If I can afford a larger mortgage amount based on the current interest rate environment but don't have the 20% downpayment, what options are

Asked by Dandl, Brooklyn, NY Mon Sep 12, 2011

there? My husband and I are looking to buy in the next year and given the current interest rate environment we can afford a slightly larger mortgage without exceeding our base monthly payment (fairly conservative) but we may be short on our downpayment (we would have appx 14%-15%). I know piggyback loans used to exist but I'm not sure how frequent they are these days and restrictions on them. I would like to know what options there are these days (if any). Thank you!

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Madeline Pad…, Agent, Brooklyn, NY
Mon Sep 12, 2011
Hi Dandi
well the interest is low now what it will be in the next year? I don't have a crystal ball..anyways he can buy
but if you are shor the 20% you apply for an FHA mortgage. interest will of course be a little higher. the best thing for you to do is speak to a mortgage banker if you send me your contact information i can refer you to someone if necessary. after that we can look for what fits your budget.
2 votes
Mitchell Fel…, Agent, Brooklyn, NY
Mon Sep 12, 2011
Dear Dandl:

In most cases, if you go less than 20% down you will have to get private mortgage insurance (PMI). On a $400,000 mortgage your PMI would cost about $350 to $400 per month. Plus most of the time you also have to pay an up-front private mortgage insurance fee which will increase the closing costs associated with your purchase. The bottom line is that PMI is costly and should be avoided if at all possible.

If you do not have the 20% to put down but are close, you may want to talk to friends, and family to see if someone would be willing to give you a gift for the difference (it has to be a gift, it cannot be a loan). If it turns out you cannot come up with the 20%, then you simply have to look at the monthly living expense and see if it is within your budget. If it is and your getting a good deal, it may be worth your while to simply pay the PMI and become a homeowner! Most importantly you need to speak to a mortgage banker to see what you are qualified to do!

If I can be of further assistance, please let me know. Good luck!

Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
Email: MitchellSFeldman@aol.com
2 votes
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Mon Sep 12, 2011
I suspect you are concerned about not having a 20% down payment because you want to avoid having to pay PMI/private mortgage insurance.

If so, you may be surprised to know that in NY PMI is based on the appraised value and not the purchase price, so if you are buying a home for $460k and you only are able to put $60k down, but for the purchase it appraises for $500k, then you do not have to pay any PMI since $400k loan amount vs. $500k appraised value is 20% equity.

However even if the home doesn't appraise out to give you 20% equity that way, so you have a loan at 86.9% loan-to-value, there are different forms of PMI - including paying a 1 time premium instead of having to pay it on a monthly basis and also taking a little higher interest rate and not having to pay either the 1 time premium nor the monthly payment amount (although the higher interest rate will impact your payments for the entire life of the loan, not just for the period of time you'd have paid the PMI payment for). I don't believe there are any 2nd mortgages going above 80% in the NYC area (which would be the piggyback you are referring to) - but I wouldn't say never.

Everyone has brought something important up though, you said based on the current interest rate environment, and interest rates change all of the time, so if you are anticipating buying 12 months from now, to be on the safe side I'd use interest rates of 1% higher so you don't have to constantly change your plans - and if the interest rates are still this low the closer you get to being ready to buy, you can slowly increase your sales price limit to coincide with the prevailing interest rates at that time.
1 vote
Pat Champion, Agent, Mount Dora, FL
Mon Sep 12, 2011
In our market area if your credit is worthy there are other financing options available for home buyers. Your best way to find out your options for your area is to contact a local lender or mortgage company to assist you in the home buying process. A local Realtor should be able to put you in contact with a qualified individual to help with the process if you don't know anyone.
1 vote
Anna M Brocco, Agent, Williston Park, NY
Mon Sep 12, 2011
Without overall financial information---To learn about all your options, visit with any loan officer.....
1 vote
PriscillaE., , Brooklyn, NY
Tue Sep 13, 2011
If your a first time home buyer or its been at least two yrs since you sold ur property you can qualify for a grant. The grant range is about 6,700 which can goes toward down payment or closing cost. For more info please contact me.
0 votes
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