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Mortgage option question

08CivicSi 2,600 225 May 26, 2016 at 12:37 PM
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Last Edited by 08CivicSi May 29, 2016 at 08:25 PM
i had 2 options for my mortgage, debating which was a better choice - both are 30 yr terms:

1. Down payment assistance of 3% ($5130) with rate of 4.5% - repayment requirement drops by 20% per year after i've been there for 10 years, completely forgiven at 15 years in the house - which i will meet, don't foresee needing/wanting to move.

2. No down payment assistance, i supply 3% of my own funds for the down payment. Rate would be 4%

House was $171k. Which was the better option? I could only supply 3% max down payment if i needed to, but i didn't want to use my savings and this is through a state housing finance program.

Both options will require PMI of ~$125/month

I bought last year and chose option 1...did i make the right choice for the long run? i'm planning on making extra payments and improvements to the home to raise the LTV and hopefully can cut the PMI in the next few years.

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#2
Ok people need real numbers what will your payment be for both options and what would your cost be for an 80/20 loan to skip PMI?

http://www.bankrate.com/finance/m...pmi-1.aspx
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#3
with a difference of ~40/mo payment between the 4.0 and 4.5%, it would take over 120 months for the lower payment to negate the $5130 of down payment assistance, at which point you are into the principal reduction in option 1. what housing finance program is willing to forgive your mortgage like that? i'd be interested to see the details.
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#4
Quote from tresh View Post :
with a difference of ~40/mo payment between the 4.0 and 4.5%, it would take over 120 months for the lower payment to negate the $5130 of down payment assistance, at which point you are into the principal reduction in option 1. what housing finance program is willing to forgive your mortgage like that? i'd be interested to see the details.
"For both first-time and move-up home buyers, our NC Home Advantage Mortgage(TM) provides qualified individuals with stable, fixed-rate mortgages and down payment assistance up to 5% of the loan amount. Even better, repayment of the down payment is required only if you sell, refinance or transfer your home before year 15--the down payment assistance is forgiven at 20% per year after 10 years in the home."

Also, let me go ahead and clear up, i already bought the house last year using option 1...im just wondering if i made the right decision.
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#5
Quote from komondor View Post :
Ok people need real numbers what will your payment be for both options and what would your cost be for an 80/20 loan to skip PMI?

http://www.bankrate.com/finance/m...pmi-1.aspx
A 2003 article

Banks are tighter now. Call and ask if they even offer 80/20 or similar.

your down payment assistance amort over 15? $40?

who's paying closing? any assistance from current owner

You answered your own question. Only 1 way to put down money if you don't use yours

edit: see you cleared some things up

What type of Mortgage did you go with.
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Last edited by stufine May 26, 2016 at 01:21 PM
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bulb save money by checking your insurance every 2 years (and not every 20)
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#6
Quote from stufine View Post :
A 2003 article

Banks are tighter now. Call and ask if they even offer 80/20 or similar.

your down payment assistance amort over 15? $40?

who's paying closing? any assistance from current owner

You answered your own question. Only 1 way to put down money if you don't use yours
I edited my first post - i bought the house last year...im just curious if i made the right choice (option 1). Seller paid closing. I researched a lot when i was in the process and found nothing about 80/20 mortgages anywhere.
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#7
Quote from 08CivicSi View Post :
I edited my first post - i bought the house last year...im just curious if i made the right choice (option 1). Seller paid closing. I researched a lot when i was in the process and found nothing about 80/20 mortgages anywhere.
Did you go conventional or FHA
FHA you're stuck with PMI
Conventional should have # of months/years PMI or value
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#8
Quote from stufine View Post :
Did you go conventional or FHA
FHA you're stuck with PMI
Conventional should have # of months/years PMI or value
conventional.
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#9
The honest answer is you bought prematurely without having enough funds. Now moving on to answer you current questions.

Your financing program requires you to live there for 15 years or you must payback the down payment. 15 years is a long time in your first home so I can't answer for you if that was suitable or not.

Avoiding PMI would have been in your interest as it's money down the drain. $125/mo in PMI is a lot and that really hurts any "financing deal" you received.

Your best option going forward is to determine the constraints of the financing program you used and see if there is a cost-benefit option for getting out from under the PMI.

It's hard to answer anything further with the information provided but hopefully that sums up what we can for now.
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#10
Quote from stufine View Post :
A 2003 article

Banks are tighter now. Call and ask if they even offer 80/20 or similar.

your down payment assistance amort over 15? $40?

who's paying closing? any assistance from current owner

You answered your own question. Only 1 way to put down money if you don't use yours

edit: see you cleared some things up

What type of Mortgage did you go with.
Ok here is one from Sept 2015 same basic information

http://www.trulia.com/blog/the-pi...er-than-1/

If your house has appreciated so that you have 20% equity or when it reaches that point see if they will remove the PMI or see if you can refinance, or does a refi trigger the payback clause?
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Last edited by komondor May 26, 2016 at 04:09 PM
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#11
i say the wrong move. just because 10-15 years isn't a hell of a long time to be certain of anything. and in the long run you want the lower interest rate since interest compounds. might have saved you maybe 500 a year.
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so i spent time making a signature. only to realize that you couldn't put an image in the signature. please enjoy the link to my signature, assuming it works.

http://imgur.com/FtBghZ2
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#12
Quote from 08CivicSi View Post :
im just curious if i made the right choice (option 1).
In cases like this you are better not off asking at all (after the fact).
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"This whole.. I have XX company so my pee pee is 2" longer talk is hilarious. Who cares what company is cheapest, best, etc. Pick the company and plan you want and keep it to yourself."
#13
I would have done the exact same thing as the OP
I would take the assistance, keep my cash and get into a house.
Throwing rent away and with housing markets improving, why wouldn't you
Keep an eye on values to see if you can refi before it meets PMI end. If he has a 5 year PMI it might not be worth refi cost.
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#14
Quote from stufine View Post :
I would have done the exact same thing as the OP
I would take the assistance, keep my cash and get into a house.
Throwing rent away and with housing markets improving, why wouldn't you
Keep an eye on values to see if you can refi before it meets PMI end. If he has a 5 year PMI it might not be worth refi cost.
That doesn't really make that much sense though. People wanting to get into a house they can't afford is what helped fuel the bad mortgage crisis. Consumers have to take SOME responsibility for biting off more than they can chew.

In this case I don't think it's a responsible move based on the low cash flow to opt into a house, especially with the penalty for doing so which, IMO, offsets the gain from taking advantage of the program. There are ways to capitalize on the opportunity but it does not appear that is the case for this thread and is often seldom the case anyway.

You are actually much better off financially to rent if you cannot truly afford a home. The math theory of owning is always better than renting is not technically true, there are way too many other variables that come into play.

And as others pointed out, it's a little late AFTER THE FACT to start doing your due diligence. I think this is a good case for how not to finance a home (on the fly and especially not just because of an assistance program). The OP can capitalize on this but I honestly won't hold my breath. IE: needs to refinance out from PMI, but is also unfortunately locked in to an obscene time-frame to offset the repayment option.
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#15
cash flow wasn't his problem. saving was.
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