The FHA Mortgage Loan Program, the Veteran’s Administration and the USDA Home Loan Program do not ACTUALLY make loans. They simply insure the bank against default, they issue underwriting guidelines to tell the banks which loans they WILL insure and which ones won’t cut the mustard. Those guidelines are loosely used by Banks, with many Banks adding their OWN rules (called overlays) regarding which loans they will make under a government loan program – regardless of the guidance from FHA (for instance). Because all Government Loans have various forms of Mortgage Insurance that protect banks against Foreclosure, we call that insurance PMI. The Government Mortgage Loan PMI Rates are set by the Government – they will not vary based upon the lender you get your loan from.
PMI is NOT the insurance that covers you in the event you lose your job, or someone on the mortgage dies – that’s a different type of insurance. This is strictly for the purpose of covering the Bank in the case of default.
PMI is normally associated with Conventional Loans, and for folks who have some cash to put into a transaction (maybe 3%?) and have credit scores of at least 640 – you might be more interested in the Conventional PMI Programs – and the special First Time Home Buyer Program available from the state of North Carolina.
Government Mortgage Loan PMI Rates
- FHA PMI Rates: Okay, technically, FHA doesn’t have PMI. They call their Mortgage Insurance MIP… but most folks we know refer to it as FHA PMI, so that’s what I’m going to describe here. FHA sets the Upfront and Monthly PMI rates, and they will not vary based upon what credit score you have, or what lender you decide to get your mortgage through. It also doesn’t “age off” when you pay your mortgage down to 78%, unless you got your mortgage a long time ago – and some of those still have those clauses written into them. FHA Loans do have a maximum loan size based upon the County you are buying a house in, and those are subject to change between October and January 1 of each year. FHA Loans will allow us to make loans for folks with credit scores below 600 (down to 580) and they are NOT just for first time home buyers. If you qualify, the FHA PMI charges you pay on a monthly basis CANbetax deductible (at least for now – who knows when Congress will change their mind?)
- The Current FHA PMI Upfront PMI Rates: There’s an upfront premium collected at closing. Generally the Up Front FHA PMI premium is financed into the loan. For a Borrower who is getting a 30 year mortgage, that is under the high cost limits (so anywhere in NC) and putting the minimum of 3.5% down – the rate for this initial FHA PMI Premium is 1.75%. Again, with a $100,000 loan, this means you would be borrowing $101,750, and we are financing that initial FHA PMI Premium into the Mortgage. That makes this portion of the FHA PMI Rate tax-deductible as it’s part of the interest.
- The annual FHA PMI Premium charges are broken into 12 monthly payments. The FHA PMI Rate for the Annual premium is currently is .85%. To calculate that – you would take your TOTAL Loan Amount (including your Upfront PMI) and multiply that by the Annual FHA PMI Rate of .85% (assuming again that you are the typical FHA Home Buyer getting a 30 year mortgage with the minimum down payment). Divide that Annual FHA PMI Premium amount by 12. You will have THAT amount added to your Principal and Interest Payment. Going to our example of a $100,000 loan, with the upfront FHA PMI Premium and a new total loan of $101,750 – multiplied by .85% is $864.87. Divide that by 12, and we are adding $69.75 to your monthly payment for FHA PMI. BUT – we CAN make you a loan, there are NO restrictions on household or individual income, and the qualifying is MUCH easier than ANY other type of mortgage financing… PLUS you can get the down payment from the State of North Carolina in a First Time Home Buyer Grant – so you don’t really have to have cash for a down payment! WOW!
- VA Loan PMI Fees: Again, TECHNICALLY the Veteran’s Administration does NOT have a PMI program… however, they DO charge a “Guarantee Fee” which is a type of Mortgage Insurance, and so – we call that the VA PMI Rate. The Veteran’s Administration charges the same PMI Rates no matter what lender you go to, or how much you borrow, or what your credit score is. There IS a difference, however, based upon whether or not you make a down payment (which is not required on most VA Loans) and whether or not you’ve used your VA Eligibility before. They also have different rates for Cash Out Refinances, and for Reservist. Surviving Spouses of Veterans, and Disabled Veterans could have NO VA PMI Fees charged, and it’s all determined on a case by case basis by the VA. There’s NO Monthly FEE charged on VA Loans, only an upfront VA Loan PMI Rate – and that’s normally added to the loan amount.
- VA Loan PMI Rates: Calculating a VA Loan PMI Rate can be calculated because there are SOOOOO many variables. Here’s a full listing of VA Loan PMI Rates which will be in place through 2016. So, if you are a first time “user” of your VA Eligibility Benefits (you don’t have to be a first time buyer – just using your VA Benefits to buy a house for the first time) and you are borrowing less than $417,000, and you are making no down payment… and you are “regular military” (not reserves, etc) then your rate is 2.15%. So, on a $100,000 loan, that means we are adding the 2.15% (for most folks) to their loan – making the total loan $102,150. It can’t be cancelled – but every penny of interest, if you qualify, can be a tax deduction.
- USDA Home Loan PMI Fees: USDA Home Loans are one of the most sought after mortgages in North Carolina. There are several reasons why – it’s cheaper, when you look at the PMI Rates than a FHA Loan, and they are designed for the more “rural” parts of our state. The mortgage interest rates for USDA Home Loans are some of the lowest available – generally lower than a Conventional Loan! Like FHA and VA Loans, technically USDA Loans do not carry any PMI – they have a Guarantee Fee, which is a mortgage insurance program. Because of that, we call the Guarantee Fee the USDA PMI Fees. Also like FHA Loan, USDA Home Loans have two charges, an upfront premium, which is generally added to the loan at closing and a monthly USDA PMI Rate. No matter what your equity position is on your USDA Loan, you will always have USDA PMI – it does NOT “age off” when you reach 78% equity position like Conventional Loans. If you qualify, your monthly PMI rates can currently be deducted on your taxes.
- USDA Home Loan Upfront PMI Rates for 2014: There’s an upfront premium collected at closing. Generally the Up Front USDA PMI premium is financed into the loan. This premium CAN be paid in cash, so if you are getting a gift (for instance) you can have that money go towards the Upfront USDA Loan PMI Fee. The PMI rate for this initial USDA PMI Premium is 2.0%. This is slightly higher than FHA, however it’s pretty easy to calculate. With a $100,000 loan, this means you would be borrowing $102,000, and we are financing that initial USDA PMI Premium into the Mortgage. This is what your mortgage payments are calculated upon.
- Monthly USDA Loan PMI Premium Rates 2014: The USDA PMI Rate does not change based upon your credit score. So if you qualify for the program, no matter what your credit score is – your monthly USDA Home Loan PMI Rate stays the same. Beginning October 1, 2014 that Annual PMI premium will be .5%. To calculate that – you would take your TOTAL Loan Amount (including your Upfront PMI) and multiply that by the Annual USDA Loan PMI Rate of .5%. Divide that Annual USDA Loan PMI Premium amount by 12. You will have THAT amount added to your Principal and Interest Payment. Going to our example of a $100,000 loan, with the upfront USDA Loan PMI Premium and a new total loan of $102,000 – multiplied by .5% is $510. Divide that by 12, and we are adding $42.50 to your monthly payment for USDA Loan PMI. As you can see, it’s about $50 a month cheaper than a FHA loan – but as I said, it’s becoming more difficult to qualify for a USDA Home Loan.
There’s also several First Time Home Buyer programs that go hand in hand with these Government Mortgage Loan programs. For instance, the NC Affordable Housing Loan program allows you to only make a 3% investment if your credit score is as above 640 – and it will provide a 3% GRANT that is forgivable for the down payment or closing costs! There’s no difference in the PMI Coverage, based upon your credit score, making the PMI Mortgage Insurance Rates very low for this program.
AND HERE’S A NOTE TO THE PARENTS (who hate PMI), the ones who are ready for their kids to move out... Remember when you bought your first house? Our Mortgage Rate on our first house was 13.75%! These days, mortgage interest rates are almost 10% lower! It’s time… kick the kids from the nest, and help your kids buy a house in NC!
Want to know how much Government Loan PMI Rates might change your monthly payment? Call Steve and Eleanor Thorne 919 649 5058, We’ve been in this business, in North Carolina, forEVER, and we want to help you buy your Dream Home! The information we provide is FREE, and there’s no obligation – so call!
DISCLOSURE: PMI Rates for Government Programs quoted above are based upon the Agency Guidelines. That does NOT MEAN that ALL BANKS will do loans for folks with certain credit scores to buy certain types of property.