cancel
Showing results for 
Search instead for 
Did you mean: 

Upfront pmi vs monthly, etc.

Auto Loans for ANY Credit Situation. Immediate Response.
Advertiser disclosure
Highlighted
New Contributor

Upfront pmi vs monthly, etc.

Hi everyone,

 

    I am heavy into researching the best conventional loan program for my situation, and wanted to ask - is it best for me to find a loan with a upfront pmi option vs monthly pmi? I changed my mind and decided I will be purchasing an hour away in el paso, tx and am bracing myself for the high property tax, so if paying upfront pmi will lower my monthly mortgage payment, that would be great.

Also, how does fannie mae deal with student loans in deferment? If my projected monthly payments 3 years from now will be less than $100, will Fannie Mae treat this payment like usda loans and just put my loan payment at $100, or will it use the actual monthly payment of $47?

 

Thank you in advance.

Message 1 of 11
10 REPLIES 10
Highlighted
Contributor

Re: Upfront pmi vs monthly, etc.

Depending on how long you will keep the property, PMI will drop off once you hit the natural 78% LTV.

 

Regarding your student loans;

 

(scource) https://www.fanniemae.com/content/announcement/sel1104.pdf

 

The Selling Guide currently requires deferred installment debts, such as student loans, to be
included in the debt-to-income ratio. If the borrower’s credit report does not indicate the monthly
amount that will be payable at the end of the deferment period, the lender must obtain a copy of
the borrower’s payment letter or forbearance agreement to determine the monthly payment to
be used in qualifying the borrower.
With this update, the Selling Guide now includes an exception to this policy for student loans.
The lender may calculate a monthly payment based on 2% of the balance of the student loan in
lieu of obtaining documentation of the monthly payment when the credit report does not contain
one. However, if any documentation is provided by the borrower or obtained by the lender that
indicates the actual monthly payment, that figure must be used in qualifying the borrower.

Message 2 of 11
Highlighted
New Contributor

Re: Upfront pmi vs monthly, etc.

Thank you for responding.

"Depending on how long you will keep the property, PMI will drop off once you hit the natural 78% LTV" - yes, I understand this.

My question is - is it better to pay upfront pmi vs monthly pmi?

Message 3 of 11
Highlighted
Regular Contributor

Re: Upfront pmi vs monthly, etc.

I have researched upfront pmi versus monthly as well since we are looking to buy in a year.  From what I can gather, upfront pmi makes sense 1) if you have the cash for it upfront  and 2) if you are going to stay in the house long enough to where it is less expensive than monthly (i.e. more than two years).  Seems like it would be more advantageous for most to pay it upfront if possible.

 

We were hoping to get the seller to pay the pmi or roll the cost of it into the mortgage.  I am not sure how many lenders allow this in practice, but it seems to be something that is a possibility from what I can gather.  I am in the process of talking to lenders about our situation and will update when I get some concrete info.

Message 4 of 11
Highlighted
Contributor

Re: Upfront pmi vs monthly, etc.

Depends on how long you plan on keeping the home.

 

3 types of PMI

 

Monthly (low rate with monthly PMI)

Lender paid (higher rate no monthly)

Borrower paid (lower rate no PMI, large fee)

Message 5 of 11
Highlighted
Regular Contributor

Re: Upfront pmi vs monthly, etc.

A simple break even will net you your answer. As others have pointed out. You'll get upfront and monthly options from your lender. Simply take upfront and divide it by the monthly. That's how long you'll have to stay to make it worth it. If you plan to stay longer pay it up front. If not.... Its not for you.
Message 6 of 11
Highlighted
New Contributor

Re: Upfront pmi vs monthly, etc.

Thank you for the responses.

I plan to live in the home at least 3 years before renting it, and am hoping to pay off most of the home during this time. So upfront pmi seems the way to go. It seems as if, by paying upfront,  i will save somewhere between $100 and $200 dollars (is this right? I'm guestimating for a $100-150000 home). So my monthly payments will only be the mortgage?

Message 7 of 11
Highlighted
New Contributor

Re: Upfront pmi vs monthly, etc.

Also, can anyone out there answer my second question?

Also, how does fannie mae deal with student loans in deferment? If my projected monthly payments 3 years from now will be less than $100, will Fannie Mae treat this payment like fha loans and just put my loan payment at $100, or will they use the actual monthly payment of $47?

Message 8 of 11
Highlighted
Regular Contributor

Re: Upfront pmi vs monthly, etc.

For conventional loans your reported monthly payment will Always be used in your DTI.

FHA will not count loans with 12+ months of deferment.

Also on your PMI calculations $100-200. PMI is heavily dependent on your down payment amount and credit score. If you have excellent credit PMI will not be nearly as much as you think. Typically the upfront PMI amount in my experience is usually at least 5-7 years worth of of me nthly payments. So if you plan to stay three years. You'll be throwing money away if you stay less. Radian rates has an app for PMI. Its pretty useful. Check it out.
Message 9 of 11
Highlighted
Contributor

Re: Upfront pmi vs monthly, etc.

FNME will use a 2% factor unless you have documented proof what the payment will be and it sounds like you do.

 

(source)

 

https://www.fanniemae.com/content/announcement/sel1104.pdf

Message 10 of 11
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.