Does this mortgage sound ok? (real estate, insurance, loans)
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I believe what that lender is doing is using an increased mortgage rate to cover PMI using "borrowed" money.
It is same thing as no closing cost loan - it usually really means 0.25% or more rate bump that what you actually qualify for to get that no closing cost offer.
You also need to realize that a Good Faith Estimate is not legally binding (i.e. there are no legal penalties for lying) and all that matters is what is on HUD-1 and promissory note at closing. You have to make judgement call on whomever you are dealing with (personal recommendations from more than one friend who actually dealt with same people and are happy would be ideal).
When you get to closing, some dishonest or unethical lenders / brokers / banks know you are in a tough situation if you don't sign the documents and will take advantage of that. Very few people ever use same mortgage person again (probably because they all had such a bad experience), so often they are not motivated to create best impression possible - they just want commission, etc.
edit: you also have to realize that home is collateral for loan. According to Eric Tyson's Home Buying for Dummies, 20% down is amount lenders have found by experience protects them from loss if borrower defaults and they have to take possession and resell home. If purchase price is at what the home is really worth and market values in area are stable and not predicted to drop significantly going forward, then you may be able to get away with 20%; in more uncertain markets, lenders may require 30% or more because they think home will be worth significantly less than it is now in future.
Last edited by mshan242709; 06-21-2011 at 06:47 PM..
That sounds pretty good, I had a similar deal, 10% down, no pmi, and interest rate is 4.875. It all depends on the commission the broker is going to make pending the interest rate of the loan. With the 4.99 your broker may be getting a substantial commission which is then applied to pay off your PMI during closing.
calculate both ways 4.99% no pimi & current rate (i think they are around 4.5 right now) w/PMI and compare. See what the best option is for you. Don't forget PMI comes off once your loan to value has gone below 80% but 4.99% is for life of loan.
calculate both ways 4.99% no pimi & current rate (i think they are around 4.5 right now) w/PMI and compare. See what the best option is for you. Don't forget PMI comes off once your loan to value has gone below 80% but 4.99% is for life of loan.
Bingo. If your're planning on being there long term, I would think going with the PMI is the better bet.
calculate both ways 4.99% no pimi & current rate (i think they are around 4.5 right now) w/PMI and compare. See what the best option is for you. Don't forget PMI comes off once your loan to value has gone below 80% but 4.99% is for life of loan.
I agree with this. You may be better off with paying the PMI as it's a tax write-off and it will go away when you get 20% equity in the home.
Right now I've seen rates hovering at about 4.75% - but remember they will fluctuate until you lock in your rate. I've closed deals with Quicken and they are ok - but I've had better experience with other local direct lenders as they understand the nuances of Jersey Real Estate.
National companies like Quicken will often use terminology that is not used in NJ and confuse the borrower into thinking they aren't getting the correct information from their attorney/realtor.
the PMI must be built into the loan. you can't not pay PMI with 10% down. i'd pay PMI, make extra payments when you can, to get rid of PMI earlier, rather than have a higher rate for the life of the loan. i think PMI lasts around 7-8 years if you never make an extra payment.
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