If you’ve ever purchased a home without putting down at least 20 percent of the purchase price, then it is likely that you’re familiar with PMI. Private mortgage insurance, also referred to as PMI, is a type of insurance that certain buyers are required to obtain in order to protect the lender from a borrower’s default.
The cost of PMI can typically range anywhere between 0.25 to 2 percent of the loan balance each year, depending upon the size of the mortgage and the down payment, as well as the borrower’s credit score. In this case, the higher your risk factors are, the higher rate you are likely to pay for PMI.
According to the U.S. Federal Housing Administration (FHA), though, the premiums for private mortgage insurance are slated to decrease this year on FHA-insured loans that close after January 27 (2017). And, while a mere quarter of a percentage point may not seem like a very big deal, it can actually save home buyers an average of roughly $500 per year.
This can be a nice incentive for purchasers who are taking out FHA home loans – especially if you’re strapped for cash for a down payment, but are otherwise ready to make a move. It can also help to essentially ease the burden of the mortgage rate increases that have already been seen over the past few months, and that are anticipated to possibly continue going forward.
The Federal Housing Administration had actually raised PMI premium rates between 2010 and 2014, primarily as a way to help in protecting itself from another U.S. housing market collapse. PMI rates, however, decreased in 2015 by 0.5 percent, and will do so again this year.
If you’re considering making the move to a new home, right now could just be the perfect time. In addition to lower PMI rates, mortgage rates are still at considerable lows – but this may not last for long. Contact Us for more information on homes that may be available in your desired location.