Mortgages

[svivian]

Partially true - the pmi is based on the loan to value ratio and will go away once you hit the 80/20. That’s based on the original value so you’d have to pay for a new appraisal if you want the new value reflected (and it has to be an appraisal through someone the bank approves). If you have a 30 year mortgage and pay it that way you barely touch principal the first 7-10 years so PMI will stick around a while.

Id wager with the way housing prices are going it wont be an issue for 10 years.... an appraisal is a small cost compared to the interest paid.

My point was to not let PMI scare people off from buying in now.

 

[TCUHunter34]

Id wager with the way housing prices are going it wont be an issue for 10 years.... an appraisal is a small cost compared to the interest paid.

My point was to not let PMI scare people off from buying in now.

View attachment 712179

I recently paid only $190 for the PMI assessment to remove the $40/month payment.

 

[JBrew]

Broker here. My opinions for most general situations. If you don't have 20%, look at Rural Development(USDA) or FHA. They both have PMI but are at a lower percentage, along with your base rates being cheaper than conventional. You also have to figure in closing costs. If you go conventional, either you or the seller will be paying them. You have the option with USDA to finance those in, if the home appraises well enough.
Going a little deeper on rates, most brokers have what is called Lender Paid Commission and Borrower Paid Commission. You will get a better rate on borrower paid commission, however, it will be from buying down(points), when it all comes down to it. I wouldn't look at an ARM unless you knew absolutely for sure that you won't be in the area in the next 5-7 years...or unless you want to gamble on the long term market and the rates being at least 2% cheaper than what they are now. Keep in mind that when you refinance, you're going to be paying closing costs all over again, although a little cheaper. This plays into having PMI vs no PMI as well, long term.
As others have said, get with a broker/bank/whoever...have them print out each scenario on paper. That's going to help you decide what is best for you. Don't just talk about it...look at it. It will make more sense.

 

[william schmaltz]

Agree with meeting with a lender, just know your limits. Maybe things have changed in the last few years, but the couple times I’ve met with lenders, they were happy to approve and encourage a loan that would’ve taken 50% of our take home pay. MAX don’t spend over 25% of take home on mortgage and ideally it’s under 15% IMO.

We did a 30 year with 5% down in 2019. For the reasons Corb explained, thank God we did. Could’ve done more, but I’d rather keep a large emergency fund and pay the $50/mo in PMI (we eliminated that in under 2 years). When I set up my auto pay on month one, I automatically set an additional monthly principal payment to pay it off like a 15. When we had a family tragedy in 2021, I was able to shut that off while neither of us worked for a couple months and my wife took off 6 months to allow us to take care of ourselves and family. Once life settled, I turned it back on. If you lack discipline, do a 15 yr. If you can keep promises to yourself and won’t take your extra principle payment and turn it into a boat payment, do a 30 year yr and set to pay off early. Again, just my opinion worth what you paid for it.

Also, don’t rush and make sure you get what you want. Everything is dropping in price here including all new builds. It feels like you’re throwing $1900 away, but once you see how your first payment disperses, you will see you’re hardly paying principle for a decade. My $2K payment is nearly $600 in taxes and insurance and nearly $800 in interest. So only $600-700 is actually paying my house down. It will be even more lopsided with your 7% rate. I pay more than $700/mo on average in upkeep and all other other little things mentioned (mowers, appliances, snow blower, new garage doors, etc.) If it wasn’t for the massive appreciation over the last 5 years, it would’ve almost been just as beneficial to rent.

 

[mxgsfmdpx]

Bought my first house in 2011 and only put down 5% on a FHA loan. They have hard credit/income lines that have to be met, but we were able to barely make it.

Because of home equity I was able to put 20% down on the next two properties I bought. It's rare that your first house is going to be your "forever home". Settle on something you can afford, live in it for a few years and let the potential equity move you up.

 

[zacattack]

I would just pay the PMI and go 30 year conventional. I'm far from a money expert but I feel like it's your best bet

This is what we did on our first home we bought. Sold it 5 years later with enough profit for 20% down into a nicer home.

 

[bone collector 13]

Ok, so next question. Obviously not sold on 1 particular house or anything but the subdivision that spurred all this, the developer has a lender they “work with”. Obviously I’m smart enough to know that I have options. I guess what my question is how do I shop my lender options without running my credit multiple times? Do I tell them what my score is? Can they do soft pulls? How’s that part all work

 

[CorbLand]

Ok, so next question. Obviously not sold on 1 particular house or anything but the subdivision that spurred all this, the developer has a lender they “work with”. Obviously I’m smart enough to know that I have options. I guess what my question is how do I shop my lender options without running my credit multiple times? Do I tell them what my score is? Can they do soft pulls? How’s that part all work

Mine was able to estimate things and then pulled it when we finalized things. He was pretty close with what he estimated and the actual.

 

[Danny Hoey]

Ok, so next question. Obviously not sold on 1 particular house or anything but the subdivision that spurred all this, the developer has a lender they “work with”. Obviously I’m smart enough to know that I have options. I guess what my question is how do I shop my lender options without running my credit multiple times? Do I tell them what my score is? Can they do soft pulls? How’s that part all work

Once you have a hard pull, you have a certain window that it can be pulled multiple times with no additional effect to your credit. I think it's two weeks.

 

[cowdisciple]

I would just pay the PMI and go 30 year conventional. I'm far from a money expert but I feel like it's your best bet

This. Chances are good you're going to refinance it, and when you do you'll have a chance to pay down the balance to 80% and get out of the PMI anyway (and also gives you the chance to go to 15 year if that makes sense).

As previously mentioned, USDA rural loans are great if you can get one.

 

[cowdisciple]

Start keeping up with rates, and shop around. Mortgagenewsdaily.com is a great site to stay up on what's happening to rates.

Don't be afraid to bail on lenders if you get a better rate elsewhere. It's pretty annoying that you have to go all the way through the qualifications process to get a real rate quote, bit if you have electronic documents it only takes an hour or so. A lot of the online lenders offer good rates, and they're pretty much all going to sell your mortgage to another company for servicing anyway. Nerdwallet can give you good places to start on rates.

 

[bojangles808]

Both of my daughters are in home mortgages, this is their advice.
Since you are a first time homebuyer, get with a mortgage broker and find out about your options for first time homebuyers. Just make sure the broker is familiar with the programs. They usually have reduced rates and potential down payment grants.

If they don't know about USDA rural housing or FhA find a new broker. Some banks are better at these programs than others. Those are what you should look at first as a new homebuyer first and foremost

 

[ewade07]

I’ll just say… if you haven’t bought a house before, the closing costs and subsequent moving costs are shocking the first time. And furnishing and stocking it can suck up any extra income for a long time. And in today’s market, the banks usually want you to have cash reserves. They may not let you zero out your savings. Just because you have $100,000 in the bank doesn’t mean it is all available for a down payment.

That said, it’s pretty rare for a first time buyer to put down 20%. Great if you can do it though.

This right here. I wanted to put 20% down on my first house to avoid PMI but only ended up putting 10% down. The cost to move and furnish as well as closing costs (factor in at least 10k) are often overlooked. After all that i had zero in my savings and still had to borrow money! I didnt make the same mistake with my second house.

 

[SDHNTR]

In most cases…. 20% down. 30 yr conventional.

And no one with a 3% ish mortgage should be in any hurry to pay it off when there’s 200 bps positive leverage available on risk free money (or substantially more for smart long term investors).

 

[Doc Holliday]

Ok, so next question. Obviously not sold on 1 particular house or anything but the subdivision that spurred all this, the developer has a lender they “work with”. Obviously I’m smart enough to know that I have options. I guess what my question is how do I shop my lender options without running my credit multiple times? Do I tell them what my score is? Can they do soft pulls? How’s that part all work

No need to talk to lenders until you are ready to buy and have a property identified

All you have to do to check rates daily is google "current 30 year mortgage rates" and then toggle the drop downs for your credit rating, state of residence, loan amount, and down payment

 

[bozeman]

The 20% down is not only to avoid PMI, but to keep people from buying more house than they can truly afford.....

OP- run your income against your current bills and a house payment with PMI and house insurance escrow..........I wouldnt go over 20% of my monthly income for a house payment.

 

[big44a4]

As another mentioned I went 30 year route and make 1 large payment each year towards principal. The first 2 years wasn’t able to make the extra payment. Currently 6 years in and on track for 12-15 years total payoff pending investment strategy changes.

But I’m a big fan of having the flexibility and have the self control to hold that lump sum for when life happens.

 

[maxx075]

As another mentioned I went 30 year route and make 1 large payment each year towards principal. The first 2 years wasn’t able to make the extra payment. Currently 6 years in and on track for 12-15 years total payoff pending investment strategy changes.

But I’m a big fan of having the flexibility and have the self control to hold that lump sum for when life happens.

Just out of curiosity, if you don't care to share, what are you making as your 1 large payment per year?

 

[big44a4]

Just out of curiosity, if you don't care to share, what are you making as your 1 large payment per year?

Depends on the year but usually 15-17k to principal. My wife owns her own small business and it’s very cyclical so I like to have the flexibility in event need to pay for anything life throws my way. Like a new roof for a hail storm that just rolled through etc.

 

[cowdisciple]

The 20% down is not only to avoid PMI, but to keep people from buying more house than they can truly afford.....

That's certainly a generous interpretation. I would say it's to make sure the bank can always get their money back if they have to sell it at foreclosure. Potato potahto.