Does one have to pay PMI on sub prime mortages? Are no money down home loans considered sub prime?

Question

Does one have to pay PMI on sub prime mortages? Are no money down home loans considered sub prime?

Answer 1

Often the choice of making a consumer pay PMI is up to the lender. Some banks such as HSBC of HFC pay the PMI insurance themselves. Typically any loan is considered for PMI if the loan to value is over 80%. Sub prime is considered to be any loan that is lent to a risky borrower, i.e. low credit scores or little borower investment ( down payment and equity)

Answer 2

Instead of PMI, the subprime mortgages had high interest rates.  Starting at 7.3% and rising to 11% was the only insurance that the mortgages companies wanted.  Traditional PMI companies would not insure these subprime loans.  The borrowers didn't fit in any of the lending guidelines.

No money down loans are not subprime unless the borrower had a sub 599 credit score.

Answer 3

I have never seem PMI on a sub prime loan.  The rate is so high it covers it.  And then that darn pre-payment penalty they tack on.  Many lenders that sell on the secondary market have Lender Paid Mortgage Insurance programs.  Your middle credit score has to be above 700.  The rate is higher but you don't have PMI.  Many times it is cheaper.

Good luck finding a 100% sub prime loan.

Answer 4

Yes, there is  PMI, and no money down are the most extreme of the sub-prime loans.