We were recently asked if Credit Scores affect FHA Mortgage Insurance (MI) rates. They do not. Credit Scores can affect FHA interest rates but not FHA MI. Credit Scores do, however, significantly affect Private Mortgage Insurance rates associated with Conventional Loans.
For 30 year loans, FHA annual MI rates vary from 1.30% per year to 1.55%, depending ONLY on loan amount and loan-to-value (LTV). For 15 year loans, FHA annual MI rates vary from 0.45% per year to 0.95% per year, depending ONLY on loan amount and LTV, once again. Credit scores have no bearing on FHA MI rates. This annual MI is now permanent; it remains for the life of the loan.
Private Mortgage Insurance (PMI) rates (for conventional loans) vary significantly based on loan-to-value ratios, loan types, loan amounts, and credit scores. PMI rates range from 0.25% (for 85% LTV loans) all the way to 1.38% (for 97% LTV loans). For a 95% LTV loan, a person with a credit score of under 680 will have an annual PMI rate of 1.20%. If that same 95% LTV borrower has a score of over 760, his PMI rate will drop all the way to 0.59% (at MGIC for example).
PMI rates overall are much lower than FHA MI rates. In addition, PMI can be eliminated in various ways when certain LTV targets are hit, unlike FHA MI.
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