Alyssa,

Sounds to me like you are in great shape to buy a house. The amount to put down is really up to you. My suggestion would be to shop the loan to get the best deal. Tell them you want to do a 90/10/10 or a 90/15/5 to avoid PMI. If you would like to know some reputable lenders other than banks I could help you with that.

Please feel free to call me at 512-217-4761 or email me direct at scottbrooks@austin.rr.com.

Thank you

Scott

Scott Brooks
Keller Williams Realty
1801 S Mopac STE 100
Austin Tx 78746
512-217-4761

Dear Alayna,

The down payment really depends on your unique situation and circumstances. For example a VA loan will finance 100% with no down payment required, but you have to be a veteran. The most common loan today with the least amount down is FHA financing which only requires 3.5% down payment. FHA is a government backed loan program and the mortgage insurance premium is usually cheaper than conventional. But again this may not be your best bet based on your unique situation. It also depends on where you want the payment to be and how much of a home you want to qualify for. My suggestion would be to talk with a lender who can do your loan in your local market. Talk with that lender and come up with a mortgage plan based on all your needs. The down payment is just one part of the overall decision on which loan program will be the best for you. If you are looking to buy in Arizona, I would be happy to speak with you.

Actually you can get 100% financing with a USDA loan, but there are geographinc and income restrictions.
Also, with an FHA loan, your rate should be the same whether you put down the minimum3.5% or 50%.

As to waiting until you gather 20%, that culd be foolish. If you can find a place to close on before November 30, the government will give you 8,000 after tax dollars. Combine that with very low interest rates and prices way below their highs and you have an almost unbeatable situation. Only if prices fall a little further can you do better and there is no guarantee of that.

Alayna,

There is a lot of information to answer here, so I will break it down for you. First, the lowest down payment you have to put down is 3.5% with an FHA mortgage loan. The smaller the downpayment, the higher the mortgage rate. If you can put down between 10 and 20%, then you will be better off with a conventional mortgage loan.

As for the PMI, there is a program or two out there that does not require mortgage insurance, but they are few and far in between. To answer your question on removing the PMI when you get 20% equity, Citimortgage's policy (which is more than likely similar with most companies) in their wholesale division is if the borrower wants to get rid of the PMI after the LTV was down to 80, they would have to refinance. However, if they choose not refinance, the LTV would have to be reduced to at least 75 in order for the PMI to be removed. In this scenario, obviously a new appraisal would be needed. You would need to call the servicing department of your servicer (who you send your monthly mortgage payment to) to get their policy on PMI removal.

You are accurate about the initial payments going mostly towards interest, rather than the principal balance. Because home values are so low now, they may start to rise again in the near future, so you can gain equity when that happens too.

I hope this information helps. Best of luck!

Regards,
Total Mortgage Services