I have cash. Where does it go?
- Thread starter bp
- Start date
Cessnaflyer
Wooooooooooooooooooooooooooooooo
For the love of god please don't shop for government subsidized loans! When it comes to refinance to try to get rid of the whole term PMI you are probably not going to have these great interest rates. You can get a conventional with PMI at 95% and in a few years have the house reappraised to get rid of the PMI.Been doing a little more research and running some numbers, might be making my first home purchase in the next 6-8 months!Time to start shopping for FHA mortgages
I'm not really sure how great of an interest rate I'm going to get, I've only had a few credit cards for five-seven years and a car payment for two. My score is mid 700s but I don't have much of a history to speak of. If I wait until middle of next year to put 20% down, I'll probably have a higher rate by then, no? The only thing I was looking for was a streamlined 203k, to do a little bit of renovation on a fixer up duplex and rent out the other half with a lower downpayment
SlumTodd_Millionaire
Most Hated Member
Is your FICO score above 740? That's usually when the good interest rates kick in.
The score that I get with one of my credit card statements every other month says yes, but I'm not sure if that's from all three bureaus
SlumTodd_Millionaire
Most Hated Member
They'll all be within a few points of each other.
drunkenbeagle
Gang Member
Um, what exactly is the problem with having a lower interest rate? Rates aren't likely to become negative, they are already about as low as they will ever be in the future, meaning the need to refinance is unlikely. Even if you refinanced for some reason, you still would have had the benefit of the lower rate until then. Better idea is to not have PMI in the first place though, if you can help it.
SlumTodd_Millionaire
Most Hated Member
PMI is better than putting the money down.
drunkenbeagle
Gang Member
Depends on the rate, whether it is deductible in the future, and the down payment the lender would require anyway. If you are going to have to put 15% down anyway, might as well not have the PMI in the first place.
SlumTodd_Millionaire
Most Hated Member
I've never put down more than 5% on any property, except those really cheap ones I bought with cash. I'm about to put down 10% on a beach condo, and it makes me cringe to even put that much down.
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drunkenbeagle
Gang Member
I've never put down more than 5% on any property, expect those really cheap ones I bought with cash. I'm about to put down 10% on a beach condo, and it makes me cringe to even put that much down.
Your experience with underwriters has been better than mine, though I suppose you have been buying more houses too.
SlumTodd_Millionaire
Most Hated Member
Always go for 30 years.
drunkenbeagle
Gang Member
What he said.
Cessnaflyer
Wooooooooooooooooooooooooooooooo
Government subsidized loans have a higher interest rate and their version of PMI is for the life of the loan. The main reason people go for the FHA, USDA loans because they can't get the extra 2% down to get a 95% LTV for a conventional.
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SrFnFly227
Well-Known Member
If you're truly set on avoiding a PMI payment, there are a few options that will get you there.
The first is to put down enough money to not have one. This is the simplest in terms of the process, but most people of our generation have a problem getting anywhere near enough money to put down that large of a down payment. And as Todd has mentioned, it may not be the smart play over time anyway.
The second is what my wife and I did while buying our house 2 years ago. Our "PMI" is built in to our interest rate at something like an eighth of a percent. This is called Lender Paid PMI. The downside to this is that we will pay it for the life of the loan. The advantage is that because it is not differentiated from standard mortgage interest, it becomes a tax right off at the end of the year. Standard PMI can not be written off on your taxes once you hit a certain income. Our long term plan when we bought was to stay in this house for 5-10 years and then move up. At that time frame, we save money over a standard PMI. It should also be noted however, that both my wife and I both hover around an 800 credit score. We also bought in July 2013 and our combined rate is 3.75%.
The third option was what we had originally planned to go for, before deciding on the Lender Paid PMI. You take out 2 mortgages. I don't remember the exact numbers, but for sake of explaining, I'll estimate them from memory. The first mortgage is your primary and works just like any other 30 year mortgage. It is for 80% of the loan value. The second mortgage is for 10 or 15% of the loan value. The second one will be at a higher interest rate and will be for a shorter term than the primary loan. You put down the other 5 or 10%.
Both the Lender Paid PMI and 2 mortgage options saved us money over paying a conventional PMI. That may not be true if you plan to hold on to your property for longer than 10 years though. Ask who ever is doing your mortgage to put together numbers for all of the options and see what works best for your situation.
The first is to put down enough money to not have one. This is the simplest in terms of the process, but most people of our generation have a problem getting anywhere near enough money to put down that large of a down payment. And as Todd has mentioned, it may not be the smart play over time anyway.
The second is what my wife and I did while buying our house 2 years ago. Our "PMI" is built in to our interest rate at something like an eighth of a percent. This is called Lender Paid PMI. The downside to this is that we will pay it for the life of the loan. The advantage is that because it is not differentiated from standard mortgage interest, it becomes a tax right off at the end of the year. Standard PMI can not be written off on your taxes once you hit a certain income. Our long term plan when we bought was to stay in this house for 5-10 years and then move up. At that time frame, we save money over a standard PMI. It should also be noted however, that both my wife and I both hover around an 800 credit score. We also bought in July 2013 and our combined rate is 3.75%.
The third option was what we had originally planned to go for, before deciding on the Lender Paid PMI. You take out 2 mortgages. I don't remember the exact numbers, but for sake of explaining, I'll estimate them from memory. The first mortgage is your primary and works just like any other 30 year mortgage. It is for 80% of the loan value. The second mortgage is for 10 or 15% of the loan value. The second one will be at a higher interest rate and will be for a shorter term than the primary loan. You put down the other 5 or 10%.
Both the Lender Paid PMI and 2 mortgage options saved us money over paying a conventional PMI. That may not be true if you plan to hold on to your property for longer than 10 years though. Ask who ever is doing your mortgage to put together numbers for all of the options and see what works best for your situation.
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Cessnaflyer
Wooooooooooooooooooooooooooooooo
That's if you have a large enough loan or a higher interest rate. My interest rate and principal is so low that I can't deduct any of it. That's something that caught a few buyers off guard when they did their taxes.
Check. If a 1/8th share, a canoe, and a 1992 honda count