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Buyers who put down less than 20 percent down payment are required to pay Private Mortgage Insurance (PMI). We have a special program to avoid paying monthly PMI. Please consult with us.

The Homeowners Protection Act of 1999 requires lender to inform borrower when they can cancel coverage. PMI can also be cancelled once the loan to value is 80 percent or less base on the original purchase price or appraised value - whichever is less. Automatic cancellation can also happen once 22 percent equity is reached (for mortgages with terms of 30 years or more). However, the law only applies to loans made on or after July 29, 1999.

PMI may cancelled during the first 5 years under the following conditions - mortgages with terms of 15 years or less and the LTV reaches 78% or less.

In order to determine whether the threshold has been reached according to the Federal Reserve Board:

a) Multiply the present value of your mortgage by 1.25.

b) Ascertain the purchase price or appraised value of your property.

c) If the value in step a is larger than b, PMI will continue. If the value in step a is smaller than b, you may request PMI cancellation.  

FHA mortgage insurance is required for the first 5 years regardless of the Loan-To-Value. Though, this will be revised in June 2013 with Mortgagee Letter 2013 -14.

If you have a problem with a lender over PMI cancellation, contact the Federal Trade Commission and Washington state's attorney general.

Recent HUD announcement to increase its annual mortgage insurance and mortgage insurance for the life of the loan makes the decisions to go conventional a bit easier (if one can qualify). Here are some pointers for conventional with Private Mortgage Insurance (PMI):

• 700 FICO score, 3% down, 45% maximum Debt-To-Income (DTI) on Owner Occupied (OO), Single Family residence (SFR).
• 660 FICO score, 5% down, 45% max DTI on OO, SFR/Warrantable Condo.  
• 700 FICO score, 10% down, 45% DTI on second home (must be located in resort/vacation area).
• Collections may be required to pay.
• Bankcruptcy requires 4 years since the date of discharged.
• Adjustable Rate Mortgage (ARM) - DTI is capped at 41%.
• Manually underwritten files - 10% down is required.
• Full appraisal is mandatory.
• 3 - 4 unit properties are ineligible.
• Interest Only (IO) loans are ineligible.
• Homeowners with prior claims are ineligible.

3% gift funds is allowed provided that:

• Max DTI is 41%
• 740 FICO score is required.
• Fixed-rate loans only.
• SFR only.
• OO only.
• No subordinate financing allowed.

Please be advised that the files will require closer scrutiny from the lender as well as the mortgage insurance company. Pacific Coast Financial will pre-underwrite the files internally to ensure that our files will be approved.  Each borrower is unique. Please call or email us for free consultation.

Homeownership is looking more attractive now than it has in years. Rents are climbing 6% in King and Snohomish counties over the past year. Home prices have begun to bounce with interest rates hitting record lows. The monthly rent for the average 2-bedroom, 2 bath apartments in King County now is more than 40% higher than the typical principal and interest payment on  a median-priced condo. Even when closing costs, maintenance, taxes and insurance are factored in - Owning typically is less expensive than Renting in every metropolitan area in the country. Here in Seattle area is about 42% cheaper.

The case of buying a home is much stronger if the time horizon is longer than 5 years. Being a homeowner means you could paint your bedroom purple, deduct mortgage-interest payments and property taxes from your federal income tax.

In general, Owning versus Renting depends on:

1. Time horizon (the longer the better. In general - at least 5 years).
2. What is the itemize principal and interest deductions.
3. What is your marginal tax rate.
4. What are the closing costs.
5. What is the yearly maintenance or renovation?
6. What is the homeowners association dues or condo fees.
7. Income
8. Supply and demand of housing
9. Availability of financing
10. Economic stability
11. Desirability of a neighbourhoud or school system
12. Consumer confidence

HUD recently accounced with the mortgagee letter 2013-04 that starting April 1, FHA's annual mortgage-insurance premiums for most new loans will jump by one-tenth of a percentage point or 10 basis points. See schedule below.

Effective June 3 - FHA announced that it will no longer allow mortgage-insurance cancellation once the loan-to-value declines to 78% of the original loan amount. Borrowers with below 620 credit scores and 43 percent debt-to-income ratio will receive a downgrade to "manual" underwriting - which means that the file will gets closer scrutiny by the underwriter. 

Term >15 Years
Base Loan Amount	LTV	Previous MIP	New MIP
≤ $625,500	< 95.00%	120 bps	130 bps
= $625,500	> 95.00%	125 bps	135 bps
> $625,500	< 95.00%	145 bps	150 bps
> $625,500	> 95.00%	150 bps	155 bps
Term =15 Years
= $625,500	78.01 - 90.00%	35 bps	45 bps
= $625,500	> 90.00%	60 bps	70 bps
> $625,500	78.01 - 90.00%	60 bps	70 bps
> $625,500	> 90.00%	85bps	95 bps