I have about 10% down payment for an FHA loan of $450K . We want to avoid the PMI if at all possible- Can my parments co-sign to avoid the PMI?

Asked by criss.ard, Sacramento, CA Tue May 28, 2013

They are willing to use the equity in their house as collateral.

Answers

12
Lanamee, Agent, New York, NY
Sun Apr 8, 2018
For FHA loan programs, the minimum downpayment is 3.5%. FHA guidelines allow for seller concessions upto 6%. This amount can be used to cover closing costs. Additionally, you can combine with a down payment assistance program. The down payment can also be a gift.

For Conventional loans offered by Fannie Mae and Freddie Mac, the down payment required can be anywhere from 3% -20% depending on the borrower's credit and financial situation. For eligible veterans, new home purchases can be financed with as little as 0% down. There are other first time home buyer programs available if your credit score is 640 or higher. Your credit score needs to be at least a 580 to get financing.
Web Reference:  http://downpaymentguide.org
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Lilaora, Home Buyer, Laguna Woods, CA
Tue May 12, 2015
If you're in the market to buy a home, you've probably heard the rule of thumb that you shouldn't buy a home unless you can put down 20% to avoid paying Private Mortgage Insurance (PMI). Why is 20% the magic number and what is PMI?

It's a fact that the more you put down, the lower your monthly mortgage payment and the less you'll owe the bank. It's also a fact that homebuyers who put down at least 20% don't have to pay Private Mortgage Insurance, an added insurance policy that protects the lender if you are unable to pay your mortgage. As the borrower, you pay the monthly PMI premiums, and the lender is the beneficiary. However, if putting down 20% will deplete all of your savings and leave you with no financial cushion, it's probably not in your best interest.

Fortunately, when it comes to the size of your down payment you have choices – and a growing number of today's buyers are putting down between 5 and 10%. Sure, you'll have to pay PMI for a conventional loan with a down payment of less than 20%, but it means you'll be able to take advantage of today's historically low mortgage rates and affordable home prices in many parts of the country. And, once you've built equity of 20% in your home, making the amount you owe on your mortgage 80% or less of its value, you can cancel your PMI and remove that added expense from your monthly payment. For borrowers with FHA loans, you'll be responsible for paying FHA mortgage insurance premiums for the life of the loan.

The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed. It's no doubt an added cost, but it's enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.

Take a look at how a $200,000 home looks with 5% down and 20% down, below, to see the impact on a monthly mortgage payment. Not surprisingly, the mortgage payment with less down will cost more – especially until you reach 20% equity in your home – but the value may be getting your foot in the door.

As for the rule of thumb about putting 20% down: Yes, you won't have to pay PMI, but remember you have plenty of choices when it comes to your down payment. Carefully evaluate your finances to determine how much you can afford and talk with your lender or housing professional about what makes best sense for you and your particular situation.

Reference Link: http://vastreamlinemortgage.net/loan-process/
2 votes
Andrea.rylee, Home Buyer, Livermore, CA
Fri May 8, 2015
If you're thinking of buying a home, remember you're going to need to save up enough money for a 20% down payment. If you can't, it's a safe bet that your lender will force you to secure private mortgage insurance (PMI) prior to signing off on the loan. The purpose of the insurance is to protect the mortgage company if you default on the note.

SEE: Understanding The Mortgage Payment Structure

Private mortgage insurance sounds like a great way to buy a house without having to save up the cash for a down payment. Sometimes it is the only, or even the best, option for new homebuyers. However, there are several reasons would-be homeowners should try to avoid paying this insurance. In this article, we'll examine the six common problems with PMI and then explore a possible solution that allows homebuyers to avoid it altogether.

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Tue Sep 3, 2019
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0 votes
Rob Spinosa,…, , San Francisco, CA
Sun Dec 16, 2018
In 2018/2019, there are three ways to avoid PMI if you're intent on putting 10% down:

1) Use a "piggyback" or 80/10/10 structure. By breaking the loans up this way, the first mortgage does not exceed 80% of the purchase price (or value) and therefore does not trigger PMI.
2) Use a single-loan solution that does not have PMI. We will permit these types of loans even into the $3MM range. The loan does not have monthly PMI but there is typically a higher rate and the risk premium for the higher loan-to-value is built into the rate.
3) Use the Unison program. Unison is an equity share option that matches your down payment funds. The most common scenario is an 80% mortgage, a 10% down payment and 10% of Unison funds. You don't make payments on the Unison funds but they share in a percentage of the value change of the home when you ultimately end the agreement.

Avoiding PMI is possible. It may not always be the best option but a big part of our job is to help our clients figure out the best option for their needs. I'm happy to help you too and my contact info follows.
0 votes
Sheryl Arndt, Mortgage Broker Or Lender, California
Wed Apr 29, 2015
Hello Criss.ard, you may consider as low as 5% down with NO Mortgage insurance (Lender paid MI) from a minimum 620 fico score with conventional financing. The PMI stays with the FHA loan thru the life of the loan. Your fico scores can be raised within 3-4 days in most cases to qualify for programs, rates and terms as necessary.

You may qualify to buy FHA with fico scores between 500-579 with 10% down or minimum 580 fico score may qualify FHA 3.5% down or as low as .5% half percent down payment program. You may consider 3% down conventional from a minimum 620 fico score.

The purchase start from 375k for 2bd 1ba single family home in La Honda zip code 94020 which is as low as $1,875 down payment with a minimum 580 fico score @375k.

You will need to be pre-approved if you decide to buy to be able to meet an agent to view and submit offers on any homes of your choice. Your qualifications will be determined by your credit profile, debt to income ratios, fico scores, home price, loan program and how much you want to invest into the down payment and closing costs.

You may qualify to buy with minimum out of pocket expenses and pay less than rent in many cities. It only takes a few dozen questions to qualify, go over your options and email you listings to study and compare. Here are some links to study as well as web reference links to many loan program pages offered...

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0 votes
The amount I borrowed was $202, 444.00. I put $10,850 down. My balance is 192,525.00 now. when could I possibly cancel MIP? My Interest rate is 3.875%.
Flag Mon Nov 20, 2017
, ,
Mon Jun 10, 2013
You could get lender paid mortgage insurance mortgage. While in effect it still has mortgage insurance as your rate is a small bit higher, it is really the least expensive way to do it.

If I could recomend a Realtor in your area:

I would say to call Joe Cox 209-480-1103.

It is really hard out there if you are buyer in today's market. You need a good realtor. I have worked with hundreds of them and Joe is one of the best.
0 votes
Thanks Richard- I am in San Mateo County, I am not sure why it is defaulting another location.
Flag Mon Jun 10, 2013
Rosie Moore, Agent, Richmond, VA
Tue May 28, 2013
Unfortunately, you can't avoid mortgage insurance with FHA loans. I would suggest contacting a lender to see what your options are with another type of loan program.

When you use FHA financing, you are charged an Upfront Mortgage Insurance Premium, which is 1.75% of the loan amount. This is considered a closing cost that is usually added to the loan.

FHA also charges an annual mortgage insurance. As of April 3, the FHA increased the annual mortgage insurance from 1.25% to 1.35% of your loan amount -- which will cost you more on your monthly house payment.

Effective June 3, 2013, mortgage insurance will be paid throughout the life of your loan. The current rule states that if you have reached a 78% loan to value ratio (= to 22% equity), you no longer have to pay mortgage insurance, but that is changing on June 3.
0 votes
Gabino_Barre…, , Lawndale, CA
Tue May 28, 2013
HI Criss, If you have 10% down and if you have a FICO over 680 then I might be able to get you a Conventional loan with no Mortgage Insurance. It is easy to explain but over the phone. Give me a call for 5 min to explain. 424-236-1655 my name is Gabino Barrera.
0 votes
Thanks Gabino- My score is 674- I do not think I can qualify for a conventional loan- I have only been at my job for months, I have been working steady for the last 2 years, so that is why I can qualify for an FHA loan.
Flag Tue May 28, 2013
Terry Farnsw…, Agent, Lisle, IL
Tue May 28, 2013
Another option is to look into Homepath financing. You'd be limited to purchasing only Fannie Mae owned properties - however you'd be able to utilize Homepath financing if you are an owner-occupant, and avoid PMI. You'd likely be charged a slightly higher rate of interest however.

Hope this helps!
0 votes
Tony Grech, Mortgage Broker Or Lender, Michigan
Tue May 28, 2013
You cannot avoid mortgage insurance on FHA loans. Period.

If you must go FHA, then I'd recommend doing that now then looking to refinance into a conventional loan as soon as you have enough equity.

The only way you can avoid PMI altogether is to do a conventional loan with at least a 20% down payment. If you don't have 20%, then depending on your credit score you may be able to reduce the PMI or pay it in the form of a slightly higher interest rate. This requires higher credit scores though.

Sacramento is what's referred to as a high-cost metropolitan area. This means that you can go above the normal conventional loan limit of $417,000. Feel free to give me a call or email me with some further details and I can review some different rate and payment options with you.

Tony Grech


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Tony.Grech@WCSLending.com

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0 votes
George Raymo…, Mortgage Broker Or Lender, Chino Hills, CA
Tue May 28, 2013
First FHA requires an upfront MIP (upfront mortgage insurance premium) not PMI (private mortgage insurance). In addition, FHA also charges a MMI (monthly mortgage insurance). Since HUD/FHA recently increased their MMI, FHA is quickly becoming a very unpopular loan program, which is a first! FHA has always been a viable entry level loan program for millions of homebuyers. If FHA is your only loan option due to low low credit scores, short time on the job, etc then I understand. But I do not recommend putting down 10% unless you have to.

Now as a alternative, I recommend a Conventional Loan. Since the High Balance Loan Limits in Sacramento County is $474,950.00, I would certainly try for a straight 95% or a 90% LTV Conventional Loan. With a Conventional Loan, you have many options to lower or get rid of the PMI all together which is not the case with a FHA Loan. Please feel free to contact me so we can discuss these and other options.
Web Reference:  http://www.AFN-Loans.com
0 votes
Thanks George- Unfortunately, I have a BK7 from 2005 and a couple of collection accounts still to be resolved. My FICA is 674, so I believe FHA is the only way to go. Do you have any other possibilities to avoid the MMI? I really appreciate your help.
Flag Tue May 28, 2013

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