Since beginning my career in real estate finance I have often been asked questions about PMI. Some people want to know why they need it; they are concerned that the PMI brings the payment too high. Others know that it is a requirement but want to know why it is so high, is it their credit, loan to value, or is it because I am charging more for PMI.

I have given many different descriptions of PMI to people depending on their questions. Most importantly to note; conventional lenders would not be willing to take on the risk associated with lending more than 80% of the homes value. PMI companies saw an opportunity to offer insurance on loans that exceed 80% of the value of a home and because it made sense for the lender(s) so they agreed to make the loans over 80% with PMI as a requirement.

I've explained why PMI needs to be present on loans in the past and I've explained why PMI is as high as it is in some instances. Something that is very new to me is having to explain to people why they do not qualify for PMI and therefore cannot satisfy conditions that are required to be satisfied in order to get the authorization to close on a file.

Something that is new to this industry since the inception of PMI is that PMI companies are now restricting what they will lend on... News moves fast in this business and by now this is old news to many of us in the business. The most recent changes to PMI certification took place on the 31st of March.

While this is old news to industry professionals I am finding that this is new news to many people who are applying for mortgages. I am still getting a lot of people who are telling me that they want 100% financing and at a low fixed rate. One of the recent changes is that every PMI company out there just restricted the issuance of PMI to loans that are 97% of the value of the home or lower. There is no more conventional 100% option (at least for now). Fannie Mae and Freddie Mac will still issue a conditional approval for these loans that have been excluded but the approval will be conditional and one of the conditions is to obtain a PMI certificate.

Another change that has come into effect is that PMI companies will not insure anyone who has a credit score that is below 620 period. If your score is 619 and Fannie Mae says that you qualify for financing you will not be able to obtain the PMI coverage needed in order to obtain the authorization to close.

Also, you will need a 680 mid credit score to qualify for PMI if you are financing more than 95% of the homes value. These are the most recent changes and there may be more to come. Initially I thought that this would be a quick change and for some reason I thought that there would be some public announcement or something... But that hasn't been and I am still getting a lot of questions from people who would like to finance 100% of the sales price of a home and I just can't do it... no one can. So I wanted to write a little blurb about it here just so that people have access to this information and can plan accordingly.

That being said; there are some great FHA options and theoretically you can qualify to finance 100% of a homes value if you also qualify for a grant program like NHF or Ameridream.