Private mortgage insurance was hard to come by in the years following the housing market collapse, as the companies that offer it incurred significant losses, with several even going bankrupt. FHA loans therefore became the primary option for low-down-payment consumers, and their volume grew by more than 355% from 2007 to 2009. However, in recent years, as the cost of FHA loans have increased significantly and the housing market has rebounded in many areas, private mortgage insurance has once again become a more viable and affordable option for many consumers.
Key Findings
- FHA mortgage insurance premiums have nearly doubled since 2008. One now has to pay $17,398 in premiums during the first five years after the purchase of a median-price home ($212,100), compared to just $9,210 in 2008.
- Many consumers with down payments below 20% can save $2,251 to $12,026 in just five years by choosing private mortgage insurance. The higher your credit score and the more money you are able to put down, the more potential savings from PMI.
- Unlike private mortgage insurance, FHA premiums continue to be assessed throughout the life of a loan, even if your loan to value (LTV) ratio drops below 80%. As the scenario below illustrates, this can create huge cost disparities over time.
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