Home Buying in 22030>Question Details

sic2five, Home Buyer in Fairfax, VA

How does 5% down no PMI work?

Asked by sic2five, Fairfax, VA Mon Dec 6, 2010

Toll Brothers is running a special with 5% down with no PMI. Anyone can qualify as long as they have at least a 680 credit score. The agent told me that they secure the funding from the actual builder and request $10,000 up front to pay off the PMI. It wasn't until 2 weeks later that she told me there's a chance the builder likely wont pay all of it, or only pay a portion and I would be responsible for the rest. Is she just pulling my leg? She initially made it seem as if the whole thing would be taken care of up front. Another thing I'm confused about is that I thought you paid PMI until you owned 20% of your home. With 5% down on a $320,000 loan, wouldn't the builder need to pay at least $45,000 to equal 20%? something just doesn't seem right. Thank you for any advice!

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Answers

7
Hi Sic2five

You should engage with many fine Realtors on the board responding to you and negotiate not just the
PMI aspect but also the Sales Price, to cover the PMI costs. Depending on how many Units have sold in the entire complex you may or may not be able to get conventional financing.

Generally, the Builder has at least two lenders on site.

Good luck.
Perry
0 votes Thank Flag Link Sun Dec 12, 2010
You can get a no PMI loan fairly easily. It's called lender paid mortgage insurance option (LPMI) and is offered by lenders that offer Conventional financing. Simply put, you are just paying a higher rate for this option and is not as complicated as the builder and agent are making it. I would be a little more prudent in regards to proceeding with the builder's financing. You need to get a second opinion at the very least.

You need to talk to a straight forward lender that can show you your real options in writing. You need to look at a loan scenario with PMI and with the LPMI option so you can decide which is better for you. You may also want to look at an FHA loan since you can get in with only 3.5% down on that program.

Also, here is some information on Dropping Mortgage Insurance:
http://www.elliottoliva.com/rulesfordroppingMI

If you would like more information please do not hesitate to contact me.
0 votes Thank Flag Link Sun Dec 12, 2010
Hello - it sounds like you don't have a buyer's agent and you are working with the listing agent that represents the builder only? Most of the builder's agents that I have worked with know their business very well and would not make things up. However, if you are not clear on something, it is up to you to keep asking questions until you are clear on how it works. Since this is a financing question, you may be better off asking to speak with the builder's lender to get clarification on how this program works and what you have to agree to in order to qualify. If you have not yet signed a contract, please get a good buyer's agent so you will have someone on your side in this transaction.

Best of Luck,
Sonal Goda
0 votes Thank Flag Link Mon Dec 6, 2010
As Don says...what does YOUR agent say? I have sold many new homes from a host of different builders and all the contracts are different and indees one sided toward the seller. If you don't have representation you NEED it. As they say...it costs nothing to use a Realtor in the purchase of your new home...but it can cost you plenty if you don't! As for the PMI...the seller is paying it one way or another...it's a bit of a shell game..but check your contract carefully.

Kind Regards,

Erik J. Weisskopf,ABR,CDPE,CRS,GRI
Erik@AskMeAboutHomes.com
703.216.1222 c
0 votes Thank Flag Link Mon Dec 6, 2010
Read your contract if you already have one. If you are not in one now, discuss the
0 votes Thank Flag Link Mon Dec 6, 2010
If you don't have an agent of your own, in order to best protect yourself, consider consulting with an attorney who specializes in real estate for all related documentation--he/she can best advise.
0 votes Thank Flag Link Mon Dec 6, 2010
What does your Realtor say? (You absolutely need a Realtor to represent you. New construction contracts are notoriously one-sided in favor of the builder.) You refer to "the agent." I'm guessing this is the sales agent, not your agent. Did you get anything in writing from "the agent"? Otherwise, any offer from the builder and its sales agent isn't worth the paper it's not printed on.

Hope that helps.
0 votes Thank Flag Link Mon Dec 6, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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