Financing in 77007>Question Details

matkins87, Home Buyer in Houston, TX

What are the general thoughts on taking out a loan to make a 20% down payment?

Asked by matkins87, Houston, TX Fri Sep 20, 2013

If I only have enough money to make a 10-15% down payment on a home now, is it advisable to take out a separate loan to finance the other 5-10% for a 20% down payment to avoid PMI? I don't want to miss out on a low interest rate by waiting another 6-12 months to make the 20% down payment.

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You can buy with PMI and later refi to get rid of PMI once you are below 80% (which would be off of a conservative and easily justifiable by similar comps appraisal value). In other words, banks would believe a conservative appraisal that would confirm the value beyond any "reasonable doubt".

I don't recommend getting a loan on top of a loan. You may not even get such a loan (this would be subject to qualifying) and you have to disclose it to your 1st mortgage lender. And - the loan upon loan could be so stressful - it would destroy your pleasure of having your own home.

You can also save up funds to pay off the principal to get you out of the PMI zone, once you are ready.
If you like this option, read your note before signing it, to check that this is allowed by your lender. Make sure there is no pre-payment penalty.

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
0 votes Thank Flag Link Sat Sep 28, 2013
Your lender is the best person to talk to about this.
80/15/5 used to be common....years ago to avoid PMI.

You just have to let them run different options for you to see what works best for your situation.
0 votes Thank Flag Link Sat Sep 21, 2013
Bruce Lynn, Real Estate Pro in Coppell, TX
Lots of advice here, but really every situation is different. You need to contact a lender who can look at your needs. On many of the newer loans PMI is a given. And will not go away when the loan reaches 80% of value. A good lender will be able to apprise you of all options - including the 2nd loan option.


Terry Burnaman
NMLS# 284480


let him know that I sent you
0 votes Thank Flag Link Sat Sep 21, 2013
If you can get into a loan with the 10-15% down, do so. Getting a loan for down payment is usually frowned upon by lenders because it create more debt that would have to be listed in your debt to income ratios. Find out if the PMI will be more than the loan after interest rate & fees added.
0 votes Thank Flag Link Fri Sep 20, 2013
Have your mortgage lender arrange a HELOC with a local bank. You can avoid PMI this way.
0 votes Thank Flag Link Fri Sep 20, 2013
Yes, that should work well. For example you can do an 80/10/10 loan where you put down 10% and finance the rest.

Anna Maria Durr, NMLS 266699
Codemark Financial, LLC
4500 Highway 6, Sugar Land, TX 77478 281-592-0667
0 votes Thank Flag Link Fri Sep 20, 2013
You are looking for a 'Purchase money Second Lien' loan..... So the lender arranges two loans for you.
These are great for your situation.

Tom Burris
Mortgage Banker
(214) 763-4629 cell/text/nights/weekends(Really!!)
Lending all across the entire Great State of Texas!!
NMLS# 335055
Search Dallas area MLS for FREE. No registration =>
0 votes Thank Flag Link Fri Sep 20, 2013
If your lender finds out you will not be able to get a loan unless they are the seller or maybe if you are getting hard money. Talk to your loan officer before you make financial decisions to make sure you are following the rules.

best of luck .. Bruce
0 votes Thank Flag Link Fri Sep 20, 2013

Your speaking of a 80-15-5 loan where your going to get a 2nd small loan of 5% of the sales price and apply this to the first mortgage, thus avoiding PMI fees?

Lenders are just starting to do those again. The interest rate on the small 2nd loan is a bit higher, but should be able to be paid off quickly.

Before you try to go this route, find out if you qualify to write-off the PMI fees on your taxes if you did not put 20% down. Private Mortgage Insurance (PMI) is typically not a cost you can write-off on your federal tax returns, but a few years ago Congress made an exception for those making lower incomes, first time buyers, etc. Your CPA or lender should know the qualifications. Going this way would save you more money than getting the 2nd loan and not paying PMI in exchange for interest that is tax deductible.

Interest rates will be slightly higher next summer so making a move now would save you some money. Let us know if we can assist you.

Mark McNitt
m 832-567-4357
Bernstein Realty, Inc.
0 votes Thank Flag Link Fri Sep 20, 2013
I wouldn't wait, put the minimum down and just make larger payments to your principle each month.

Financing your closing costs would cost you as much as PMI in the long run.

I have 3 super local lender that can help you if you wish.

Check out my website and send me a message.
0 votes Thank Flag Link Fri Sep 20, 2013
Don't wait. With conventional loans, the PMI is on a sliding scale. The closer you are to putting down 20%, the lower the PMI. PMI will automatically drop off when the balance equals 78% of the value.
0 votes Thank Flag Link Fri Sep 20, 2013
Not 80%?
Flag Fri Sep 20, 2013
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