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July 7, 2009
Still Hard to Obtain PMI?
I have browsed old posts concerning the difficulty in obtaining PMI in the current lending climate. Does anyone have any recent experiences? We would like to put down 10% on approx 570-590k 2 fam brownstone. 20 % would really wipe out our entire savings which feels really scary in this economic climate. And we will need to do work on the house...Is the bank going to be able to predict how difficult it may be to get MI? We don't want to get approved for the loan, but then not be able to get insurance...
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It may not count as current, but we were in contract through the Fall of 08 and into the late winter of 09 (Feb), and PMI was impossible for us. We also wanted to put down 10%, and the banks actually all said it would be fine. That's because they actually have no idea what their PMI companies require. It caught them completely by surprise when our loan couldn't get insured. This isn't just one bank, either - it was 6 different banks, all working with a multitude of insurers. Nothing doing.
We ended up negotiating a 2nd mortgage, held by the sellers, for the extra 10%, so we wouldn't require PMI. It was a last-ditch effort, and it got us to closing; though there will be a reckoning when the refi comes around.
Maybe things have gotten better in the last few months?
Posted by: josereyes at July 6, 2009 9:36 PM
I just got a mortgage commitment letter for 90% financing and am waiting to hear about PMI - crossing my fingers that it will come through. Before I went into contract my mortgage broker called different insurance companies and gave specifics of the deal to see if there would be a problem with PMI and based on the neighborhood and my finances the companies said it should be alright. You might want to have your broker do this or if you're not using a broker call around to banks and specifically ask about PMI - ask them which insurance companies they use and call the insurance companies directly and give them the specifics of your tentative deal. If they've redlined the area you want to buy in you might have a problem. I've heard that 85% financing has not been a problem so if you're really worried and don't want to do 80% financing try and swing that. I was pretty set on wanting 90% financing and will just have to wait and see what happens with the PMI - I'm nervous!! Will update this posting if it goes through for me.
Posted by: brooklyncurious at July 6, 2009 10:09 PM
It was impossible to keep our PMI when refinancing our 3-family. No insurance company wanted to insure our loan. We had to buy down our loan amount to meet the 80% LTV requirement.
I remember my mortgage specialist saying that it was still possible to get PMI for a 2-family (May-June 2009).
Posted by: lostintranslation at July 6, 2009 10:37 PM
this is all really helpful. so good to be warned in advance that the bank may not be aware of the issue.
Posted by: indynycems at July 6, 2009 11:42 PM
I hear it is near impossible to get Private Mortgage Insurance (PMI) for 10% down mortgages at the moment. The reason? It is quite possible that real estate values in NYC will continue to deflate by an additional 10% thereby rendering the equity on those mortgages non-existant.
It is also important to note that this insurance does not protect the borrower in any way but rather the lending institution if the lender defaults and loses the property.
Posted by: Minard Lafever at July 7, 2009 11:09 AM
I was in the same boat as josereyes - I had the extra 10%, but wanted to keep a reserve. My credit rating was over 800 and I still couldn't get PMI this past March. I also was fortunate to have the sellers give me a secondary loan, which is actually going to work out better for me in the long run.
Posted by: Flatbushrising at July 7, 2009 11:23 AM
Can you get an FHA loan?
Posted by: dittoburg at July 7, 2009 11:24 AM
I am just going to be really honest here. You cant afford to buy so dont. Brownstones can have a lot of unexpected costs when owning. If you dont have 20 percent down and at least 10 percent more in cash reserves for unexpected repairs forget it. Keep saving up though prices are not going to be any higher for years
Posted by: brickoven at July 7, 2009 11:39 AM
We were in the market in the spring and every broker and mortgage banker we talked to said that getting PMI was basically impossible. Finally we talked to John Bach at Trachtman & Bach and he was working with a particular lender who could get insurance and he was closing 10% deals, as long as everything else is solid. So it is possible.
We were about to go for it when another opportunity arose that did not require bank financing.
Posted by: bivouac at July 7, 2009 12:06 PM
The insurers are actually doing you a favor.. and quietly saying dont buy.
Forecasters are predicting more of a drop. Does it still make sense to buy?
Posted by: big swinging nick at July 7, 2009 12:08 PM
Big_swinging_nick: I think what the insurers are actually saying is: "We weren't paying attention for the last few years and lost our hat. Sorry, we're out of money."
Lenders and insurers are scared and aren't making deals. Eventually the smart ones will come around and realize that sensible loans for people will good credit and a job history are still a good idea. No income verification loans and the like are a thing of the past, but 10-15% down is perfectly reasonable if credit and job history are taken into consideration.
Anybody can come up with reason why now is or isn't a good time to buy. If the deal makes sense for you, and you can get the financing, don't let silly things you hear on message boards change your mind.
Posted by: bivouac at July 7, 2009 12:24 PM
"If the deal makes sense for you, and you can get the financing, don't let silly things you hear on message boards change your mind."
But sense aint common and what you just wrote is silly. Paying prevailing PSF is pure luxury. Those who wait at least a few more years will optimize.
***Bid half off peak comps***
Posted by: Brownstones Half Off at July 7, 2009 12:46 PM
As of July 1, PMI is no longer available for two-family houses in New York City. However, you can still buy a two-family with 10 percent down (or as little as 3.5 percent down) if you do an FHA loan. (It comes with FHA insurance.)
You have to pay an additional $6500 fee up front, which is wrapped into the mortgage. Otherwise, the rates are the same. In fact, the rates may actually be better on an FHA loan. Last week lenders were quoting 5.75 on a conventional loan and 5.25 on an FHA loan.
Brickoven, that is nonsense. It's entirely possible that buyers may have a lot of money in the bank and yet not put down 20 percent because they need the savings in reserve for emergencies, repairs, and other expenses.
Posted by: mopar at July 7, 2009 1:38 PM
my experience is also a little out-of-date. My wife and I bought a 2 family with 10% down last september. PMI was a problem with one bank, but another (CHASE) was able to get it.
the one thing that IS relevant is that EVERYBODY said it was IMPOSSIBLE. They were wrong. Do your research and find out for yourself.
I used Nichole Crete-McCarthy at Trachtman Bach.
Posted by: cottontop at July 7, 2009 1:41 PM
"the one thing that IS relevant is that EVERYBODY said it was IMPOSSIBLE. They were wrong. Do your research and find out for yourself."
I second this. We've been told many things (including PMI for a 10% equity refinance) would be impossible and all it took was 3 phone calls. You might try talking to Adam Dahill - he posts here.
Posted by: squaredrive at July 7, 2009 1:51 PM
"Brickoven, that is nonsense. It's entirely possible that buyers may have a lot of money in the bank and yet not put down 20 percent because they need the savings in reserve for emergencies, repairs, and other expenses."
what I am saying is that if you cant put down 20 percent plus have an additional 10 percenct in liquid assets you cant afford to buy it espec. if the buyer likes to sleep at night which is what they stated. If youre def of having a lot of money in the bank is having 20 percent then you are in LALA land
Posted by: brickoven at July 7, 2009 1:53 PM
No, Brickoven. Buyer could have 30 to 40 percent in the bank and still put down 10 percent because they need the money for repairs.
Posted by: mopar at July 7, 2009 2:10 PM
As of July 1, there are no insurance companies offering PMI on two families in the five boroughs. The last one that did it is no longer doing it as of July 1. BrooklynCurious should not have a problem as long as the application was made before the July 1 deadline. I have spoken to two lenders and two mortgage brokers about this, and they all say that as of July 1 it is no longer possible. Previously they said it could be done. So until a new PMI company comes along, it's not possible without FHA financing.
Posted by: mopar at July 7, 2009 2:13 PM
Oh Ok Mopar we I thought you were saying you only needed 20 percent. If you read the posters comment however they are making it sound like they are going in 10 percent down and 10 percent for repairs I may be reading it wrong but they said nothing about allocating a certain amount towards repairs
Posted by: brickoven at July 7, 2009 2:21 PM
Fair enough, BO. I'm a little sensitive because some lender made the same comment. He's never owned property so doesn't realize -- where we're looking almost everything needs major structural and mechanical repairs. And it's cheaper to do it with cash than borrow.
Posted by: mopar at July 7, 2009 3:00 PM
Hello,
PMI is a very tight squeeze these days, for more then a single family with a loan amount above 417k you will NOT get PMI, the only times mortgage insurance companies are giving out any pmi is a single family home credit score above 700, debt to income ratio below 43% then and only then will you get pmi.
however when you do get pmi it is not cheap, rather very costly.
your only option which is not a bad option is to fha the loan, most people think fha is for people with porr credit whcih is incorrect, and on a two family house they allow you to calculate the rental income 10 percent highe, so if the debt to income ratio is tight this might help. yes there is upfront pmi, but that can be financed in on top of the max ltv of 96.5, however the mortgage insurance is much cheaper, and rates are very good as well.
feel free to contact with anymore questions.
benjamin.levin@wellsfargo.com
Posted by: Blev9701 at July 7, 2009 11:20 PM
UPDATE: I was just approved for PMI with 10% down for a co-op in Fort Greene and am a few days from closing. Good luck!
Posted by: brooklyncurious at July 28, 2009 10:00 PM
brooklyncurious, congratulations !
I was wondering if you would share what bank you used, and the name of your contact there.
I have been in contract since mid-june, and have been unable to get financing for my 10% down deal. This is despite having an 800 credit score, no debt, and the monthly payments are less than 30% of my gross income. I've been told its impossible to get pmi and that my only option might be a SONYMA loan. I might lose the place...
Posted by: FalulahBaker at July 31, 2009 6:12 PM
brooklyncurious, congratulations !
I was wondering if you would share what bank you used, and the name of your contact there.
I have been in contract since mid-june, and have been unable to get financing for my 10% down deal. This is despite having an 800 credit score, no debt, and the monthly payments are less than 30% of my gross income. I've been told its impossible to get pmi and that my only option might be a SONYMA loan. I might lose the place...
Posted by: FalulahBaker at July 31, 2009 6:13 PM
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