Consumers who lack a 20% mortgage down payment should shop around for alternatives to FHA-insured loans, according to WalletHub, a consumer finance website.
In its 2014 Mortgage Insurance Report, released Tuesday, WalletHub observed that premiums for mortgage insurance from the FHA have roughly doubled since 2008. A consumer purchasing a median priced home ($212,100) in 2008 paid $9,210 in premiums during the first five years of the mortgage. Now, that consumer would pay $17,398.
By instead purchasing private mortgage insurance, those consumers could save $2,251 to $12,026 in just five years, WalletHub reported. In addition, the site reported that consumers with higher credit scores have lower PMI premiums.
Further, WalletHub reported that the FHA's premiums are generally assessed over the life of the loan, even after the loan's balance falls to less than 80% of assessed value, a policy that could cost consumers thousands of dollars more than private alternatives.
“The fact that consumers are generally stuck with their lender's PMI company of choice is another good reason to shop around at several lenders in order to make sure that you are getting the best loan terms and the best deal on mortgage insurance,” WalletHub advised.
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