100% or 80/20 loans?

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

ok well we are well underway to building a house now and we have a few decisions to make, the biggest is if we do a true 100% or if we do an 80/20 loan.

I know if we do the 100% then we have to get pmi, but if we get an 80/20 we might get a higher interest rate on the second 20% part but the total payment might be less.

can any one confirm this stuff and tell me anything else I may need to know? thanks

adonis · Posted: Wed Feb 07, 2007 9:06 pm Post subject:

Welcome Silentneko,

You may go for 100% financing. For that you will have to purchase PMI but then you can avoid taking two loans and that one at a high rate of interest. Managing two loans is easier than a single loan.

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

how is managing 2 loans easier then 1?

and if the 100% with PMI? is more expensive monthly then the 80/20 then wouldn't it be better to get the easier monthly payment?

Guest 0.10 Dollars($)

It wasn't easier for me when i had a mortgage as well as credit card debt. I had to keep a track of both the payments each month and then fix my budget accordingly.

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

we have no debt and very few payments on anything, we have been preparing for this for a while.

helping_user

Hi Neko,

Welcome back.

Well, in general, 100% financing with private mortgage insurance costs less compared to an 80/20 loan. But you need to collect the loan rate, fees, and charges on 100% financing and the premiums on the insurance policy. Then only you can compare the two and see which is less expensive. You also need to contact an insurance provider to know about the insurance premiums.

Thanks.

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

from what the broker was saying it seemed that the 80/20 would cost less because we wouldn't have to pay the PMI.
one more factor is that the builder is offerning 3% towards closing costs, but if we do an 80/20 then she may be able to get them to do 6%.

I can't wait till I get the good faith estimate, if I can I'll post it up here so you guys can tell me if it looks good. thanks

Guest 0.10 Dollars($)

Managing two loans can sometimes become hard, even if the builder is offering to pay 3% towards closing; my suggestion would be to go with a single 100% one.

Regarding PMI, as per Homeowner's Protection Act (HPA), you can request for cancellation of Private Mortgage Insurance (PMI) after mortgage is paid off to a certain point.

Roger Pilon

wablola · Posted: Thu Feb 08, 2007 6:03 pm Post subject:

Best would be to go with the Single Loan. Yes, you wil have a PMI, however, PMI's as of January 2007 can be used as a tax deduction.

If you go with a 80/20, as you know already, the second loan will have a higher rate. Much higher then a single loan.

Their are programs with 30 yr fix interest only loans and this can help lower your monthly payments. However, I only suggest this to people who are good with managing their money.

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

well I am still waiting for my good faith estimates so I don't know what the deal is just yet, hopefully it will come tomorrow

adonis · Posted: Thu Feb 08, 2007 9:04 pm Post subject:

yeah until and unless you get the Good Faith Estimate, you cannot compare the two options and decide upon the right choice.

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

I'm getting screwed!!!!!!
well atleast I feel the first 2 good faith offers were not what I expected, the mortgage broker told us worst case scenario we would pay $1826 a month for 100% and an 80/20 would be much lower, well niether was true, I feel like I will be paying way to much compaired to what the broker was originally saying to us. here are the links to the 2 good faith offers I scanned. tell me what you guys think.

http://i50.photobucket.com/albums/f332/firecat1981/faith1online.jpg

http://i50.photobucket.com/albums/f332/firecat1981/faith2online.jpg

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

I forgot to ask in my last post, but if I do a 100% FHA loan (if there is one) doesn't that get rid of PMI?

wablola · Posted: Fri Feb 09, 2007 12:41 pm Post subject:

100% FHA loans do not remove PMI. PMI is still involved with a FHA loan.

silentneko · Joined: 02 Jan 2007 Posts: 33 14.45 Dollars($)

what about the good faith estimates? did they look good? and I can write off PMI now? so I get all that money back at the end of the year?

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