Mortgage

So I'm going to be shopping for a mortgage soon. We don't have 20% to put down more like 5%. I heard from people that we can get a NO PMI conventional mortgage if your credit score is above 700, you put at least 5% down and raise your interest rate about .5% higher. Has anyone ever done this? It saves a lot of money a month ...it seems.


Thanks!

Re: Mortgage

i've never heard of this..bc that would have worked well for us

we did an fha though, and put down 3.5 percent-but we do pay pmi..fwiw our credit score was above 700

Re: Mortgage

I heard this from one mortgage broker, and then I heard from another that it didn't actually exist that way. I know for us since we're doing less than 20% we have to pay PMI.

Re: Mortgage

I would ask a bank or broker. I just used Justin Schiatta from Home Reliant Funding for the mortgage we got. We closed on Wednesday and this is our second home buying experience. We had such a terrible time with the bank last time (Wells Fargo) and this time it was very easy. We ran into one problem towards the end, I emailed Justin, and he took care of it that night. Couldn't hurt to shoot him an email --

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email -- [email protected]

Mortgage

i don't know the answer to your question but when i bought my co-op a few years ago, i was able to take out two separate mortgages - one for 80% and one for 10% (i put down 10%). That way, the larger mortgage did technically have the 20% equity i needed so i was able to avoid PMI. That said, my smaller loan had a MUCH higher interest rate.

In the long-run, i'm not entirely sure it was the best plan money-wise so just make sure you run through all the numbers before doing anything ... just wanted to share so that you were aware of this option too.

Re: Mortgage

Re: Mortgage

When we bought our house in 2005 we had scores over 800 and no money down so we ended up with two mortgages. I think it was 85/15. We didn't have any PMI. Things are so different now though with mortgages so I am not sure how it works but back then, we were lucky and still got a good rate and had no PMI.

Re: Mortgage

One of my buyers recently closed in early August with a conventional loan with 5% down and lender-financed pmi. It was the first time I had heard of it, and I think it's a relatively new loan product. However, the lender needs to make its money, so my understanding is that you pay a higher interest rate than you otherwise would, and with 5% down on a conventional loan (which requires stellar credit, ect), you are always going to have a higher rate to start with (even if you pay pmi) than if you put 10%-20% down. So it's kind of like rolling the pmi into the mortgage, in a way.

Personally, I don't know that it really benefits a buyer to do it this way. I think you are better off taking a lower rate and paying pmi, because the rate is forever (unless you can refinance with a lower rate) and the pmi is not. If someone who has a small down payment goes with FHA (where you can put as little as 3.5% down), the rates are even lower than a conventional mortgage... they are still under 3.5%. With an FHA loan, once the 5 year mark passes, you can apply to have the mortgage insurance removed, as long as you can show you have 22% equity in the house. The rates are being held artificially low because of the state of the economy and will start going up, so buyers may never see 3.5% again. It was unheard of before... that's an all-time low. So I would take advantage of that -- since interest is a huge part of your mortgage payment, esp. the first part of the term of your loan -- and worry less about the pmi. That's just me!

If you are interested in finding out more about the conventional/lender-financed pmi, my buyer used Chris Clifford of Cliffco Mortgage in Westbury.

Also, please contact me if I can help you at all with the buying process! (516) 587-7618 (cell) or [email protected].