The private mortgage insurance (PMI) conforming loan factor varies based on credit score and loan to value. This discusses PMI at different credit scores. For people with FICO scores from 640-719, this is a good example of a FHA vs Conventional comparison.
In general, the past few years of the credit crunch have caused two large changes for PMI rates:
- PMI is available to less borrowers
- PMI is more expensive
Years ago, PMI was readily available down to a 620 FICO score. Many PMI companies will only accept 680+ FICO.
PMI is also 20% more expensive for even good borrowers these days. However, where a 720 FICO used to see roughly the same PMI rate as a 680 FICO, now there is a gap. For example, at a 95% loan, the rates look like this:
- 700 FICO: 0.94% or roughly $78 per month per $100,000 in loan amount
- 699 FICO: 1.20% or roughly $100 per month per $100,000 in loan amount
On a conventional loan, that single FICO point could mean an additional .375% loan level price adjustment fee. That’s $375 plus an extra $260 for mortgage insurance. One point can easily cost $50/month on a loan of only $100,000.
If your credit score is over 740, the conventional loan is typically your best option. As the credit scores go down, the FHA vs Conventional comparisions start to tip towards FHA. Take a peek at FHA Interest Rates before making any decisions. Each individual loan is different and it worth the extra few minutes to explore all options.
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