FHA requires an “Up Front MI” payment of 1% no matter what, as we mentioned yesterday. You cannot, however, pay extra Up Front MI to avoid Monthly MI with FHA.
For Conventional Loans, however, you can pay ALL of your PMI (“Private Mortgage Insurance”) in a single upfront payment. This is a great alternative for purchases with large seller credits; the seller can pay ALL of the PMI.
The monthly PMI rate for a 90% loan-to-value, $400,000 loan is 0.49% of the loan amount divided by 12 months. This works out to $163 per month.
Alternatively, you can have NO monthly PMI at all at 90% loan-to-value, if you pay a single payment at close of escrow equal to 1.810% of the loan amount. For the $400,000 example above, this payment would be $7,240.
It would take you 44 months of monthly payments to offset the single up-front payment.
We often do not push Single Payment or Up Front PMI for one reason: We think inflation is on the horizon, and that it will push UP real estate values, allowing buyers to get OUT of PMI before 44 months is up.
Call Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646