Another mortgage insurance company has announced that the Minneapolis St Paul metro area is no longer in a declining market. There are now a couple different options for mortgage companies when it comes to getting private mortgage insurance for conventional loans.
Most MI companies require a valid credit score of between 660 and 680 and a minimum of three tradelines that have been evaluated for 12 months. Without the tradelines, the credit score may not be valid and won't be used. You need a minimum of a 660 credit score on a purchase transaction with 5% down. The maximum debt to income ratio is 41%, although there are a couple companies that will allow 45% DTI with a 740 credit score.
At least one mortgage insurance company is going to have new premiums based on credit scores. It still needs regulatory approval, but once approved it will help those borrowers with better scores. An example of the new rates would be with a credit score of 720 or better and 5% down, the rate would be .67%, if you credit score was between 680 and 719, the rate would be .94%. The rate would be even higher with a score between 660 and 679 – about 1.20%. It will make a difference in your payment and what you will qualify for in a mortgage.
If you are looking for a conventional loan and have less than 20% down, you will need mortgage insurance. Make sure you are aware of what your credit score is and what the monthly payment will be for the mortgage insurance. If your monthly MI payment increases your total payment too much, you will not be able to qualify for the same mortgage. Just as interest rates affect your qualification, so will your mortgage insurance payment. If your lender has to update your credit report during your mortgage process, your credit score could change and it may affect your rate/payment, etc – which could mean you might not qualify for the home you were looking at – or maybe it will improve and mean that your payment and rate might be even better!
The benefit to conventional loans with mortgage insurance is that the MI will go away once your mortgage balance is at 80% of the home value. FHA mortgage insurance will also go away, but not until you pay down your loan balance to 78% of the original purchase price. In both cases you need to keep mortgage insurance for a minimum of two years.
The most important thing to remember when going through the home purchase process is to let your lender know if there are any changes to your income or credit during the process. Make sure all your payments are on time and don't make any major purchases without letting your lender know.
