Proper Planning…The Key To Home Ownership

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 you have less than 20% down and are shopping for an eligible* condo, check with me about doing a conventional loan with PMI.

*Normal restrictions apply, e.g., no condo-hotels, timeshare, excessive commercial space, AOAO delinquencies above 15%, etc.