Pre-paid Mortgage Insurance?

[Hooosier]

We are under contract on a home with a purchase price of $419,900 and a 5% downpayment.  This puts the loan amount at $398,905.

With this loan amount our lender has said the MI payment will be approximately $295.85 per month or an up-front payment of $13,522.88 to avoid paying monthly MI.  When we originally spoke with this lender in September she estimated the up-front MI payment would be $6,840.00 if we wanted to avoid paying monthly MI.  Obviously there is a huge difference between 13.5K and 6.8K upfront MI payments to avoid monthly MI payments.  We have emailed her back to figure out why the upfront MI payment has nearly doubled but haven't heard back yet.

Do either of these numbers seem accurate or reasonable?  Hopefully we will hear back from her soon, but in the meantime I would love to know what our MI should be (ballpark) from the wonderful members here.

[psm]

Try this tool to see if it is in the ballpark
http://www.goodmortgage.com/Calculators/PMI.html

[psm]

Also I think it matters a lot if it is FHA or conventional

[Hooosier]

It is conventional.

[psm]

Her higher quote is more in line with the tool. Maybe she misquoted or quoted based on a higher down payment.

[Anonymous]

Hi...I'm going through same thing but just on much smaller scale, as my fiance and I are buying our first home. Apparently, it all revolves around your credit score at the time of close. If you and spouse / other are applying, they take the lower of the two scores at the time to calculate your PMI. We have been told to pay ours in lump-sum or else you will be required to pay throughout the duration of the mortgage, which ends up being a great deal more than just paying it off. When we asked "why", we were redirected to the issue of improved credit scores at time of close resulting in "less risk" for the lenders and thus, a decreased PMI, either in duration or lump sum. That's all I got for ya for now...not sure why the span would be THAT different, unless you were hearing from two different potential lenders at two seperate times when there could have been a decent fluctuation in your credit scores. Good luck! 

[StartingOver10]

Nikol373, the only loan that requires mortgage insurance payments for the life of the loan is FHA. 

If you are getting a conventional loan, then the mortgage insurance payment automatically drops off at 78% LTV based on your original purchase price.

Also, if you are getting a conventional mortgage, the difference in mortgage insurance rates is substantial between lower scores and higher scores (tiered rates). It is also based on the LTV. Lower the LTV, lower the rate until you get to 80% and then there is no PMI.

If you can pay lump sum up front for the PMI, that is a good thing. Just run the numbers to see if it makes more sense to pay the PMI or to add to your down payment rather than paying the PMI upfront.

[DallasLoanGuy]

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StartingOver10 wrote: Just run the numbers to see if it makes more sense to pay the PMI or to add to your down payment rather than paying the PMI upfront.

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