East Allegheny (Deutschtown) (Irwin, Lincoln: for rent, homes, water heater)

[Goodjules]

I hope you can borrow what you need for closing costs from your parents. I'm so happy that you finally found a house you love. My fingers are crossed that the deal goes through. Keep us posted.

[Kippy]

If you have extra cash after you have paid back your family members and paid off any higher interest debt, you might want to consider making principal-only prepayments on your mortgage, at least until you achieve 20% equity and can drop the PMI.

While technically there are better investment vehicles for your extra cash, since your priorities are to pay off your house as quickly as possible with as little interest paid as possible, you would be a prime candidate. If you aren't familiar with how prepayments are applied and how they shave time off of your mortgage and save you interest, you can read up on it.

Just be sure that your loan has no prepayment penalties, and be sure you know how prepayment works before you send in any extra cash.

[ferraris]

Originally Posted by Kippy

If you have extra cash after you have paid back your family members and paid off any higher interest debt, you might want to consider making principal-only prepayments on your mortgage, at least until you achieve 20% equity and can drop the PMI.

I though PMI had to stay for at least 5 years even if you did get up to 20% equity? The only way around it is to start with 20% equity, at least that's what I was told. Dollar Bank set me up with a PHFA program where I only did 5% down and no PMI required. Also helped that it was a conventional mortgage and I didn't have to meet the FHA inspection requirements. I suspect nearly any house in East Deutschtown will have some sort of problem when the inspection comes. Though it is priced pretty highly for the neighborhood, so maybe that house is the exception. I looked at a $40K list price home on Suismon and it sold for $25K eventually. I really think SCR should be able to knock the price down quite a bit on this home.

[Hopes]

Be careful how you handle the loan money from your parents. Even though it won't technically be used for the downpayment, the lender might not differentiate. Read up on how to handle "gifts" when getting a mortgage. We had to supply X months of bank statements. Any influx of large amounts of money need to be explained----and explained as not being loans. Even gifts can be a hindrance because people who needed gifts to buy houses historically have a higher foreclosure rate. I can't remember all of the details. I'm just warning you to do your research on exactly how to incorporate this money both of your parents will be lending you. At the very least, you'll have to supply the proper letters saying they are gifts. (There's a specific form.)

I googled this quickly to give you an idea of what I'm talking about.

How To Get Cash Downpayment Gifts For Homes And Mortgages

As I said, it doesn't pertain to money for a downpayment, but it's relevant because your closing costs sound higher than your downpayment. In essence, you will be receiving money for the downpayment in the eyes of the mortgage company.

Research further than I just provided. I'm just giving you a heads up that you need to be aware of a potential problem so you can avoid it.

[greg42]

There's a form they'll have you do for a gift, even if it's just a couple grand. I had one too. It's required by the lender. What they're looking for is an affirmation that you have no obligation to pay the gift money back. (Because if you did have to pay it back, that would change your debt load.) The person giving the gift will have to sign.

[Kippy]

Originally Posted by ferrarisnowday

I though PMI had to stay for at least 5 years even if you did get up to 20% equity? The only way around it is to start with 20% equity, at least that's what I was told. Dollar Bank set me up with a PHFA program where I only did 5% down and no PMI required. Also helped that it was a conventional mortgage and I didn't have to meet the FHA inspection requirements. I suspect nearly any house in East Deutschtown will have some sort of problem when the inspection comes. Though it is priced pretty highly for the neighborhood, so maybe that house is the exception. I looked at a $40K list price home on Suismon and it sold for $25K eventually. I really think SCR should be able to knock the price down quite a bit on this home.

You make some good points. I don't have any personal experience with PMI, as I would not consider a mortgage that requires it. I have never heard of the five-year rule, but that might be the case. In addition, I do not know much about FHA loans, but they do have all sorts of different rules and contingencies.

The HPA of 1998 made it so that with standard mortgages, if the homeowner does not request to cancel PMI 20% equity is achieved, then the lender is required to cancel it when the borrower achieves 22% equity. Unfortunately, this rule does not apply to FHA loans and certain high-risk loans: The Federal Reserve Bank of San Francisco: Economic Research, Educational Resources, Community Development, Consumer and Banking Information

I would encourage the OP to see what options are out there, since PMI is money down the drain. Maybe check out the PHFA options cited by ferraris: Homeownership Programs: Loans

[Kippy]

If a political career is in your future, be careful borrowing money from your parents for a down payment. Just look at what happened to Sen. Clay Davis. Shhhheeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeet.

[greg42]

PMI is deductible now so it's the same money down the drain as interest. Although that may be equally completely down the drain on a cheap enough house (not enough interest+PMI annually to get over the standard deduction). Also the status of that deduction is uncertain beyond 2013, but you should treat the interest deduction the same way because eventually that could be nixed too.

All things equal, better to have no PMI, of course.

[SteelCityRising]

Right now $700/month is going down the drain to rent a place we don't feel like we're getting much value for. If we could pay $350/month with at least a PORTION of that NOT going to waste, then that's already a massive financial improvement for us. Renting is much more expensive in Pittsburgh than owning due to our rental shortage crisis.

[Katarina Witt]

Originally Posted by greg42

PMI is deductible now so it's the same money down the drain as interest. Although that may be equally completely down the drain on a cheap enough house (not enough interest+PMI annually to get over the standard deduction). Also the status of that deduction is uncertain beyond 2013, but you should treat the interest deduction the same way because eventually that could be nixed too.

All things equal, better to have no PMI, of course.

PMI is deductible? I thought the only thing that was deductible was the interest?