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I don't have a house set in mind yet so this is only what I have been preapproved for.
1st time home buyer and I have a preapproval for 300k with 5% down. LTV is at 95%.
"Bad" is very subjective term. You will see wide-ranging responses, most of them valid.
IMO: I'm a huge fan of putting more debt into the house than elsewhere. Load in. Usually, mortgage interest is a tax write off, and you can't tap that equity again. Cashout refinances are capped at 80% of the value, so allocate your $$ elsewhere. As far as the nuts and bolts of 5% down: you can only get a 3% seller contribution toward closing costs, and yes you end up with mortgage insurance. But with rates where they are, I really don't see that as much of an issue.
If you can swing 10% (maybe you could do so, as under that Down Payment scenario, you can get up to 6% seller-paid closing costs), you can do an 80/10/10 and avoid mortgage insurance. But if you can't, I personally see nothing wrong with a 95% scenario, as long as you can and will make the payments.
"Bad" is very subjective term. You will see wide-ranging responses, most of them valid.
IMO: I'm a huge fan of putting more debt into the house than elsewhere. Load in. Usually, mortgage interest is a tax write off, and you can't tap that equity again. Cashout refinances are capped at 80% of the value, so allocate your $$ elsewhere. As far as the nuts and bolts of 5% down: you can only get a 3% seller contribution toward closing costs, and yes you end up with mortgage insurance. But with rates where they are, I really don't see that as much of an issue.
If you can swing 10% (maybe you could do so, as under that Down Payment scenario, you can get up to 6% seller-paid closing costs), you can do an 80/10/10 and avoid mortgage insurance. But if you can't, I personally see nothing wrong with a 95% scenario, as long as you can and will make the payments.
10% cash down payment. 80% "normal" mortgage (this would be in the First Lien Position, ie., in the event of foreclosure, the lender in First Lien position is first in line to get their cash.) Then a Second mortgage for 10% of the price, either a Fixed-rate (varies, but think 5-6%, possibly a 20-year fixed, don't want to muddy the water with all the permutations of this loan type), but it can also be a Home Equity Line Of Credit (HELOC), with a variable rate after a fixed period. I'd suggest the fixed term.
Because that first mortgage is at 80%, they will not require mortgage insurance, but lenders do consider the fact that you have another lien going and may nick the rate up a bit, but not more than the MI would be.
IMO: I'm a huge fan of putting more debt into the house than elsewhere. Load in. Usually, mortgage interest is a tax write off, and you can't tap that equity again.
Are you suggesting loading all your other debts into the mortgage?
Are you suggesting loading all your other debts into the mortgage?
Not intended to come across that way. I prefer high LTV mortgage notes compared to putting down a bunch of money instead of paying off credit cards and pretty much everything this side of low interest student loans. I see a lot of credit reports where money could have been much more efficiently spent retiring high interest revolving debt instead of going toward a needlessly (IMO) large down payment on a house.
I don't have a house set in mind yet so this is only what I have been preapproved for.
1st time home buyer and I have a preapproval for 300k with 5% down. LTV is at 95%.
Should I work to lower down my LTV ratio?
95% is far better than FHA or USDA. VA is almost as bad, due to the funding fee added to the balance.
If you have a strong file (strong credit, reserves), it is possible to get an 80/15/5. Your first loan would be 240K, your second 45K and then you put down 15K. This keeps the tax deduction in your favor. You may have to look around, but these loans are out there. Look for a credit union, where the rates are not increased due to a combo loan.
95% is far better than FHA or USDA. VA is almost as bad, due to the funding fee added to the balance.
If you have a strong file (strong credit, reserves), it is possible to get an 80/15/5. Your first loan would be 240K, your second 45K and then you put down 15K. This keeps the tax deduction in your favor. You may have to look around, but these loans are out there. Look for a credit union, where the rates are not increased due to a combo loan.
You are still going to pay more out of pocket even with the tax deduction. The more money you put down the better you will come out in the long run. You will pay less interest overall and still have the deduction. I would never borrow more just for the sake of the tax deduction. You are essentially throwing money away in interest for no good reason.
I don't have a house set in mind yet so this is only what I have been preapproved for.
1st time home buyer and I have a preapproval for 300k with 5% down. LTV is at 95%.
Should I work to lower down my LTV ratio?
the low-down on low-down loans, pardon the pun, is that after 6% selling costs you are underwater from Day 1. Since no one can be sure they won't have to sell soon (apart, perhaps, from tenured professors and elected officials), this is a bad idea unless you have a backup plan.
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