Buying A Home
MrsAxilla
member
Anything you can achieve through hard work, you could also just buy.
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Second loan for PMI? (80/20?)
So I was talking to my dad, and he suggested that we look into a second loan to cover PMI. From what I understand, PMI is only necessary if you have less than 20% equity in your home. We technically have 20% to put down, but that would leave us with no e-fund, so we're going with an FHA loan. According to my dad, PMI is necessary, but also a waste of money since it only benefits the lender. This smacks of those risky no down payment loans, but my dad is in real estate (albeit commercial) so I tend to think he knows what he's talking about. Has anyone done something similar? Thoughts?
Anything you can achieve through hard work, you could also just buy.
Re: Second loan for PMI? (80/20?)
Anything you can achieve through hard work, you could also just buy.
I havent but we did go with a conventional loan with less than 20% down. It has PMI for a minimum of 12 months but we can have the house reappraised after 12 months to drop PMI which is something like $80/month. PMI on conventional loans are less than the FHA pmi.
I'm not sure they do 80/20 loan anymore which would mean take an 80% loan and then a 2nd loan for 20%. Maybe you meant spmething like 80/10/10- 80% loan, 10% 2nd and 10% down?
Anything you can achieve through hard work, you could also just buy.
Anything you can achieve through hard work, you could also just buy.
No money down loans were part of why we got into this housing mess.
I doubt you will find anyone giving 80/20 loans today.
Anything you can achieve through hard work, you could also just buy.
We had an 80/20 loan in 2005, but I don't think they offer them anymore.
We had the 20% to put down on our current house (closed on a month ago), but like you we didn't want to use up all of our funds. We were able to get a conventional loan with 11% down with no pmi.
I think you're talking about an 80/10? You put down 10% and take out a second mortgage for the other 10% so that you don't pay PMI.I don't think many people are doing those anymore.
You really don't want to go with FHA if you don't have to the fees are much higher and you have to pay PMI for several years. With a conventional you can get out of the PMI once you have 22% equity, even if it's not too long after buying.
You could get a no PMI loan, but your interest rate will be higher so it only makes sense if you're not planning on staying in the home long enough to get to 22%
We did something similar. We did a 30 year conventional loan with 15% down, no points, and the only difference is that the interest is just slightly higher than it would have been if we put 20% down. The PMI can be dropped after so long (forget the time frame, dont have paperwork here). We're taking the rest of the cash back from our house sale and putting it into savings.
A second loan "to cover PMI"? Are you sure you understand what all the terms mean? You don't borrow money "to cover PMI." PMI is insurance for the lender in case you default.
I also don't understand why you're "going with an FHA loan" and talking about 80/20's (or 80/10/10's).
FHA loans only require 3.5% down. Obviously you can put down more than 3.5%, but most FHA loans I've come across require you to pay MIP (the FHA version of PMI) for a certain period of time regardless of equity. Ours is 5 years. So even if you only borrowed 80% of the value of the house with the FHA loan, you wouldn't avoid MIP (PMI).
If you're going to take out a 2nd mortgage for, e.g., 10% of the value in an attempt to avoid PMI, you would need to have a conventional mortgage, not FHA, for the first mortgage.
All this effort is not necessarily going to save you money in the end, though. The interest rates are likely to be higher, particularly on the 2nd mortgage. How much does it matter if you spend the money on interest or PMI?
Alternatively, you could save up a little longer to allow you to put 20% down without blowing your e-fund.
The title of your posts is asking about 80/20 loans. An 80/.20 loan IS a no money down loan. All you would pay for is closing costs.
Sorry for the delay in getting back to you! Yes really, 5% down no PMI, and no the house wasn't sold below market. And you are right PMI is typically is on anything with less than 20% equity, but there are banks that will lend to very well qualified buyers without requiring a PMI policy.