Ready for some GOOD news? Please take a moment and read this important info. This is a big improvement for buyers purchasing condos with less than 20% down…
Generally speaking, mortgage insurance is required whenever a buyer is putting less than 20% down. This can present some challenges for condominium buyers. That’s because until now, in order to get Private Mortgage Insurance (PMI), the condominium had to meet a minimum level of owner-occupancy of 70%. Such a high rate of owner-occupancy can be rather hard to find when it comes to Hawaii condos.
As a result, on low down payment condo loans, quite often we’ve had to go with an FHA loan. FHA has the advantage of requiring only a 50% owner-occupancy rate. However, FHA condo loans can be problematic since the condominium project quite often has to go through a lengthy approval process. Also, the monthly mortgage insurance premiums on FHA loans have been steadily increasing to the point that they are becoming prohibitive.
For example, effective April 18, the FHA mortgage insurance rate increased yet again to an annual factor of 1.15% on most loans (that’s $288 on a $300,000 loan.) This is nearly double the cost of PMI on a conventional loan.
THE GOOD NEWS is that Honolulu HomeLoans has been granted the ability to provide PMI on conventional loans for condos having as low as 51% owner-occupancy. This is basically the same as FHA but there’s no lengthy condo approval process and the premiums are much cheaper.
TO SUMMARIZE, if your borrower has less than 20% down and is shopping for an eligible* condo, check with us about doing a conventional loan with PMI.
*Normal restrictions apply, eg, no condo-hotels, timeshare, excessive commercial space, AOAO delinquencies above 15%, etc.
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This policy is typically paid for by the borrower as a aspect of final nominal (note) rate, or in a single lump sum up front, or even as a separate and also itemized component of monthly loan payment. In the last case, mortgage insurance can be dropped when the lender informs the borrower, or its subsequent assigns, how the property has appreciated, the loan has been paid out down, or any kind of combination of both in order to relegate the loan-to-value under 80%.
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