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re: Is avoiding PMI that important?
Posted on 3/5/15 at 2:01 pm to Croacka
Posted on 3/5/15 at 2:01 pm to Croacka
We're considering refinancing to a Lender Paid PMI loan right now. One thing to consider is that if you are paying PMI, you can eventually get that removed once you earn enough equity. However, with Lender Paid PMI where you pay a higher interest rate, the only way to get out of it is to refinance.
The risk is that by the time you have 80% equity in the house, you will probably have to refinance at a higher rate than what you could have had initially.
The risk is that by the time you have 80% equity in the house, you will probably have to refinance at a higher rate than what you could have had initially.
1
Posted on 3/5/15 at 3:10 pm to BoogaBear
PMI isn't that bad. Like some posters said take the loan with the PMI, refinance down the road and get rid of it.
I currently have PMI but it is only $30 a month. I spend more on stupid sh*t than $30
I currently have PMI but it is only $30 a month. I spend more on stupid sh*t than $30
Posted on 3/5/15 at 3:40 pm to seawolf06
That was my strategy as well.
Posted on 3/6/15 at 9:29 am to TigerDeBaiter
I dont see how people realistically save 20% for a first home purchase. In most cities, a decent house will be at least 200k, meaning with closing cost and everything you need to have about 46k saved up for the house. How is someone coming out of college supposed to do that these days? Lets assume they have a great job, and start out making 55k. It will take them til they are about 30 to do this if they literally save just for the house. Doesnt make sense to me
This post was edited on 3/6/15 at 9:30 am
Posted on 3/6/15 at 9:38 am to lsupride87
quote:
I dont see how people realistically save 20% for a first home purchase.
I would guess that the majority of first time home owners don't have 20% on their first house from their earning alone unless they go pretty low end, lived with their parents for way too long, or lived with roommates still cheaping it out. I played too much to save for all that.
I'd guess that most people that are able to hit the 20% borrow from relatives, have money from inheritance, gifted from parent's, etc.
This post was edited on 3/6/15 at 9:45 am
Posted on 3/6/15 at 10:16 am to LSUAfro
quote:Yeh this is how I feel as well
I'd guess that most people that are able to hit the 20% borrow from relatives, have money from inheritance, gifted from parent's, etc.
Posted on 3/6/15 at 10:46 am to lsupride87
quote:
I dont see how people realistically save 20% for a first home purchase. In most cities, a decent house will be at least 200k, meaning with closing cost and everything you need to have about 46k saved up for the house. How is someone coming out of college supposed to do that these days? Lets assume they have a great job, and start out making 55k. It will take them til they are about 30 to do this if they literally save just for the house. Doesnt make sense to me
The only people I know that have had 20% to put down had a good inheritance. Noone has 20% down, it would take way to long as you have stated.
Posted on 3/6/15 at 10:51 am to trident
quote:
The only people I know that have had 20% to put down had a good inheritance. Noone has 20% down, it would take way to long as you have stated.
Just making sure. This board can be a little confusing. Buy right away, but not until you have 20%. Well......... 
Posted on 3/6/15 at 11:19 am to lsupride87
quote:
Just making sure. This board can be a little confusing. Buy right away, but not until you have 20%.
This board is either full of shite or they are all in the 1%.
20% down, max out Roth IRA and 401K, 100k in 401K by 30...... unrealistic
Posted on 3/6/15 at 12:26 pm to trident
quote:
This board is either full of shite or they are all in the 1%.
You also have to take in to consideration that those who are most likely to respond are those that are have accomplished such things.
quote:
100k in 401K by 30.
I did do this
....combined with my wife's 401k. 
. quote:And this will be accomplished on my next house due to principal paid and appreciation. Thank god I didn't wait till I had 20% down to buy my first house or I'd still be renting.
20% down
Posted on 3/6/15 at 12:30 pm to lsupride87
quote:
I dont see how people realistically save 20% for a first home purchase. In most cities, a decent house will be at least 200k, meaning with closing cost and everything you need to have about 46k saved up for the house. How is someone coming out of college supposed to do that these days? Lets assume they have a great job, and start out making 55k. It will take them til they are about 30 to do this if they literally save just for the house. Doesnt make sense to me
These are essentially my exact thoughts and almost my exact situation. I saved up 5% and bought a house 2 years ago at age 25.
Posted on 3/6/15 at 3:49 pm to LSUengineer12
quote:
LSUengineer'12
Looking at homes right now and thinking about doing the same thing. Is there a set rate for PMI on RD loans or is there a calculation to figure out PMI for these loans?
Posted on 3/6/15 at 4:19 pm to LSUAfro
quote:
would guess that the majority of first time home owners don't have 20% on their first house from their earning alone unless they go pretty low end, lived with their parents for way too long, or lived with roommates still cheaping it out. I played too much to save for all that.
I'd guess that most people that are able to hit the 20% borrow from relatives, have money from inheritance, gifted from parent's, etc.
I'm hoping to get into my first home within the next 1-1.5 years. It will be custom built and I'll have to put way more than 46k down. I haven't lived with my parents since college. Got married after college so no roommates except my wife. My relatives have no money, numerous times they have borrowed from me. I'm just glad my parents paid off their double wide this year. Just a lot of sacrificing on my wife and I's end.
I just turned 30 though. Ours cars are 16 and 14 years old respectively and I can't enjoy my car hobby the way I want. We don't always have the newest I-phone or take many vacations either so it's not for everyone. Once we get the house though, the saving clip we are currently hitting will go down and we'll enjoy our cash a little more. It can be done though.
Edit: I'm not trying to brag. Just trying to point out that having that 20% on a first home generally takes sacrifice. I have no problem with people buying without it. I just worry a lot and want to have a ton of equity from the start plus I have no choice since I'll need a construction loan.
This post was edited on 3/6/15 at 4:25 pm
Posted on 3/6/15 at 4:58 pm to lsupride87
Most people who have 20% to put down on a house purchase are people that didn't have 20% to purchase their current home and now have the equity to do so.
Posted on 3/6/15 at 6:09 pm to man117
quote:
man117
Nice. That takes a lot of discipline and hard work. I applaud that.
I could've never done it. It's just not for me.
Posted on 3/6/15 at 6:46 pm to hungryone
quote:
Paying PMI is throwing money away.
Well, yes. But ... mortgage rates are still very good right now so you might be better off pulling the trigger today anyway. Run the numbers in a spreadsheet, considering PMI as an extra "interest" cost until you build up the 20% and see what is involved.
Posted on 3/7/15 at 8:31 am to foshizzle
No one gets a loan with PMI and rides it out for 30yrs
You get the home you want with minimum down and refi out of it later
FHA just drop the PMI rate as well.
Id rather put down 3.5% on a 300k house over putting down 90k just to avoid an extra 200 in payments
What if you needed that cash for anything but its trapped in the wall paper of your home earning zero interest
You get the home you want with minimum down and refi out of it later
FHA just drop the PMI rate as well.
Id rather put down 3.5% on a 300k house over putting down 90k just to avoid an extra 200 in payments
What if you needed that cash for anything but its trapped in the wall paper of your home earning zero interest
Posted on 3/7/15 at 11:03 am to BoogaBear
Using a few calculators online, and with the assumption that you be putting down 3.5% now with a 3.9% 30-yr FHA loan on a $325,000 house ($319,113 financed assuming upfront PMI is rolled into the loan), your notes would be:
Principal and interest: $1,686.61
PMI: $226.04
Let's assume that the house neither increases nor decreases in value over time, you'd be able to refinance and remove PMI after 105 months. Your cumulative payments over the 30 years would be $607,180 in principal and interest + $23,734 in PMI = $630,914.
On the other hand, if you put 20% down, your cumulative notes would be lower as long as your 30-yr mortgage is lower than 6.07%.
IMO, there are three things to consider:
1) Do you believe you'll have the downpayment in time to finance with a rate under 6.07%?
2) How much do you value having an extra $53,625 in the bank (difference between 20% down and 3.5% down)?
3) If you financed with PMI, could/would you pay off the loan more aggressively over the next 2-3 years and refinance to remove the PMI even quicker?
Best of luck!
Principal and interest: $1,686.61
PMI: $226.04
Let's assume that the house neither increases nor decreases in value over time, you'd be able to refinance and remove PMI after 105 months. Your cumulative payments over the 30 years would be $607,180 in principal and interest + $23,734 in PMI = $630,914.
On the other hand, if you put 20% down, your cumulative notes would be lower as long as your 30-yr mortgage is lower than 6.07%.
IMO, there are three things to consider:
1) Do you believe you'll have the downpayment in time to finance with a rate under 6.07%?
2) How much do you value having an extra $53,625 in the bank (difference between 20% down and 3.5% down)?
3) If you financed with PMI, could/would you pay off the loan more aggressively over the next 2-3 years and refinance to remove the PMI even quicker?
Best of luck!
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