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Mortgage loan approved.

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Anonymous
Not applicable

Mortgage loan approved.

My wife and I got pre-approved for a mortgage on September 4th for $350K. We make 107k a year together and our middle mortgage scores were 768 and 803. We are both 42 with a 13 year old and 5 year old.

We were hoping to get a MassHousing loan but found out were just above the income limit. Its a 3% down loan that has a higher interest rate in place of PMI. Currently 4.625%. Our broker suggested my wife apply alone since she makes more and I carry our vehicle loan.She was pre-approved for $300K alone. We found our dream home on October 5th. The owner was asking $284,900. We offered $279,000 with 5k closing costs credit. She countered with full asking price and only $2500 credit with lawnmower, snowblower and washer and dryer. We thought about it for a day then accepted.

We signed the P&S on October 7th and got an inspection on the 12th. We did all the loan paperwork on the 13th and the house was appraised this past Wednesday for $286K. At Noon time, today our loan was approved.

We gave the owner until Dec8th to close but she hopes to find housing before Thanksgiving.
Message 1 of 11
10 REPLIES 10
Anonymous
Not applicable

Re: Mortgage loan approved.

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.

Message 2 of 11
Anonymous
Not applicable

Re: Mortgage loan approved.

Our loan does not have PMI. We are paying a higher interest rate. We are able to refinance after making 6 consecutive payments. Obviously we will not have 20% equity after 6 payments but will be able to refinance as soon as we can
Message 3 of 11
Anonymous
Not applicable

Re: Mortgage loan approved.

Smart move, congrats!!!

Message 4 of 11
Anonymous
Not applicable

Re: Mortgage loan approved.

happy for you, congrats

Message 5 of 11
VALoanMaster
Valued Contributor

Re: Mortgage loan approved.

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.
VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.
Message 6 of 11
kc0039
Established Contributor

Re: Mortgage loan approved.


@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.

 

 

Licensed in IL
Message 7 of 11
Anonymous
Not applicable

Re: Mortgage loan approved.

I didn't mention that this loan also has a $1500 lender closing credit and the lender paid PMI also includes job loss insurance that would at least pay our interest for 6 months. It's a very popular and consumer friendly loan in Massachusetts
Message 8 of 11
VALoanMaster
Valued Contributor

Re: Mortgage loan approved.

What happens to your numbers if I can drop PMI in year 4 or 5?
VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.
Message 9 of 11
kc0039
Established Contributor

Re: Mortgage loan approved.

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.

Licensed in IL
Message 10 of 11
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