About Private Mortgage Insurance

Active Duty & Veterans Can Avoid PMI

On Tuesday, the House of Representatives passed HR2486 which increased the Department of Veterans’ Affairs’ home loan guarantee program. The current program guarantees 25% of a qualified veteran’s mortgage loan up to $240,000 (or a guarantee on $60,000). Currently, this means is that up to the first $60,000 of the loan is guaranteed by the government and now the eligible veteran no longer needs private mortgage insurance. HR2486 increases the limit from $240,000 to $333,777, or a guarantee of $83,245, and it indexes it with inflation.

Why can veterans now avoid private mortgage insurance? It means that the veterans can now go apply for and hopefully be awarded a VA guaranteed loan, which can be used as a down payment, and thus avoid private mortgage insurance. With a $83,245 loan as a down payment, you can buy as much as $416,225 worth of house without paying private mortgage insurance. While the bill is likely to be signed and passed into law, the current limit of $60,000 means a veteran could still buy $300,000 with nothing down and still not pay private mortgage insurance.

Whether or not this is a good decision is another discussion altogether (if you can’t make any down payment and need all $60,000 should you be buying $300,000 worth of house?) but this does avoid private mortgage insurance.

This entry was posted on Wednesday, June 14th, 2006 at 11:13 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.