What Borrowers Should Ponder Before They Finance

Jessica Thompson

Since 2010, many private MI companies have worked to open up markets and normalize their underwriting criteria. Some altered pricing, based on borrower credit scores.

The FHA made changes, too, namely to its rates. New rates effective April 9 reflect the third increase since 2010:

  • Monthly rates increase another .10% to 1.20% for LTVs up to 95% and 1.25 for LTVs greater than 95%
  • The FHA upfront premium increases from 1.0% to 1.75%

What does this change mean for your borrowers? 

It raises the question, “Which is better: FHA or conventional financing with private monthly MI?” The answer is, it depends…

If your borrowers have a lower credit score, an FHA loan may be their best option. FHA can be more flexible on certain guidelines, like debt-to-income. However, borrowers with higher credit scores may want to consider the less expensive, money-saving alternatives that private MI offers.

One last consideration

Before making a final financing decision, borrowers should ask themselves whether it’s important to be able to cancel coverage — and reduce their  monthly payment — as soon as possible. Most investors’ cancellation rules are more flexible than FHA’s. For example, most homebuyers with private MI are able to get a new appraisal to determine whether they qualify for cancellation, allowing them to take advantage of any home improvements or appreciation. FHA does not accept new appraisals. The sooner they can cancel MI, the more money they will save over the life of the loan.

What to take away from all of this…

Just remember this: FHA financing and conventional financing with private MI are both viable options.

MGIC provides a calculator to compare MGIC’s monthly MI with FHA.

Also, the great news is that you can now order MGIC MI from within Point.  This integration shows MGIC’s commitment to providing customers with quality, seamless access to MGIC’s MI programs.  Watch how it works.

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