topic Re: Avoiding PMI in Mortgage Loans

Avoiding PMI

Anonymous — Wed, 03 Jun 2020 02:24:00 GMT

is there anyway to avoid PMI outside of 20% down?

Our profile is pretty solid, but we lack the cash to put down 20% (in our case would be 100K-120K)

My wife and I co-borrowing:

-Both over 760 middle fico mortgage score (im at 749, but will be at AZEO shortly from 3 reporting so i should get there)

-Both on Thick/Clean/aged score cards with no derogs, no collections, no chargeoff, not lates of any kind

-No AU's all of our credit is our own credit

-$190K combined salary (105 for me, 85 for her)

-$30-$40K downpayment (we'd top out around 5%)

-Combined DTI of 25-28% (assuming a $3,000-3500 morgage/housing cost)

We can afford the PMI, but would obviously love to avoid it if possible. we could wait a couple years and try and save 90K, but our daughter is turning school age and we want to move into a particular district, our current rate is very high (3000) and we want to take advantage of low rates and housing costs being slashed. (prior to this we were priced out of that area... this months homes listed 650-700 are dropping well under 600).

Re: Avoiding PMI

Anonymous — Wed, 03 Jun 2020 02:28:29 GMT

NFCU offers conventional mortgages with no PMI. I imagine you would pay a slightly higher rate though, but worth reaching out to them.

Re: Avoiding PMI

NC_Mtg_Loaner — Wed, 03 Jun 2020 02:30:27 GMT

Just get a 15 year loan and refinance out of that in 3 or 4 years to a 20 year loan.

Otherwise, don't be so afraid of PMI, it's assessed at a fraction of a percent and the opportunity cost of NOT owning a home is insane, not to mention the fact that 15% that you don't have to put down for a deposit isn't being wasted because it's rate of return is 3%.

Re: Avoiding PMI

Anonymous — Wed, 03 Jun 2020 03:04:10 GMT

@NC_Mtg_Loaner wrote:
Just get a 15 year loan and refinance out of that in 3 or 4 years to a 20 year loan.

Otherwise, don't be so afraid of PMI, it's assessed at a fraction of a percent and the opportunity cost of NOT owning a home is insane, not to mention the fact that 15% that you don't have to put down for a deposit isn't being wasted because it's rate of return is 3%.

Unfortunately, i dont think we can afford a 15 year loan.

We can afford about $3500/mo. all in (Mortgage+PMI+Taxes+HO insurance). if we borrow 500K-550K i dont see how we can be near that range on a 15-year loan.

We could techincally afford 4000-4500, but that would overexpose us. Right now I put $2000 a month/40% of my salary into savings. and ill need to continue to do that to replenish our savings once its used for a down payment.

Agree PMI woldnt deter us, i just didnt know if there were other avenues or loopholes. some impled a higher credit score may remove or reduce PMI?

Re: Avoiding PMI

Anonymous — Wed, 03 Jun 2020 13:23:13 GMT

Did you serve in the military? Are either of you a doctor, lawyer, CPA? I know for VA loans and certain professions such as the ones I listed there is no PMI penalty

Re: Avoiding PMI

Anonymous — Wed, 03 Jun 2020 13:27:57 GMT

@Anonymous wrote:
Did you serve in the military? Are either of you a doctor, lawyer, CPA? I know for VA loans and certain professions such as the ones I listed there is no PMI penalty

No military. I'm an IT Consultant she is an education consultant

Re: Avoiding PMI

TheKid2 — Wed, 03 Jun 2020 14:11:19 GMT

Are 80 (MORTGAGE) / 10 (HELOC or SECOND) / 10 (DOWN) not a thing anymore to avoid PMI?

Re: Avoiding PMI

CreditFun — Thu, 04 Jun 2020 11:34:51 GMT

Summary of ways to avoid PMI

Include in a marked up interest rate
Get a 2nd mortgage - HELOC, Owner financing, family member, etc.
removed automatically after about 7 years of payments no matter the value of property
get property reappraised after about 2 years
buy a fixer upper with 203k or FNMA homestyle and refinance after repairs are complete
USDA or VA loan
get seller concessions to offset closing costs to increase downpayment

All of these have opportunity costs and you need to figure out what your breakeven is, whether it be increased rates or closing costs. No free lunch on any of these.

Re: Avoiding PMI

Anonymous — Thu, 04 Jun 2020 13:34:05 GMT

PMI isn't anything to be afraid of IMO.

I was quoted 4.5% on my mortgage through Navy with no PMI.

I ended up getting 3.25% from another lender w/ $135/month PMI. I'll make double payments and knock it out in 1-2 years.

Interest rates are crazy low right now. I didn't think it made sense to take the 4.5% and then need to refinance (and pay thousands in fees to do it) again in a few years. Plus who knows what rates will be when that time comes.

Re: Avoiding PMI

Anonymous — Thu, 04 Jun 2020 17:02:10 GMT

TBH, I'd rather pay PMI for a few years than a much higher interest rate on Hundreds of Thousands for 30 year Mortgage.

like mentioned above you just haev to weigh your options and choose the right fit financially.

Re: Avoiding PMI

Anonymous — Fri, 05 Jun 2020 13:05:03 GMT

@Anonymous wrote:
TBH, I'd rather pay PMI for a few years than a much higher interest rate on Hundreds of Thousands for 30 year Mortgage.

like mentioned above you just haev to weigh your options and choose the right fit financially.

Do you know what determines the PMI amount? is it a % of something?

Re: Avoiding PMI

Anonymous — Fri, 05 Jun 2020 16:34:42 GMT

PMI rates are based on loan-to-value, the percentage of the loan compared to the value of the house. Then multiply the loan amount by the rate to get the yearly price, then divide by 12 for the monthly amount.

Re: Avoiding PMI

Anonymous — Fri, 05 Jun 2020 17:06:32 GMT

Ok so if the house is listed at 550 and i put 25K down and borrow 525K at 3.25% on a 30 year FHA fixed how does that math all plug in?

Re: Avoiding PMI

dragontears — Fri, 05 Jun 2020 17:16:51 GMT

If you are going FHA with less than 10% down you will have MIP for the life of the loan. If you put 10% down you will have MIP for 10 years.

Re: Avoiding PMI

NC_Mtg_Loaner — Fri, 05 Jun 2020 19:00:33 GMT

@Anonymous wrote:

Ok so if the house is listed at 550 and i put 25K down and borrow 525K at 3.25% on a 30 year FHA fixed how does that math all plug in?

And FHA will collect 1.75% upfront in MI or $9187.50 as well as .8% of the annual unpaid balance or $333.33 per month (more or less for the first 5 years) and even though the APR on your FHA loan is low, the mortgage insurance can be expensive.

Re: Avoiding PMI

Anonymous — Sat, 06 Jun 2020 04:39:00 GMT

Bank of America has a great first home buyer program with no pmi.

Re: Avoiding PMI

MD2012 — Sat, 06 Jun 2020 12:48:02 GMT

@Anonymous Try taking a look at LPMI (lender paid mortgage insurance) options. Slightly higher interest rates but may have a better monthly mortgage payment than buyer paid PMI. We are literally in the same boat as far as credit profile and buying price. The only exception is that we are selling our current home first which is taking longer than expected. Upside: More time to AZEO.

Re: Avoiding PMI

Anonymous — Sat, 06 Jun 2020 22:16:19 GMT

After @Revelate's recent experince with BoA, I'm not sure they would be me first choice.

Re: Avoiding PMI

Revelate — Sun, 07 Jun 2020 03:07:00 GMT

I am sure BOFA employs some competent underwriters just I didn't get lucky with my own. From other people's stories though BOFA may be more miss than hit.

I am not a fan of trying to avoid PMI, possible exception of 80/10/10. Known mark that PMI comes off and I would rather pay marginally more for that period of time than a higher interest rate over the course of the loan which will work out similarly.

Re: Avoiding PMI

UpInSmoke — Sun, 07 Jun 2020 21:21:59 GMT

@Anonymous wrote:
Did you serve in the military? Are either of you a doctor, lawyer, CPA? I know for VA loans and certain professions such as the ones I listed there is no PMI penalty

@debtguy - I'm curious about your statement. I'm a CPA, however I don't know if any mortgage co.s or loans that do not require pmi based on my profession. If you do, could you share info? TIA