I'm a 1st time home buyer and will put 5% as down payment. I have already been approved for a loan from Bank of America (BOA). They did not

Asked by Kathy, 75070 Sat Sep 5, 2009

tell me anything about PMI. Now, I'm reconsidering to get 2 loans instead of 1 from BOA to avoid PMI. Is it too late to get this 2nd loan. I'm not able to talk to my loan officer because of the Labor day holiday. Would like more infor. Thanks

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T.E. & Naima Sumner’s answer
T.E. & Naima…, Agent, Dallas, TX
Sun Sep 6, 2009
There are 2 typical forms of mortgage insurance (which protects the lender from non-payment by the borrower). MIP is collected on FHA-guaranteed loans and PMI is collected on conventional loans, in either case when the amount borrowed exceeds 80% of the value of the property.

MI payments can be deductible for Federal tax purposes, so in a small way they're similar to interest, which can also be deductible.

Avoiding MI often turns out to be an exercise in futility. Years ago it was actually advantageous to avoid the MI, first because MI was not deductible and second because it was a whole lot easier to get a second lien mortgage loan.

When you get your GFEs for both scenarios, compare them carefully. You will probably find that the bottom line monthly payment is practically the same, but it could be substantially worse with PMI if your credit scores fall between 620 and 630. The cash to close can be smaller with 2 mortgage package, but often borrowers elect to roll the upfront MIP into their loan balance and pay a little bit more to reduce their cash requirements at closing.

So, if it costs more per month to have MI, why do that?
Because the interest rate on the second lien will never change. The total payments for both scenarios with and without MI are practically the same monthly because the interest rate on the second mortgage is often very much higher than the first. The reason is simple: the insurance you're avoiding is effectively built into the second mortgage interest rate. They're at risk and they demand additional interest to cover that risk.

After you pay down the loan balance on the loan with MI to 78% of the property value, the MI premium can be discontinued. This can take several years to get to that point, but the higher interest rate on the second will not change at all, ever. So, if the bottom lines of the GFEs look similar, remember that the MI will eventually go away, but the second lien payment will never go down.

In name you can avoid paying the MI, but is that really in your interest? Study the GFEs and ask your loan officer.
Web Reference:  http://www.Mortgages-TX.com
1 vote
T.E. & Naima…, Agent, Dallas, TX
Sat Sep 5, 2009
Kathy,
Only your loan officer can answer your question. Any answer here would pure speculation.

Your loan officer knows your file and your situation. As long as you haven't closed yet, it is not too late. Have you discussed the different scenarios with your loan officer prior to this? Also doing a second loan means that your closing costs will be higher too. So get the GFE (Good Faith Estimate) from BOA with both scenarios with 5% down which will include PMI and doind and 80/15/5 without PMI. That GFE will explain exactly all the fees you are charges and how they will be disbursed.

I'll be happy to assist you if you have further inquiries.

Naima
214-289-8555
Naima@Sumner-Realty.com
Web Reference:  http://www.SumnerRealty.com
1 vote
Kathy, Home Buyer, 75070
Fri Sep 11, 2009
Thank you everyone for responding.
0 votes
Tamika Goree, Agent, Arlingon, TX
Sun Sep 6, 2009
Hi Kathy,

Private Mortgage Insurance (PMI) is insurance that the buyer pays for if they don't put at least 20% down. It protects the lender in the case that the buyer defaults on the loan. 1To avoid PMI, you would have to put down at least 20%. I would suggest to speak to your lender and get a Good Faith Estimate on putting your 5% down and also one with 80/15/5 and compare. I will never understand why some loan officers do not explain closing costs, especially to 1st time homebuyers. I have work with some who do but some don't.

Let me know if I can be of any assistance!

Make it a Blessed Day!

Tamika Turner,
"Your New Home Specialist"
Cell: (972) 697-1178
Fax: (682) 222-1049
Email: Info@NewHomesInDFW.net
http://www.NewHomesInDFW.net
"Specializing in the Sale of Brand New Homes in DFW!"
0 votes
Patrick Jack…, Agent, McKinney, TX
Sat Sep 5, 2009
You need to speak to your lender or a lender. Call one of my preferred lenders today. There is a cell number listed on my First Time Buyer site for Carroll Dyer with ViewPoint Bankers Mortgage. He doesn't keep "Banker's Hours" and will usually get back to you the same day. I will tell him to expect your call.
http://www.thefirsttimehomebuyerguide.com/Mortgage_101/page_…
0 votes
Barbara Capo…, , Frisco DFW Metroplex
Sat Sep 5, 2009
Did your loan officer suggest FHA? What price range are you looking to spend? A lot of times rates are better. You do pre pay insurance, however I have had a few clients check, and it was cheaper and better rate when they figuired. One of the lender's that I work with, works like I do, and it's not 9 to 5 hours. It's difficult when you can't get answers when you need. You think the worst!Have you found a property? If you haven't and don't have a Realtor? Please feel free to email me at Barbara@powerteamtexas.com, (972) 757-4527 Please check out the Power Page on Powerteamtexas.com
Web Reference:  http://Powerteamtexas.com
0 votes
RJ Avery, Agent, Forney, TX
Sat Sep 5, 2009
BTW

you will definitely need to talk to you loan officer on this, mainly because any secondary loan is going to effect your DTI and basically your purchasing power. Plus in know that you are not allowed by most lenders to take money of say a credit card for down payment, not sure if an actual bank loan would be different. If you are ready to look I have an open schedule on Monday.

RJ
Web Reference:  http://www.findapadfast.com
0 votes
RJ Avery, Agent, Forney, TX
Sat Sep 5, 2009
The only way you can avoid is putting 20% down. Im sure this you probably know. If you are considering getting second loan from BOA to cover this other 15% it would probably have to be secured by something other than the house you are purchasing, like a CD or just an outright line of credit.

If that is available it would definitely be a good idea as long as the other loan was a good interest rate and the difference in monthly payment is less than what it would be if you had to get PMI.

As far as if it is too late that really depends on if you have even found a home yet. If you have not and are not working with a Realtor yet I would be happy to assist you. An added bonus of my services is that my lack of a large name broker allows me to rebate you 20% of my commission after closing.

A link to my website is below. Please forgive the mess as I am in the middle of redesigning it. You can look up Avery Properties on Google or Yahoo and find out what some of my clients have said about me.

Thanks again and good luck. Definitely do need to get moving as one would expect underwriting times will start getting longer the closer we get to the deadline.

Thanks again and dont hesitate to call.
RJ
214-682-0598
Web Reference:  http://www.findapadfast.com
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