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Hello! Very confused first time homebuyer here! I will try to break this question out in to two related parts. I am looking for advice from homebuyers, real estate pros, or anyone who knows anything about real estate
Here is my situation: fiance and I are looking to buy an apartment in Hoboken. We have 30K to provide at closing, so assume 20K for a downpayment, 10K for closing costs. The property we are interested in is asking 375K, and has 3 units in the building.
We have received 4 good faith estimates from mortgage brokers and bankers who know we have only 20K to put down, and we have been "pre approved" for at 360K loan, technically meaning we could buy a 380K apartment. I do know that these estimates are not binding, and could go up or down at any time.
So these mortgage pros know that we don't have 10% to put down, but are still pre approving us and wanting to work with us. But I am hearing that the PMI companies are no longer insuring anything LESS than 10% down on any property. So you can get lots of estimates from lenders that are for 5% or 8% down, but they never get all the way through the process because the PMI companies won't pickup the cost. Is this true? Wouldn't this be a huge waste of time for the lenders?
So with this in mind, our next idea was to go the FHA route, allowing us to put 3.5% down, negating the down payment issue. But now we hear that buildings can only get FHA approval if there are more than 4 units, and most must be owner occupied. Does that sound accurate, or am I getting bad info?
Naturally, our top choice is in a building with only 3 units. We are assuming that all units are owner occupied, and we know for a fact that the unit we are interested is owner occupied. And it is an old building with an association that has been established for years.
So my two questions are: 1. Is it possible to put less than 10% down in Northern NJ and still get a conventional loan? Will the PMI companies go for this if you have good credit? 2. Is it a hard and fast rule that there must be 4+ units in a building in order to get FHA approval, or is there some wiggle room with this?
If it matters, we have credit scores of:
Fiance - 784, 798, 786
Me - 771, 751, and 755
If I haven't explained myself enough (yeah right, look at how long this post is!) or if you need more info to provide an answer, please don't hesitate to ask! Thanks in advance for any and all advice!
I could be wrong...and I don't know if it's the same in NY as in NJ, but i bought a home last year...and I had to put at least 20% to not be slammed with the PMI or a 2nd mortgage. As far as I know thay have not done away with this process. IMO, your best best, if you can, put down @ least 20%...that way you don't have to worry about PMI if it does come to rear it's ugly head...and that way your monthly payment would be a little less too.
FWIW, I got a conventional loan earlier this year with only about 11% down. My wife and I had credit scores at or above 800. We have to pay PMI monthly until we have paid 20% on the principle of the loan. So after about 7 years we'll no longer be paying PMI. The higher your credit scores the more negotiating power you will have with the lenders.
Thanks to everyone for the advice! I would not be buying the entire building, only one apartment unit within the building. Looks like I'm going to end up having to go the FHA route, just due to not having at least 10% down. But it's now my understanding that buildings must have 4+ units in order to qualify...is this incorrect?
So you are buying a condo? If that's the case, then yes, there are specific requirements on the number of units, number of owner occupied units, and other specific criteria.
If you can't put even 10% down, why do you think you can afford the house?
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