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Old 03-27-2015, 06:39 PM
 
Location: Denver, CO
2,391 posts, read 1,713,761 times
Reputation: 1915

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In the Denver forum, I posted this:

Quote:
I'll have to look at them. I just spoke with a broker today, and he said I'm looking at about a $1100-$1300/mo mortgage payment on any condo or town home in that range ($150k-$170k) with what I can currently put down (about $15k by end of July).

The sad part is that I'm probably going to have to wait so I can save more of a down payment, making me lose out on the lower interest rates that are in place today. Just to get 20% down for anything decent ($200k-$250k) around here, I'm probably going to need another $25-$30k in savings, which will probably take me another 4-5 years. The 2nd job option, as appealing as it is, isn't really an option because I travel for work sometimes.
AmFest said s/he had a few ways of dealing with this type of scenario.

Essentially, I'm a first time buyer with zero equity and a lower down payment (about $15k-$19k). I was hoping to buy a home now while the interest rates are at record lows. It has been advised to me by several people. However, my hold up is the low down payment. I'm told by several people I know that there are programs for first time buyers, but I don't have any specifics. Can anyone tell me some examples of these programs?

Is it possible for me to get an affordable mortgage payment with this kind of down payment? Affordable to me would be between $900-$1200/mo. The price range I have set for myself is between $150k-$225k. In Denver, it seems like the best price point I'm going to find is probably somewhere around $170k - $200k. I make $66k/yr and my credit score is around 780. The only debt I have (student loans) is around $275/mo.

Any thoughts? Any additional info required on my part? Thanks for your insights in advance!
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Old 03-27-2015, 07:01 PM
 
2,409 posts, read 2,494,452 times
Reputation: 1807
All right you called me out. The 3 solutions I have are:

1. Pay PMI until your equity catches up to 20% of the value of the property at which point PMI will drop off. If your FICO score is excellent, PMI is rather modest especially at your range of property value. PMI payments are also tax deductible.

2. Take an 80/10/10 mortgage package if you have 10% down payment. What this does is give you a second, smaller mortgage to cover the difference between your down payment and 20% of the property value so you avoid PMI. The second mortgage is going to have a higher interest rate, so you should focus on paying it off. If you have less than 10% to put down, some lenders also have an 80/15/5 option so you'll only need 5% down.

3. Get an ARM and combine it with one of the options above so you can accelerate principal payment to get rid of PMI or the second mortgage faster. This deal is even sweeter if you don't plan to own the property for longer than 10 years.

You can also get the lender to pay the PMI in exchange for a higher interest rate. I do not recommend this approach because the higher interest rate sticks with you for the entire duration of the mortgage.

Keep in mind that you can also get the lender to pay for closing costs in exchange for a slightly higher interest rate, usually a 1/8% higher rate, which is minimal, so that you can afford a higher down payment. If you opt for this, an ARM will not work quite as well because the lender will then require a significant interest rate increase for the fixed rate period.
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