no money down Mortgage question (Dallas: mortgage broker, refinance, credit score)

[KSJT]

Hello

RE: Home purchase in Dallas area

I have had contact with a national, very well reputed bank, regarding a no-money down, no PMI mortgage. They charge five-eighths to seven-eighths more on the interest rate for a zero-percent-down-payment loan compared to a loan with a 20 percent down payment. This lender caters to military and govt personnel, of which I fall into their criteria.

This lender is quoting Interest Rate as 5.25% and APR rate as 5.571% for 30 year Mortgage under the above no-money down program.

While I will likely put 10% down, I prefer not to put 20% down, as I need extra cash to deal with some family medical issues and travel back and forth for those.

What are peoples thoughts on the rates, overall scenario. Tips/comments/etc.

Thank You

[GBCommenter]

I have also been giving very general thought to home-buying (though different loan and maybe different reasons). It seems the advantage of your offer is you don't have to come up with as much cash upfront so you have that for other expenses or could invest it another way (which is a valid idea but probably a wholly different discussion).

Otherwise, is the extra interest you're paying (and locked into for the life of the loan, as opposed to PMI that goes away after you have 20% of the loan paid) actually costing you more in the long run? In fact, is the higher interest actually pushing your monthly payment higher than just paying the PMI if needed, meaning less money each month for living expenses?

I would probably do a comparison on mortgage calculators to see what my monthly payment would be in each scenario, how much interest I am paying in the long run, and then decide what is more important for the situation right now.

I also pulled an article stating Dallas interest rates are running around 4.33% (admittedly that was a quick search) so consider that into the equation.

I'd finally shop around with mortgage brokers to see what options are out there for conventional loans but with lower down payments. If you're going to put 10% down, you'll pay PMI anyway. Therefore, could you find a loan with 3-5% down and either keep the difference for expenses or invest it differently? Either way you'll pay PMI, the only difference being what will your mortgage payment be and how important is that difference to you?

[nsumner]

Many people have the misconception that the VA interest rate is set by VA department. It's not. It's set by the lender and depends on what your individual credit, debts, financial market as well as other factors.

I closed a buyer last week at 3.89% who had a credit above 720 and a stellar credit history.

You need to shop around, and may I suggest that you use a broker, don't go to the big box banks especially BofA or Chase. They take a very long time to close loans.

I'll PM you the names of 2 lenders. You may not want to have your credit pulled each time but fill the application so they have a full view of what you're to expect. I hope you know your credit scores too, for all 3 bureaus.

Naima

[Ralyks]

Personally, I would not buy a house with less than 20% down, but that's just me.

I think if I can't afford to put 20% down on a house, that house is above my means, and I should either buy a smaller, cheaper house, or I should continue to save up for a larger down payment and not buy that house until I can afford it.

The average on a 30-year mortgage right now is 4.14%. On a $250,000 house, you will save over $60,000 in interest in the course of the loan at that lower rate.

[BigDGeek]

I bought in 2009 and put a little less than 10% down. My old mortgage was a 30 year loan at 5.5%. I could have put 20% down, but the way the market was back then I didn't want to have so much skin in the game. I figured I could always refinance into a better mortgage later.

Last year I refinanced into a 15 year loan at 2.75%. My PMI will roll off later this year. Once I have my eye surgery paid off at the beginning of next year, I plan to start paying a little extra on my mortgage. If I pay just the monthly payments, my house will be paid off when I'm 53. My goal is to have it paid off before I'm 50.

I don't regret my decision. YMMV.

[keribeth818]

You said you were thinking about putting 10% down. To avoid PMI you could put 10% down and take a second lien for 10% at a slightly higher rate. This way you can take advantage of the low rates for your primary mortgage and just carry higher interest on a small amount. The rates are only slightly higher than what you listed above. Then you could just work to pay off the 10% loan quickly and be done with it, leaving you with a conventional mortgage at a low interest rate for the remainder of the loan.