Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I'm in the process of finding a starter house. My price range is up to 175K, but I am looking more up to 165K range. Taxes are around 4-5K a year in the areas I am looking. I have 20% for these homes. Should I put 20% down or just pay the PMI? What would you suggest? I'd like my monthly payments as low as possible.
I'm in the process of finding a starter house. My price range is up to 175K, but I am looking more up to 165K range. Taxes are around 4-5K a year in the areas I am looking. I have 20% for these homes. Should I put 20% down or just pay the PMI? What would you suggest? I'd like my monthly payments as low as possible.
Ok, let's compare the two and then you make the decision.
Let's go with 3.5% down @ 4.5%: LTV 78% ($159,225) (30 Year)
Quote:
Monthly Payment = $806.77
MI = $130.03 (per PMI Calculator)
Taxes / 12 = $375 ($4500 annual assuming)
Home Owners = $50 ($600 annual assuming)
Grand Total Payment = $1361.80
Total PMI Paid until LTV=80%: $13,783.18 ($130.03 * 106)
Total Interest Paid over 30 years: $131,212.14 (OUCH!)
Ok, let's go with the idea of 20% down @ 4.25%: LTV 80% ($132,000) (30 Year)
Monthly Payment = $649.36
MI = $0
Taxes / 12 = $375 ($4500 annual assuming)
Home Owners = $50 ($600 annual assuming)
Grand Total Payment = $1074.36
Total PMI Paid until LTV=80%: $0
Total Interest Paid over 30 years: $101,770.07
It looks to me like you would have a savings of $43,225.25 in PMI and interest and a monthly savings of $287.44 including PMI saved.
Put the money down.
I assume, of course, that even with putting 20% down, you have an emergency fund and can afford to deal with various household issues as they come up?
I forgot to add that if you applied the saved amount between 3.5% and 20% down you would have your house paid off in a little more than 16 years!
Quote:
Monthly Payment = $649.36 + savings of $287.44
MI = $0
Taxes / 12 = $375 ($4500 annual assuming)
Home Owners = $50 ($600 annual assuming)
Grand Total Payment = $1361.80
Total PMI Paid until LTV=80%: $0
Total Interest Paid over 30 years: $51,159.41 (That saved $50,611 over 20% down over 30 years!)
Total Months to mortgage free: 196 (16.33 years)
I'm in the process of finding a starter house. My price range is up to 175K, but I am looking more up to 165K range. Taxes are around 4-5K a year in the areas I am looking. I have 20% for these homes. Should I put 20% down or just pay the PMI? What would you suggest? I'd like my monthly payments as low as possible.
Since you are considering this your starter home, this seems to imply that at some point you wont want the starter home anymore and would want to move to something else. With that being said, warriorfan really did the math which is the most transparent and during normal times I would say no doubt 20%. However, it depends on how much you are truly willing to invest into real estate right now at 20%.
If 20% cleans out you, I say no way. I dont trust this market at all where I live. Dont forget, you can always pay into your principle after you get the loan with PMI to hit 78% LTV and the economy cools off.
Since you are considering this your starter home, this seems to imply that at some point you wont want the starter home anymore and would want to move to something else. With that being said, warriorfan really did the math which is the most transparent and during normal times I would say no doubt 20%. However, it depends on how much you are truly willing to invest into real estate right now at 20%.
If 20% cleans out you, I say no way. I dont trust this market at all where I live. Dont forget, you can always pay into your principle after you get the loan with PMI to hit 78% LTV and the economy cools off.
If 20% cleans him out and leaves him with no emergency fund, he's not ready to buy the house quite yet. Better to wait a few months, save a bit more, then buy the house with the 20% down.
mi26, I commend both your ability to save that much, the idea of buying less house than you can afford, and your serious consideration of avoiding PMI. You've received some great advice here, and I've no doubt that you'll do well in this home.
I'm in the process of finding a starter house. My price range is up to 175K, but I am looking more up to 165K range. Taxes are around 4-5K a year in the areas I am looking. I have 20% for these homes. Should I put 20% down or just pay the PMI? What would you suggest? I'd like my monthly payments as low as possible.
When you say starter home, how long of a time frame are you looking at before you move on to your permanent home? Just make sure you are staying in the home long enough, otherwise the transaction costs won't be worth it. Don't bet on appreciation in order to move up anytime soon. Otherwise I agree with everyone's advice, put 20% down.
Dont forget, you can always pay into your principle after you get the loan with PMI to hit 78% LTV and the economy cools off.
Just wanted to caveat this with the statement that you can only remove the PMI on an FHA loan after 5 years.... even if you hit 78% 1 month later
So keep this in the back of your mind...
And even after you remove your PMI, your "required" Principal/Interest payment will still be higher than if you had put down down 20% upfront....unless your bank allows you to re-ammortize or rebalance your account of course...find out.
Just wanted to caveat this with the statement that you can only remove the PMI on an FHA loan after 5 years.... even if you hit 78% 1 month later .
exactly! great point!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
