Is There A Limit To PMI
Is there a limit to what a lender can charge for PMI? Let say that a house is sold for $183,000 and the principal payment is $1250/month. A certain lender charged $645 for PMI. This should be illegal! If it is, what can be done? Credit scores at the time of the loan were in the low 500's. Please help. This the loan from hell! :-x
I am closing on a house in which my buyer is paying $721.15/mo on a $209,900 house. 100% LTV
I agree that this is crazy but I don't see any way around it. Plus it's not me paying it...
Quote:
This should be illegal! If it is, what can be done? Credit scores at the time of the loan were in the low 500's. Please help. This the loan from hell! :-x
If it was illegal then that borrower would not be able to get a loan. PMI is the lenders insurance in case of default.
PMI is just like any other insurance policy - the amount you pay is based on the risk involved. With pmi a third party insurance company is insuring the lender for any losses they may incur from you defaulting on the loan.
It stinks to have to pay pmi, but without that insurance lenders would not offer many of the high risk loans available today. including low down payment fha and va loans..and about 1000 other loans.
Side note though- is that $645 a month- if so thats about as high as I have ever seen it. I would be curious to know all the details of that loan including; LTV, cashout, income verification and ratios, occupancy, credit, and type of loan (arm/fixed/term etc.)
just me 2 cents--- good luck
I purchased my first rental property with 10% down, thus had to pay PMI. The PMI was around $70/month. Crunch numbers:
Purchase - $100,000
Int - 6%
Financed amount - $90,000
pmt based on 30 yrs - $540
PMI - $70
Total pmt including PMI - $610
Assume rents of $1,000
Simple cash flow - $390
Assuming I would have put 20% down, pmt would have been $480, with no PMI, leaving a simple cash flow of $520, or $130 more per month.
It would have taken over 6 years to make up the additional $10,000.
If you have decent credit and the property can handle a higher mortage payment and still cash flow, you may actually make a better return on your money.
FYI- The PMI is $645 per month plus the principal and interest. Our debt to income ratio is relatively low .
There is no way. It must be just a mistake. Like somebody said, there are a few PMI companies, and they have different rates, but they are very competitive to each other.
PMI is charged base on your loan amount and loan to value. Did you talk to your lender or broker? I really think this is just a honest mistake.
If you still need help, you can call us at 7708221700. We are a broker in Ga.
80 to 85% Ltv --- Multiply .32 by your mtg balance then divide by 12. Use this as a very crude guide for pmi.
85 - 90 .52
90-100 .78
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UpFront Mortgage Professional
[ Edited by aressllc on Date 11/09/2004 ]