Posted on 07/15/2008 5:28:30 AM PDT by shrinkermd
...Stung by growing defaults, lenders are offering borrowers fewer ways to avoid purchasing private mortgage insurance. Mortgage insurance, required for buyers who are unable to make a full down payment or who have insufficient credit histories, reimburses lenders in the event of a borrower default. But over the past few months, mortgage insurers have been declaring more and more of the U.S. a "declining market," raising the requirements and making such insurance harder to obtain.
...For a time, it seemed mortgage insurers were going the way of the dinosaur. During the housing boom, when lending standards loosened drastically, borrowers often avoided mortgage insurance by taking out two loans, one that covered 80% of the purchase price and a second, "piggyback" loan to cover the once-traditional down payment.
...mortgage insurance with the balance of all mortgage loans underwritten during the same period, jumped from about 8.5% in early 2006 to about 20% in the fourth quarter of 2007, according to several insurers' filings with the Securities and Exchange Commission. (The rate dropped to 13% in the first quarter as insurers increasingly focused on more credit-worthy borrowers.)
...Nowadays, insurers are frequently requiring at least a 10% down payment, compared with previous standards that might have included a 3% to 5% down payment. Prices also are rising. Next month, for example, MGIC plans to charge an annualized premium of up to 0.75% of the loan balance for fixed-rate, 30-year mortgages with a 10% down payment, up from 0.67% this month. The company doesn't plan to change course anytime soon. "Housing cycles don't correct quickly," says MGIC's Mr. Zimmerman
(Excerpt) Read more at online.wsj.com ...
If you plan to buy or sell a home it is important you understand mortgage insurance.
But But.....won’t the Justice Department be forced to threaten the mortgage companies again over redlining?
Yes.
And look at your credit well ahead of time. I had a customer come in to get pre approved. Wife's scores in the mid 700’s.
His was 100 points lower. Reason, the cable company put a collection on his credit for $40 item. The item had been returned properly, but the cable company screwed up.
The 100 differential will cost them dearly in rate as he will be considered the primary borrower.
There are many other changes out there also, to numerous to mention,
Bottom line though, good credit and a downpayment, and people are fine.
Amen to that.
About damn time, too.
Is it with a solid lender? If so you should be OK.
Also look at at getting your rate locked in. Rates have dropped quite a bit the last week and half. And some loan changes have been applied to those who are not locked in.
Another potential issue could be LTV, depending on which comps your appraiser has to use. Another good reason that the appraisal is done sooner rather than later if values are getting softer.
But yes putting 20% down sidesteps many potential issues.
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