Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
USDA Loans Now Requiring PMI Insurance
I just received a call from my lender informing me that as of Oct. 1, any USDA loan that has not closed will be required to carry PMI insurance. This is going to jack up our monthly payment, and I just feel a little frustrated. I could understand that as of Oct. 1 any NEW loan would need to carry the insurance, but we are halfway through the process! We started Sept. 1 with the loan process, and I feel like they shouldn't be able to throw this in 2 weeks before closing. I asked if there was any way we could try closing this week before the dealine, and she told me they can't on such short notice. I feel royally ticked.
Re: USDA Loans Now Requiring PMI Insurance
Just curious, is this a USDA Direct loan?
Did you do a little more investigating?
I totally agree I would be irked as well (we were going to do USDA, then had to switch to FHA 203k)..so PMI here we come..
BUT...you already knew the 3.5% guarantee fee was rolled into your mortgage-as Dept of Ag was backing your loan; now it's just calculated differently. You will pay more b/c the 3.5% is a one time deal but on a 100k loan, the 2% is $25 a month and it goes down as your balance goes down...
I know it doesn't help but even USDA is not truly "0% down down..." They still get you either way
She claimed that they just got the call about it....if they knew about it way back in July than I am REALLY mad!
We knew about the 3.5% fee....what's this 2% fee that you are talking about that goes down? I don't really even understand PMI insurance, what is it? Will I always have to have it?
FI and I started the process for a USDA loan three weeks ago and our LO told us about that upfront, so we already had that in our calculations. Sounds like your LO either doesn't do a lot of these or is completely oblivious.
ETA: I don't 100% understand PMI insurance, but after you pay a certain percentage of your mortgage down, PMI goes away. USDA PMI is about 1/3 the cost of FHA, if that makes you feel any better. It's basically insurance for loans that are over 80% the cost of the home. Because a loan like that is riskier for the bank, you have to pay them insurance for if you default on the loan.
October 13, 2012
Flirt01 - Essentially PMI (private mortgage insurance) is a monthly payment (different based on purc price, DP, etc) that is separate and add'l than your actual mortgage payment if you put less than 20% down. It's essentially 'cover-their-butts' insurance that lenders charge you should you default on the loan.
USDA loans were made so that lower income individuals and higher income individuals who wanted to live in what is considered 'rural' for the state - could get financing and as a result, instead of charging PMI (each month), they were 'charging' you by making you pay a guarantee fee (3.5% before) upfront that could be ROLLED into the loan for up to 102% of the mortgage loan amount. It's technically 0% down because you dont have a 'down payment' like FHA (3.5%) conventional (5%-20% or more)...but you did have a charge of that 3.5% as USDA's cover-their-butt should you default.
They were talking about in February
(http://www.mortgagescanbesimple.com/USDA Loans no longer NO PMI come October 1st)
but it wasn't confirmed til I believe March 2011. Your lender should technically have known if they are on the up and up. This is also why they state that you should make sure you find someone who specializes in USDA (b/c to do USDA mortgages requires a little more work on their part so lots of brokers/lenders don't do it) AND to make sure they continue to be on the up and up with USDA changes.
Try the link: It will explain how the change affects you and your loan.
PMI can be removed if you pay down X amount of the loan value. Some people used to do it by refinancing, but now, with house values on the continued decline, many people don't qual to do it OR on certain types of loans there is a stipulation that you cannot try to do this for X amount of years...
Flirt01 - Good. I tried to explain it in the way that would make sense.
Hubby and I are first time homebuyers too and we have learned alot. We got a good recommendation for a mortgage broker and I hadn't even HEARD of USDA loans til we told him where we were looking in MN and we ended up starting that way but ended up as FHA 203k.
Overall, USDA is still a pretty good deal even though it doesn't seem like it now that you will have PMI (or whatever label they want to try and spin it for you), bottom line: You'll be paying more and that sucks. On the UPSIDE, our monthly PMI is about $125, so ....does that make you feel better? LOL AND on the other upside, you and I are paying interest rates that haven't been seen since around the 1950s.....
Snoboard....Haha that makes me feel better!! The First Time Homebuyer loan I inquired on was at 4.75%, and then I heard about USDA and it was 3.75%. I was shocked, it dropped my payment nearly $100 a month!
The lending officer just called and told me that our PMI will jack the payment up about $30 a month, and USDA is dropping the 3.5% fee they charge down to 2%, so I guess that makes me feel better too. I told my fi that we are just gonna try and pay the mortgage off quicker by adding some principal only payments when possible!