Pmi | NC FHA Expert

USDA Home Loans have PMI?

August 24, 2009 by Eleanor 1 Comment

USDA loans are the coolest loans on the planet right now, and most people don’t understand that it has a form of mortgage insurance…

Mortgage Insurance does not pay your mortgage off when you die (well, maybe there’s a kind that does, but that’s not what I’m talking about). The PMI-type mortgage insurance is default insurance. It covers a small portion to the bank if you default on the loan.

With Conventional loans, it’s referred to as Private Mortgage Insurance, or PMI. This insurance generally cost @ .58%of the loan amount on a monthly basis (assuming you have 10% to put down and really good credit scores).

FHA has Mortgage Insurance Premium, or MIP, which is 2.25% of the loan amount PLUS a monthly amount of .90% of the loan amount (think it’s kinda’ expensive?).

VA has a Guarantee Fee. So if you are Veteran using your VA benefits the fee could be as much as 3%! (For details click here).

USDA Home Loans also have a form of default insurance (PMI), and it’s a Guarantee Fee. The actual dollar amount is a rather complicated formula, and it ends up being about 3.5% – but most people use 3.5% as a rule of thumb for prequalifying purposes. (updated 5.27.2010 from 2% which is what they charged earlier) USDA Home Loans are AFFORDABLE!

Note that starting October 1, 2011 USDA Home Loan will change it’s PMI calculations. Starting in October – there will be a 1% upfront fee and a MONTHLY CHARGE!

If you want more information about USDA Home Loans in NC - please call Steve and Eleanor Thorne, 919-649-5058. We are Mortgage Lenders in the Triangle that specialize in these types of mortgage loans. Ask us about your Tax Credit! We have the lowest rates!

PMI For VA Loans??

July 15, 2009 by Eleanor Leave a Comment

Veteran’s have a great benefit with VA Financing. It’s a 100% loan, and in most cases, the seller can pay for closing costs. It’s a conservatively underwritten loan, so there Uncle Sam Wants YOU to buy a house! is little chance that 5 or 6 years from now a Vet is going to be in trouble with a mortgage that they can’t afford!

All mortgage products that have less than a 20% downpayment have some sort of “Mortgage Insurance.” I call it “Default Insurance,” because it really benefits the bank – in the event of foreclosure, the bank gets a small amount of money to cover some of their costs (It’s not a policy that pays the mortgage off in the event of death).

PMI is what most of us have heard this “Default” Insurance referred to. For FHA Mortgage Loans, it’s called MIP (click here for details), and USDA Home Loans have a Guarantee Fee, which serves the same default insurance purpose.

Veteran’s Administration Mortgage Loans also have a Guarantee Fee. Here are some basic guidelines regarding how much your fee might be:

A basic funding fee of 2.0 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent.
A funding fee of 2.75 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 2.25 percent and a 10 percent down payment will reduce it to 2.0 percent.
The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent.
Veterans who are using entitlement for a second or subsequent time who do not make a down payment of at least 5 percent are charged a funding fee of 3 percent.
Veterans who are classified by the VA as disabled will have a percent (down to zero) of their fee waived.

Why would a Veteran make a Downpayment??? Because, with the cost of the “traditional PMI” the reduced Funding Fee is much C-H-E-A-P-E-R!

We love making loans to Veterans! If you have questions about purchasing a home in Cary, NC using VA financing, or refinancing your VA mortgage please call Steve and Eleanor Thorne, 919-649-5058.

Filed Under: First Time Home Buyer, VA Mortgage Loans Tagged With: financing, first time home buyer, guarantee fee, home, loans, mip, mortgage, pmi, reduced, tax credit, update, VA home loan, va mortgage loans

Government Loan Update to Guidelines

January 29, 2009 by Eleanor 1 Comment

And in the blink of an eye – while I was checking my Blackberry – there it was. More guideline changes! Holy Cow Batman!

Many of that Nation’s Banks changed guidelines to show that FHA, VA and USDA minimum credit scores (some people call them FICO scores) are going to 620. What does this mean – since FHA has an underwriting “guideline” that allows for scores even below the traditional 580, and VA doesn’t have a minimum credit score? Well, just because FHA and VA might accept and insure borrowers with lower scores – Wells Fargo, Suntrust, Countrywide, Security National Mortgage Corporation and OTHERS are not.

We do have companies that we work with that will make Government Loans to folks with scores under 620… that’s the good news. Here’s the BAD news. The rates are higher – and because we have a rate spread LAW in North Carolina – not all of those loans will be available!

Additionally – the PMI companies listed Wake County as a “Distressed” area effective February 2, 2009. This means that the minimum credit score needed for a loan that requires PMI here is now 700. That’s STIFF!

If you are considering a purchase later this year – go ahead and talk to your lender. Let us begin the work of getting your scores “tight…” especially if you think you have a low credit score! We need to start this process EARLY! Especially in view of the fact that Government Underwriting Guidelines are changing so quickly! Call Steve and Eleanor Thorne, Corporate Investors Mortgage Group, 919-649-5058.