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In preparation for a new house purchase in April, I'm investigating various mortgage lenders for information. One thing I notice is that their web sites offer dramatically different PMI payments for my loan:
300,000 home value
270,000 loan (90% LTV)
The lender web sites have the "excellent credit" disclaimer, and their PMI payments run from $78 to $139 per month.
I have excellent credit (788 FICO), 15 years employment with same company, and little debt. PITI would equal 21% of monthly gross income, total debt (including this mortgage) under 30% of MGI. I also have several hundred thousand in reserve, I just prefer not to use it on a house purchase.
I'd like to put down 10% on this house, but if PMI is as high as 139/mo, I would put down 20%.
Why do the various lenders PMI quotes vary so much?
In preparation for a new house purchase in April, I'm investigating various mortgage lenders for information. One thing I notice is that their web sites offer dramatically different PMI payments for my loan:
300,000 home value
270,000 loan (90% LTV)
The lender web sites have the "excellent credit" disclaimer, and their PMI payments run from $78 to $139 per month.
I have excellent credit (788 FICO), 15 years employment with same company, and little debt. PITI would equal 21% of monthly gross income, total debt (including this mortgage) under 30% of MGI. I also have several hundred thousand in reserve, I just prefer not to use it on a house purchase.
I'd like to put down 10% on this house, but if PMI is as high as 139/mo, I would put down 20%.
Why do the various lenders PMI quotes vary so much?
It used to be pretty stadardized, but now there is a lot more variation in rates. I would suggest looking at United Gauranty's non-refundable single pay option. Ask you lender if they are signed up with UG, more specifically UG's new performance pricing option. For a good borrower like yourself, you will get a very attractive rate from them.
Why not split your loan into a 80% first lien and a 10% second lien. You would have no MI and you could elect to not escrow taxes and insurance. As one lien, your lender will require that you escrow.
In preparation for a new house purchase in April, I'm investigating various mortgage lenders for information. One thing I notice is that their web sites offer dramatically different PMI payments for my loan:
Websites are nothing more than ads. Give them a call and get a quote. When shopping for anything else that has as many variable inputs(cars, insurance, etc.) as mortgage qualifying no one believes the ads they see and get detailed quotes so why does the public believe about everything they read in a mortgage ad. Ads are regulated and the rule is someone must qualify for the terms- just probably not many. How many brand new $27k Cadillacs have you bought? There's 1 available with green cloth seats and a light purple exterior, but it is brand new.
Why not split your loan into a 80% first lien and a 10% second lien. You would have no MI and you could elect to not escrow taxes and insurance. As one lien, your lender will require that you escrow.
The one fee Tim mentioned is another good option.
There are some downsides.
You might not able to have fixed rate on 2nd. If there's balloon payment, you'll need to pay off huge portion of 2nd as lump sum; or refinance (which is not free).
On the other hand, PMI is still tax deductible. If OP finds low priced PMI, then he'll pay less per month than with 2nd. In a long run, 2nd does cost less, but that means 10 yrs down the road.
You might not able to have fixed rate on 2nd. If there's balloon payment, you'll need to pay off huge portion of 2nd as lump sum; or refinance (which is not free).
On the other hand, PMI is still tax deductible. If OP finds low priced PMI, then he'll pay less per month than with 2nd. In a long run, 2nd does cost less, but that means 10 yrs down the road.
You can always make sure you have a fixed rate 2nd... Also, you can always choose a 15 year term with no balloon, or you can choose a 2nd with a balloon.
If OP income is greater than $105,000, PMI is NOT tax deductible.
If you have "several hundred thousand" in reserve, then it's a no-brainer to put down another 10%.
Not only will it save you $139 a month in PMI, but also $150 a month in PITI as well @ 5%.
That's a $3500+ return in the first year alone on your $30000 investment - a return of over 10%. Even after taxes you would be nuts not take a guaranteed 7-8% return.
The last few years have changed the way real estate is viewed. It's no longer a guaranteed appreciating asset it once was. If the OP has to pay taxes or capital gains on the liquidation of those assets, it may not be a smart move.
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