As FHA mortgage costs increase, consumers are finding that private mortgage insurance is a more viable and affordable option, according to a recent WalletHub analysis.
FHA mortgage insurance premiums have nearly doubled since 2008, data show. Today one must pay $17,398 in premiums during the first five years after the purchase of a median-price home ($212,100), compared to just $9,210 in 2008.
Many consumers with down payments below 20% can save $2,251 to $12,026 in five years by choosing private mortgage insurance (PMI), data show.
“The higher your credit score and the more money you are able to put down, the more potential savings from PMI,” WalletHub notes.
In addition, Wallethub points to FHA premiums, that unlike private mortgage insurance, continue to be assessed throughout the life of the loan even if the loan to value ratio drops below 80%.
“This can create huge cost disparities over time,” Wallethub says, adding that there is little price variation in the private mortgage insurance market.
For consumers seeking a low down payment mortgage, Wallethub advises shopping around for the best loan terms available.
“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 says.
Access the WalletHub analysis here.
Written by Cassandra Dowell