PRIVATE
MORTGAGE INSURANCE (PMI
):
Any time you
put less than 20% down (in other words, a LTV
over
80%), a bank will look at you as a risk. The
bank would like another entity to insure the fact that your applicant is a
"good risk". A Private
Mortgage Insurance
(PMI
) company will determine if you are a good risk and
issue the insurance
against
default. Basically, the lender will
take the risk up to 80% LTV
and
the PMI company will insure the amount over that to a maximum of 97%.
If PMI is needed, it is like being approved twice
for the same loan.
PMI
costs
money!
PMI
must be included when calculating front ratio
.
P.I.T.I (PITI)
P&I
is Principal & Interest
T is
monthly Real Estate Taxes
I represents
all of the monthly Insurances:
-Hazard Insurance
-Private Mortgage Insurance (PMI)
-Flood Insurance
Below is a
chart that will show you the approximate monthly factor used to determine the
PMI payment based on LTV (Loan-To-Value). The
higher the LTV, the higher the risk and the more it will cost.
PMI
factor
80.01-85%
LTV
.37%
85.01-90%
LTV
.47%
90.01-95%
LTV
.78%
95.01-97%
LTV
1.04%
How to
determine monthly PMI cost:
Take the
loan amount, multiply it by the factor and divide by 12.
Example:
95% LTV (5% down) The factor
is .78%
$100,000
loan
X
.78%
=
$780 year or $65.00 per
month
How much will PMI cost YOU?
Click here>>> "A" paper (good credit) http://www.mgic.com/is/html/ratefinder_a.html
ALT A Special Program http://www.mgic.com/is/html/ratefinder_alta.html
"A-" (less than good credit) http://www.mgic.com/is/html/ratefinder_aminus.html
Note: Premium Type should be Monthly (default)
Renewals should be Constant (default)
In summary,
any time the LTV
is
over 80%, PMI
"IS"
required.
PMI will automatically be dropped with the LTV amortized to a LTV of 78%.
Dan Palumbo has financed over 4000 families over
the past 20 years. Call
800-817-8743.
Licensed Mortgage Banker - New Jersey Department of Banking and Insurance; Licensed by the Pennsylvania Department of Banking; Virginia Licensed Mortgage Lender