Purchasing new home... my options?

Quote from luvboox : Are you sure this is true? If I remember correctly, you only have to pay PMI until the Loan To Value (LTV) is 80%- that is, until the loan is equal to or less than 80% of the value of the property. In fact, I believe the lender/escrow is required to stop collecting PMI when the LTV hits 78%, even if you don't know say anything. Wouldn't paying off principle help you reach the 80% LTV earlier, since you would have more equity in the home?

if you lump pmi into you mortgage sum -- meaning that instead of having a 100k mortgage, you have a 107k mortgage -- you can't "undo" it. It's part of your mortgage. The benefit is that instead of adding $200 monthly to your mortgage payment for the first X months, it only adds a few dollars. The downside is that it doesn't disappear when your LTV hits 78-80% and you're paying it for 15/30 years.

*numbers pulled out of my ass.

Quote from crazygrow : I don't want you to feel like I'm being an ass, but I wouldn't consider any investment where I lost money a good one. But we all take risks. I bought a short sale when we moved to Utah two years ago, put 3% down on the FHA loan. I just refinanced into a conventional loan and lost PMI because the house has appreciated 25% and I now have 20% "equity." I fully understand that I got lucky and this luck had nothing to do with me. Then again, I still own my house in GA and am still down substantially. I made the decision to hold it instead of selling it at a small loss and now have a big loss. Just be sure to be honest with yourself. It probably wasn't a good move on your part, but it is easy to second guess people when you are looking back.

Well, if you want to look at it as an investment, then you need to factor in the "income" which in this case would be the rent he would have paid had he not purchased a house. Lets say the rent would have been $1200 a month, over 3 years thats over $43,000 "saved" and thats assuming a rent of $1200 . A penny saved is a penny earned

I bet when you factor that in, i bet its not a bad "investment".

Quote from MissionHockey : Hello everyone, My wife and I currently own our home. We want to move approximately twenty minutes away where the schools are much better. I figured I would see if you guys could think of any other options we had. Right now, our house is worth as much as we owe on it. We could walk away and break even. However, we do not have a bunch of money saved up for a down payment for a new home. What are my options of getting around this? I have excellent credit (800+) and we both have steady jobs which produces a double income. I know before the housing market took a dump, people would use the profit they made to put towards a down payment on a new home. Unfortunately as we all know, it's not the same now a days. Any input would be appreciated, thank you.

I guess it depends on your debt-to-income ratio, and how the real estate market is doing in that market.

If the market is slow or sluggish, you might be able to get the owner to carry a 2nd note for hopefully 20% of the purchase price. They would have to agree to be in second position. A note like this would usually be a short term thing as the owner will want to get paid this lifetime. And of course the owner would have to have at least 20% equity in the house to make it happen. Those sorts of things usually only happen in markets where its hard to move homes and someone wants to be done and out of a property.

There are some 100% loans out there, but it really does sound like you need to just save up. I use to be in real estate and use to shake my head when someone would try and buy a home but couldn't afford a termite inspection.

Quote from BargainSnatcher : Well, if you want to look at it as an investment, then you need to factor in the "income" which in this case would be the rent he would have paid had he not purchased a house. Lets say the rent would have been $1200 a month, over 3 years thats over $43,000 "saved" and thats assuming a rent of $1200 . A penny saved is a penny earned I bet when you factor that in, i bet its not a bad "investment".

Nothing has been saved, just instead of paying rent he has been paying interest on his mortgage. He has still lost principal.

Quote from crazygrow : Nothing has been saved, just instead of paying rent he has been paying interest on his mortgage. He has still lost principal.

I had a brain fart.......i need to rest , i failed to factor in interest which is mainly what you are paying early on. The true saving would be the difference between what he would have paid in rent v's his mortgage payment.

Quote from bonkman : if you lump pmi into you mortgage sum -- meaning that instead of having a 100k mortgage, you have a 107k mortgage -- you can't "undo" it. It's part of your mortgage. The benefit is that instead of adding $200 monthly to your mortgage payment for the first X months, it only adds a few dollars. The downside is that it doesn't disappear when your LTV hits 78-80% and you're paying it for 15/30 years. *numbers pulled out of my ass.

Banks don't do it like that though...you don't ADD $10k to a loan to get out of PMI...that wouldn't make sense... Because your Value to Loan ratio would just get worse... Did they do that for you? What they did for me was gave me a Signature line of credit at a higher rate for anything above 80%.

I speak from experience. I had 0 down for my house, so I financed $100k. They gave me a signature line at 8% for 20k...and THAT became my down payment...I then got the 80k mortgage at 5%. I just threw any extra I had at the 20k loan for a couple of months...and refinanced my house after 5 months, the value went up from 100k to 125k (I had bought a foreclosure, so bought for under market value), rolled both loans back into 1 at 4.5% and was automatically out of PMI.

Quote from crazygrow : Nothing has been saved, just instead of paying rent he has been paying interest on his mortgage. He has still lost principal.

You save every month you own a house. Your interest is NO WHERE near as high as a rent check. The other part of your monthly payment goes to the principal and that is your "investment" part, you may get it back, you may not.

Every month I pay $500...$200 goes to interest and I will never see it again. Find me an apartment for $200 without bullet holes.

Quote from Curtieson : Banks don't do it like that though...you don't ADD $10k to a loan to get out of PMI...that wouldn't make sense... Because your Value to Loan ratio would just get worse... Did they do that for you? What they did for me was gave me a Signature line of credit at a higher rate for anything above 80%. I speak from experience. I had 0 down for my house, so I financed $100k. They gave me a signature line at 8% for 20k...and THAT became my down payment...I then got the 80k mortgage at 5%. I just threw any extra I had at the 20k loan for a couple of months...and refinanced my house after 5 months, the value went up from 100k to 125k (I had bought a foreclosure, so bought for under market value), rolled both loans back into 1 at 4.5% and was automatically out of PMI.

When I refinanced, my mortgage company allowed me to do what I said. As I stated, it's YMMV. We had put 10% down on our house. The house dropped a bit in value to where we were around 92-93% LTV which was up a bracket in PMI amounts, meaning our PMI would've gone from (making up numbers) 200 to 275 per month. Our loan officer said that, upon refi, we could just lump PMI into our mortgage, pay interest on it, and not pay it monthly as an additional fee. So we did that.

Since that day, I've tried to figure out how they can do that but without success. The whole point of PMI is to have insurance in case I stop paying. Did they take the extra few grand I put in my mortgage and purchase an insurance policy with it, lump sum? That's the only thing that makes some semblance of sense to me.