topic Re: School me....PMI options in Mortgage Loans

School me....PMI options

rm3 — Mon, 25 Mar 2013 01:05:03 GMT

Newbie here so bare with me please:-)

Besides a 20% down payment, what options are available to:

1. Avoid PMI
2. Pay PMI upfront(meaning no monthly fee)
3. Pay the least amount if that makes sense

I'm shooting for conventional in 6 months.

Re: School me....PMI options

rm3 — Mon, 25 Mar 2013 01:28:17 GMT

Anyone?

Re: School me....PMI options

Anonymous — Mon, 25 Mar 2013 01:54:24 GMT

20% down with Conv

Look for a Portfolio Loan

Pay the PMI upfront if going Conventional.

Some Lenders are still offering 80/20 loans, but I would advise to stay away from this.

Re: School me....PMI options

tooleman694 — Mon, 25 Mar 2013 01:54:36 GMT

A. Pay it all up front

B. Take a higher rate

Re: School me....PMI options

rm3 — Mon, 25 Mar 2013 02:08:32 GMT

Paying it all upfront...is there a set % of the loan I would pay?

Thanks to all for replying. I've learned so much from you guys/gals already.

Re: School me....PMI options

tooleman694 — Mon, 25 Mar 2013 02:12:29 GMT

I was quoted 7k for a 300k mortgage.

Re: School me....PMI options

rm3 — Mon, 25 Mar 2013 05:09:01 GMT

Ok thanks for the info

Re: School me....PMI options

Anonymous — Mon, 25 Mar 2013 13:12:43 GMT

With a 703 mid FICO and 5% down, I was quoted 3.48% of the loan amount for upfront PMI, with a purchase price of $255k. The upfront PMI could be financed into the loan as well.

Re: School me....PMI options

JustJen — Mon, 25 Mar 2013 14:19:10 GMT

I'm in the beginning of just starting to look into purchasing a home...so excuse my ignorance; I'm trying to learn as much as I can before I ever have to submit a loan application! But with conventional I thought the only way to get rid of PMI was to pay 20% down...but Autumnslight is saying you can pay 5% down and then say the 3.48% for PMI? So 5% down would be $12,750...subtracting that from the price of the home would give a loan amount of $242,250 (yes I know here are other costs that go into the actual loan cost, but just for simplicity so I can get an idea)...so 3.48% of that would be $8,430. So out of pocket would be about $21,180 versus $51,000.

So what's the benefit of paying 20% down if not to get rid of PMI? Just to lower your monthly payment?

With one of the houses we're looking at...the thing that's pushing the monthly mortgage payment just shy of where we wanna be at is based on the fact the lender's estimates were just with 5% down and therefore the monthly mortgage includes PMI. So we were thinking the only way to get the payment where we wanted to be at we would have to put down 20% to get rid of the PMI; but Autumnslight has presented an alternative, so what's the downside of this? Doing it Autumnslight way does that result in an interest rate increase?

And last question....if you were to just roll the upfront PMI into your loan wouldn't that just increase your monthly mortgage again?

Re: School me....PMI options

Anonymous — Mon, 25 Mar 2013 16:22:31 GMT

Here's the way I understand this. If anyone more experienced sees a flaw, please speak up, as I am not a mortgage professional!

For simplicity's sake, these all assume that your only cash outlay is your down payment. Obviously you'd have to compare differences in closing costs as well. I also assumed that the conventional interest rate is the same for all scenarios, which may or may not be the case, depending on many different factors.

FHA:

Purchase price $255,000

3.5% down $8,925

Loan $246,075

Upfront mortgage insurance (assuming financed) 1.75% $4,306

Total Loan $250,381

Monthly principal & interest at 3.25% $1,090

Monthly mortgage insurance 1.25% $261

Total monthly payment before taxes & insurance $1,350

Total cash down $8,925

Conventional with upfront PMI:

Purchase price $255,000

5% down $12,750

Loan $242,250

Upfront mortgage insurance (assuming financed) 3.48% $8,430

Total Loan $250,680

Monthly principal & interest at 3.65% $1,147

Monthly mortgage insurance $0

Total monthly payment before taxes & insurance $1,147

Total cash down $12,750

Conventional with monthly PMI:

Purchase price $255,000

5% down $12,750

Loan $242,250

Upfront mortgage insurance $0

Total Loan $242,250

Monthly principal & interest at 3.65% $1,108

Monthly mortgage insurance 0.94% annually $196

Total monthly payment before taxes & insurance $1,298

Total cash down $12,750

Conventional with no PMI:

Purchase price $255,000

20% down $51,000

Loan $204,000

Upfront mortgage insurance $0

Total Loan $204,000

Monthly principal & interest at 3.65% $933

Monthly mortgage insurance $0

Total monthly payment before taxes & insurance $933

Total cash down $51,000

Re: School me....PMI options

Anonymous — Mon, 25 Mar 2013 16:26:41 GMT

Also, if you go with upfront PMI and pay it in cash:

Purchase price $255,000

5% down $12,750

Loan $242,250

Upfront mortgage insurance (not financed) 3.48% $8,430

Total Loan $242,250

Monthly principal & interest at 3.65% $1,108

Monthly mortgage insurance $0

Total monthly payment before taxes & insurance $1,108

Total cash down $12,750 + $8,430 = $21,180

Re: School me....PMI options

JustJen — Mon, 25 Mar 2013 16:38:32 GMT

So then...

Conventional with upfront PMI:

Purchase price $255,000

5% down $12,750

Loan $242,250

Upfront mortgage insurance (Paid upfront) 3.48% $8,430

Total Loan $242,250 (should I be subtracting upfront mortgage insurance from loan price?)

Monthly principal & interest at 3.65% $1,108

Monthly mortgage insurance $0

Total monthly payment before taxes & insurance $1,108

Total cash down $21,180

If I did the math correctly...doesn't seem to be much of a benefit to pay the PMI upfront versus rolling it into the total loan cost.

Re: School me....PMI options

JustJen — Mon, 25 Mar 2013 16:40:38 GMT

Haha....you just did it too! So I guess I did it right. Doesn't really make sense to pay PMI upfront versus what you suggested about rolling it into the loan, not much difference in the monthly mortgage payment.

Re: School me....PMI options

Anonymous — Mon, 25 Mar 2013 16:45:16 GMT

Exactly! If I can pull off conventional, then I'll be doing upfront PMI and rolling it into the loan. Seems like the best option for these particular ffacts, assuming all of my assumptions are indeed correct.

Re: School me....PMI options

JustJen — Mon, 25 Mar 2013 17:04:03 GMT

Ok, I'll have to keep this in mind once we get closer to applying. Definitely can see that 20% down is the way to go (and that's what we're aiming for), but if for some reason we don't have it this seems like an option to keep in mind.

Another question...I know from reading on these boards that with FHA the rules are changing such that you'll pay PMI for the life of the loan. What about with conventional? If you ended up having PMI with your conventional loan is it for the life of the loan? Or do you only pay it up to a certain amount remaining on your loan?

Sorry for high-jacking your thread OP...but they're still PMI questions !

Re: School me....PMI options

chasmith — Tue, 26 Mar 2013 15:48:46 GMT

NACA is another alternative. With really clean credit you might get through their process in 3 or 4 months.

No money down, no closing costs, 30 yr fixed, very competitive rates that can be bought down (use the money you might have spent on closing costs and downpayment) to as little as 0.65%, $50.00 monthly fee for ten years instead of PMI.

Re: School me....PMI options

rm3 — Tue, 26 Mar 2013 15:50:08 GMT

I wish NACA was in KY

Re: School me....PMI options

JustJen — Tue, 26 Mar 2013 19:38:13 GMT

I don't know what NACA is....I'll have to look that up!

Re: School me....PMI options

chasmith — Tue, 26 Mar 2013 19:44:09 GMT

Neighborhood Assistance Corporation of America.

Re: School me....PMI options

rm3 — Tue, 26 Mar 2013 19:56:25 GMT

I went to there website and there isn't a workshop any where near me

I have the time and patience but no access.