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Congrats!
And honestly, you did the right thing not apping together and maxing out your limit there. The most comfortable loans are those less than 2.5X income. So if you make $107,000 x 2.5 = $267,500 to keep in the old rules over the decades. That's close!
If you decided on a PMI loan, try to get out of PMI if your loan allows it once you pay off enough to qualify. Most lenders require 20% equity, so making the minimum mortgage payments means it may take a long time to get there, but do the math and see if you can throw more at your principal without a prepayment penalty and get out of that PMI.
Smart move, congrats!!!
happy for you, congrats
@VALoanMaster wrote:
It almost never makes sense to take a loan with lender paid PMI (where you pay a higher interest rate) over a loan with PMI. Here’s why.
You’re paying PMI through a higher rate. That rate is for the life of the loan so the only way for you to lower your payment is to spend 3K+ in closing costs to refinance to a lower rate. The other problem here is there is no way to forecast what rates are going to do so you don’t know if rates are going to be lower/ low enough to make it worthwhile to refi.
On the other hand if you take the loan with PMI & you get the lowest rate you can then you can request to have the PMI dropped once you have enough equity & all it will cost you is an appraisal fee.
It would make sense if they want to spend the least amount of money possible in the beginning and staying in the home 7 years tops. Education for all the lurkers. For example:
Fixed rate mortgage (FNMA) for 30 years, credit score of 740 or better, $300,000 loan, 95% loan to value, selling at the 5.5 (66 months) year mark.
Monthly PMI option - interest rate 4.125%
P&I: $1,453.95
Monthly PMI: $147.50 (National MI)
TOTAL payment: $1,601.45
$1,601.45 * 66 = $105,695.70 (money spent in 66 months)
Lender paid PMI option - interest rate: 4.625%
P&I: $1,524.42
$1,524.42 * 66 = $101,799.72 (money spent in 66 months)
There's the savings of $3,895.98
If you plan to stay less than 7 years in a home, if you have excellent credit, and want to spend the least amount of money possible. This would work too if your credit is 680 or better. Have your chosen LO play some scenarios for you. You'll be surprised at the recommendations.
Those numbers drastically change. If and only if they have the discipline to pay it below 78% of LTV. 90% of consumers don't have the discipline to pay more into the principal.