Late last year was the first time I have ever run into a buyer being approved by a lender for a conventional loan then having the deal killed because PMI insurance wouldn't back the loan.
I live in an area where bad credit is common so I have had buyers get approved for a loan before the credit crisis only to be unable to get homeowner's insurance through anything but Ohio Fair Plan because their credit was bad.
However, 2008 was the first time I have seen this PMI phenomenon.
Today I had a buyer with a great credit score and good income who wanted to buy a home FHA. The house would not go FHA because of a FHA guideline that states the house is too close to a high voltage tower (this is the info on that.... http://www.hud.gov/offices/hsg/sfh/ref/sfh1-18f.cfm).
So this buyer now has to go conventional. For the realtors out there who can't remember what conventional means since it's been so long since we've done one in this market, those are the loans that aren't FHA or VA or USDA (heehee).
Of course, now we run into the problem of needing more money down than the typical 3.5 percent needed for FHA or FHA203K etc.
So, we go out to the search for the least amount down. Yes, some lenders will still do 5 percent down conventional. However, you can't get the PMI on those loans since we're in a declining market (Ohio, and probably everywhere else in the world).
So, we found someone who would do it with ten percent down since the credit score is high.
If you haven't run into this problem... bank will do the loan but PMI won't go for it... be aware that it's something all of us in declining markets will now be facing.
