.mgic.com/pdfs/71-61210_bpmi_monthly.pdf

MGIC is the granddaddy of PMI companies. I worked for them in 1982-1984.

The single premium can save you money if you plan to stay in the house for many years.

I believe PMI premiums are currently tax deductible like mortgage interest, but that is not guaranteed to continue.

Ask an accountant how the one time premium would get deducted. Probably amortized over several years.

Good luck.

Anonymous · ‎06-17-2015

@CH-7-Mission-Accomplished wrote:
Single premium (one time) rate schedule:

https://www.mgic.com/pdfs/71-6768_bpmi_noref_singles.pdf

Montly premium schedule

https://www.mgic.com/pdfs/71-61210_bpmi_monthly.pdf

MGIC is the granddaddy of PMI companies. I worked for them in 1982-1984.

The single premium can save you money if you plan to stay in the house for many years.
I believe PMI premiums are currently tax deductible like mortgage interest, but that is not guaranteed to continue.
Ask an accountant how the one time premium would get deducted. Probably amortized over several years.

Good luck.

Just so I'm understanding and figuring this out correctly:

Base LTV: 95%

$200,000

Credit Score 620-679

Coverage: I used 30

Single: I came up with $8,880 one time amount (200,000*0.0444)

Monthly: I came up with $2,300 per year so $191.67 per month (200,000*0.0115)

If we stay in the house 5 years, monthly would add up to $11,500 compared to up front of $8,880. I just glanced at one of the pre-approvals and the PMI he estimated is spot on using the tables you sent.

Also, is this option pretty much available to anyone, neither of the lenders mentioned it and I think this would make a big difference in what we buy.

flan · ‎06-17-2015

@Anonymous wrote:
@CH-7-Mission-Accomplished wrote:
Single premium (one time) rate schedule:

https://www.mgic.com/pdfs/71-6768_bpmi_noref_singles.pdf

Montly premium schedule

https://www.mgic.com/pdfs/71-61210_bpmi_monthly.pdf

MGIC is the granddaddy of PMI companies. I worked for them in 1982-1984.

The single premium can save you money if you plan to stay in the house for many years.
I believe PMI premiums are currently tax deductible like mortgage interest, but that is not guaranteed to continue.
Ask an accountant how the one time premium would get deducted. Probably amortized over several years.

Good luck.
Just so I'm understanding and figuring this out correctly:

Base LTV: 95%
$200,000
Credit Score 620-679
Coverage: I used 30

Single: I came up with $8,880 one time amount (200,000*0.0444)
Monthly: I came up with $2,300 per year so $191.67 per month (200,000*0.0115)

If we stay in the house 5 years, monthly would add up to $11,500 compared to up front of $8,880. I just glanced at one of the pre-approvals and the PMI he estimated is spot on using the tables you sent.

Also, is this option pretty much available to anyone, neither of the lenders mentioned it and I think this would make a big difference in what we buy.

It should be available to anyone who is willing to pay for it, but there are underwriting guidlines (which I don't know). Another alternative, which you may, or may not, be able to swing, is to finance it. That can be done by increasing the loan by the premium (8,880 in your case), where you'd have to come up with 5% of the amount, or it can be done as a seller incentive. (Basically, you pay the premium more for the house, and the seller gives you a credit for the premium, which keeps the cash-to-close at about the same amount.) Talk to your lenders, and work through what the break even is.

Anonymous · ‎06-18-2015

Yes, paying the PMI upfront is an option. I wouldn't recommend it unless you plan on living in the home for more than five years.

frugalQ · ‎06-18-2015

you should be able to consolidate your SL's and take them out of default....or rehab them like many people who are prepping to purchase a home have done.

Anonymous · ‎06-18-2015

@frugalQ wrote:
you should be able to consolidate your SL's and take them out of default....or rehab them like many people who are prepping to purchase a home have done.

They are already consolidated and he already rehabbed them once and defaulted again. Poor judgement on his part.

CH-7-Mission-Accomplished · ‎06-18-2015

@flan wrote:
@Anonymous wrote:
@CH-7-Mission-Accomplished wrote:
Single premium (one time) rate schedule:

https://www.mgic.com/pdfs/71-6768_bpmi_noref_singles.pdf

Montly premium schedule

https://www.mgic.com/pdfs/71-61210_bpmi_monthly.pdf

MGIC is the granddaddy of PMI companies. I worked for them in 1982-1984.

The single premium can save you money if you plan to stay in the house for many years.
I believe PMI premiums are currently tax deductible like mortgage interest, but that is not guaranteed to continue.
Ask an accountant how the one time premium would get deducted. Probably amortized over several years.

Good luck.
Just so I'm understanding and figuring this out correctly:

Base LTV: 95%
$200,000
Credit Score 620-679
Coverage: I used 30

Single: I came up with $8,880 one time amount (200,000*0.0444)
Monthly: I came up with $2,300 per year so $191.67 per month (200,000*0.0115)

If we stay in the house 5 years, monthly would add up to $11,500 compared to up front of $8,880. I just glanced at one of the pre-approvals and the PMI he estimated is spot on using the tables you sent.

Also, is this option pretty much available to anyone, neither of the lenders mentioned it and I think this would make a big difference in what we buy.
It should be available to anyone who is willing to pay for it, but there are underwriting guidlines (which I don't know). Another alternative, which you may, or may not, be able to swing, is to finance it. That can be done by increasing the loan by the premium (8,880 in your case), where you'd have to come up with 5% of the amount, or it can be done as a seller incentive. (Basically, you pay the premium more for the house, and the seller gives you a credit for the premium, which keeps the cash-to-close at about the same amount.) Talk to your lenders, and work through what the break even is.

I think the provlem with the idea of financing the PMI one time premium and then paying 5% down of the new amount is that the maximum LTV of 95% (in this case) is 95% of the lesser of the purchase price or the appraised value. So you can't get that number to move by adding the one time PMI premium in there. You would exceed the 95% maximum LTV limit (or 97% or whateve it is).