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Old 01-10-2009, 12:38 PM
 
99 posts, read 463,160 times
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My wife and I will be looking for a house this summer and I was wondering about PMI. It seems that you must put 20% down to avoid PMI and it seems people try to avoid PMI like the plague. I was wondering if this applies in all scenarios or can vary. We will be first time home buyers if that matters. Does PMI come with FHA loans if the person only puts down say 10-15%? How much a month would PMI cost if the mortgage was around 280k w/ 20k put down? I'm just giving rough numbers here so any information or guidance would be greatly appreciated. Thank you!
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Old 01-10-2009, 01:00 PM
 
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Here is some info I found on bankrate.com. HTH.

FHA (Federal Housing Administration) insured mortgages don't have private mortgage insurance (PMI). Instead, FHA mortgages carry mutual mortgage insurance (MMI). The MMI premium is paid through both an upfront mortgage insurance premium (MIP) and a monthly mortgage insurance (MI) premium. Any unused portion of the upfront MIP may be refunded within the first 60 months of the loan.

The monthly mortgage insurance payment will automatically be canceled when the outstanding principal balance reaches 78 percent of the original purchase price (provided that the monthly mortgage insurance payments have been made for a minimum of five years for 30-year loans). Home buyers making a down payment greater than 10 percent of the purchase price, however, don't have to pay the monthly mortgage insurance when financing with a 15-year mortgage, but do still have to pay the upfront MIP.
Bottom line: You can't avoid mortgage insurance on an FHA loan. The upfront MIP doesn't have to be financed in your mortgage. Just bring the payment to closing. Many FHA home buyers are struggling to raise the down payment and won't be able to pay cash at closing for the MIP, but it is an option.
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Old 01-10-2009, 07:44 PM
 
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You will pay some form of PMI on any type of loan unless you are paying all cash or putting 20% or more down.

As explained above, the FHA has the MIP which is paid upfront and then every month along with PITI (principal, interest, taxes, hazard insurance).

We have a VA loan which is a true no-money down loan. . .HOWEVER, the VA gets their PMI in the form of a "funding fee," which is a percentage you pay based on your military status and whether or not you have used a VA loan before (this is available to military or prior military - if you do a google search you'll find many websites that explain it). Since my husband has used his eligibility before and he is not service-connected disabled, our funding fee on our current purchase was 3.3% of the contract price.

you can pay the funding fee in cash at closing or you can add it to the mortgage balance.

One thing I DO know since we just closed on this house in December is that if your adjusted gross income is below 100K for tax year 2008, you can deduct your mortgage insurance premiums - or in our case the VA funding fee - as an itemized deduction on your federal income taxes.

DISCLAIMER - I am not a lawyer nor accountant so I do advise that you check with your own lawyer or accountant regarding this issue whenever you do buy a home (and to anyone else who is reading this) to make sure that it is indeed valid.
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Old 01-11-2009, 06:44 AM
 
99 posts, read 463,160 times
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Thank you for the info. It seems that unless we are putting down 20% (which we could but we would like some money in savings to have luxuries such as furniture, haha) we will be paying PMI in some form or another. They can call it ""don't anger the gods" fees for all I care its still some form of insurance.
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Old 01-11-2009, 01:08 PM
 
Location: Raleigh
82 posts, read 181,797 times
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Default Four Ways to Avoid PMI on a new mortgage

Until 20 years or so ago the only way you could buy a house is to save up the down payment of 20% which banks werent willing to lend on because at a short sale you can generally sell a home quickly for 80% of fair market value.

That said right now there are only four options I know to avoid PMI on a new mortgage

1) VA loan - but if you or your spouse aren't an eligible veteran this would not be an option. Another thing to consider was already mentioned; the upfront funding fee can be financed by your lender and can be as little as 0% if you are deemed 100% disabled resulting from your service all the way up to 3.3% for subsequent uses of your benefits.

2) USDA Guaranteed Housing offers Financing in Rural Areas
and provides homeownership opportunities to rural Americans, as well as programs for home renovation and repair. USDA also makes financing available to elderly, disabled, or low-income rural residents of multi-unit housing buildings to ensure they are able to make rent payments.

3) Lender Paid Mortgage Insurance; in lieu of paying monthly PMI payments you pay a higher rate on your entire loan balance for the life of that loan and with mortgage rates at record lows it seems foolish to me especially because in many cases these days PMI can be tax deductible and can be canceled under certain conditions.

4) Subordinate Finance ie; a second mortgage. Because you have 10% with good credit there is little reason you shouldn't be able to obtain a second mortgage for the other 10% you are short and albeit the rate will be higher, it is incentive to pay it off sooner and is still tax deductible.

Finally - another thought on FHA financing; if you are able to finance your home for 15 years in lieu of 30, the monthly PMI factor is only .25 compared to .55 for the 30 year mortgage and of course you will pay your home off in 1/2 the time. Compared to the minimum factor in a conventional 30 year mortgage of .78 your FHA mortgage is likely to be your most affordable option if none of the others make sense. A good lender should be willing and able to quickly provide a side by side comparison complete with APR's that will reveal for you the truly most economical option.
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Old 01-11-2009, 03:58 PM
 
Location: The MD Suburbs of DC
3 posts, read 11,676 times
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Another thing about PMI. You can have it removed from your mortgage once you have paid down your mortgage to 80% of the market value. Thus, even if you start out with PMI you are not stuck with it forever. You need to be a little proactive by watching you principal balance but, if you're diligent, you can pay your mortgage down to the point where you can get rid of it.

One caveat, most mortgage companies force you to pay it for at least two years. This is because "back in the day" house prices were appreciating so rapidly people would get and 80/20 (i.e., a second mortgage) and then refinance to get rid of the PMI.

Little likelihood of that type of frenzy happening again.
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Old 01-11-2009, 04:52 PM
 
99 posts, read 463,160 times
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Default Thanks for all the information

It seems the best way to keep the mortgage payment low is to just put down the 20%.
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Old 01-11-2009, 05:15 PM
 
1,312 posts, read 4,291,699 times
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Quote:
Originally Posted by Ken Montville View Post
Another thing about PMI. You can have it removed from your mortgage once you have paid down your mortgage to 80% of the market value. Thus, even if you start out with PMI you are not stuck with it forever. You need to be a little proactive by watching you principal balance but, if you're diligent, you can pay your mortgage down to the point where you can get rid of it.

One caveat, most mortgage companies force you to pay it for at least two years. This is because "back in the day" house prices were appreciating so rapidly people would get and 80/20 (i.e., a second mortgage) and then refinance to get rid of the PMI.

Little likelihood of that type of frenzy happening again.
We got rid of our PMI by refinancing when the rates dropped, and found out our townhouse had appreciated in value enough that the PMI could be dropped. The bank only did a drive-by appraisal too. It was a bit before the house prices were really going crazy. There was no option but for us to have PMI when we bought.
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Old 01-12-2009, 05:26 PM
 
99 posts, read 463,160 times
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Just out of curiosity has anyone had the finances available (savings) to put down 20% and avoid PMI but chose to put down less? If so, why?
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Old 01-13-2009, 11:41 AM
 
385 posts, read 1,731,150 times
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Ugh. I hate my PMI!!!!

We were originally told that it was going to be $100-$200 a month, but when we went to settlement, because we settled right as companies stopped lending as easily, it jumped to $600 a month!!!! I would LOVE to refinance, but we don't have the $$$ to refinance (we don't have any equity in the house to use towards any closing costs).

It was an unforseen cost that blindsided us and now we are housebroke!

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