Mortgage Down Payment

[RallySonsOfND]

I'm getting ready to purchase my first home (building actually).

And I am trying to decide whether or not to put down 15% or 20% for my down payment.

I can afford to put down 20% but am not sure I want to sell off that much of my investments to do so. I'm just trying to get as many opinions on this subject as possible.

Difference in monthly payment would be about $100 (including mortgage insurance).

 

[edgesofsanity]

Avoid PMI if you can. Put down the 20%.

 

[Redbar]

Avoid PMI if you can. Put down the 20%.

This. But in Louisiana I am almost sure it was 15% to avoid the PMI. Whatever it is, if you can put down enough to avoid it, I would put down at least that much.

 

[Jackalope1977]

Agree with all of the above. In Michigan it's 20% Don't pay PMI.

 

[nsisk157]

Avoid pmi at all costs...just a bs way for banks to take more of your money.

 

[woolybug25]

Avoid pmi at all costs...just a bs way for banks to take more of your money.

Banks don't keep PMI. Plus, once your principal gets to 78% LVO, PMI has to be canceled by the bank by law. Funny how banks asking for insurance from people without enough money for their down payment is bullshit... Meanwhile, you guys blame banks for the mortgage crisis. Yes... Protecting other mortgage holders, shareholders and depositors is such bullshit.

How in the hell would the board know whether putting more down on your home would be better for your personal situation? In general, it's always better to pay down debt and avoid interest. But no one knows your financial situation well enough to give you any advice outside of what's been said about avoiding PMI. I would say this, if you are building a house, don't you have people guiding your process? How have you got to a decision to build without even planning your cash flows yet?

 

[CTHindman]

Banks don't keep PMI.

How in the hell would the board know whether putting more down on your home would be better for your personal situation? In general, it's always better to pay down debt and avoid interest. But no one knows your financial situation well enough to give you any advice outside of what's been said about avoiding PMI. I would say this, if you are building a house, don't you have people guiding your process? How have you got to a decision to build without even planning your cash flows yet?

What he said.
I am a mortgage originator. As long as you aren't going FHA, PMI will be eliminated when you drop below 81% LlTV. If your investment is earning (or has the potential to earn) more than $100 a month, pay the PMI. If you want me to run scenarios for you, pm me. I can tell you how long it will take to drop below 81%. I can also tell you if your mortgage person is hosing you anywhere.


Sent from my Etch-a-sketch using Tapatalk.

 

[RallySonsOfND]

Banks don't keep PMI. Plus, once your principal gets to 78% LVO, PMI has to be canceled by the bank by law. Funny how banks asking for insurance from people without enough money for their down payment is bullshit... Meanwhile, you guys blame banks for the mortgage crisis. Yes... Protecting other mortgage holders, shareholders and depositors is such bullshit.

How in the hell would the board know whether putting more down on your home would be better for your personal situation? In general, it's always better to pay down debt and avoid interest. But no one knows your financial situation well enough to give you any advice outside of what's been said about avoiding PMI. I would say this, if you are building a house, don't you have people guiding your process? How have you got to a decision to build without even planning your cash flows yet?

Like I stated earlier, I am getting as many opinions as possible. There are quite a few people on this board.

I haven't started the process with the builder yet, because I'm still trying to decide how big, how nice, how much I am willing to spend. Kinda figured I'd figure out how much of my investments to liquidate before starting that process.

 

[RallySonsOfND]

Avoid pmi at all costs...just a bs way for banks to take more of your money.

Easy.

 

[woolybug25]

Sorry if I came off rude. My point was that any opinion regarding your financial situation would be moot, as none of us know enough about your financial situation. You should consult several mortgage guys, several banks and your family for this type of advice. We would only be giving you general comments regarding mortgages, not info that will (or should) be relevant to your process.

Good luck on the new adventure though. Are you buying any land?

 

[Buster Bluth]

Easy.

Building a house at 22? Are you sure you want that ball and chain (ie mortgage) right now?

 

[RallySonsOfND]

Sorry if I came off rude. My point was that any opinion regarding your financial situation would be moot, as none of us know enough about your financial situation. You should consult several mortgage guys, several banks and your family for this type of advice. We would only be giving you general comments regarding mortgages, not info that will (or should) be relevant to your process.

Good luck on the new adventure though. Are you buying any land?

Nah your good.

Trust me, I have been talking to more people than I can keep track of. Haha

I'm interviewing a couple builders over the next week to decide who, and which of their neighborhoods.

 

[RallySonsOfND]

Building a house at 22? Are you sure you want that ball and chain (ie mortgage) right now?

My monthly expenses will be less than I'm paying in rent, and have more than 1 bedroom.


Yeah, and when I get moved for work they take care of selling my house for me.

 

[edgesofsanity]

I'm interviewing a couple builders over the next week to decide who, and which of their neighborhoods.

Make sure you find out about any HOAs in that case as well, and add the monthly fee to your "mortgage" total too. Monthly housing costs are monthly housing costs, whatever labels you use to divide it up.

 

[woolybug25]

Just for reference, for every $100 of HOA (and property tax) you can afford 10k more house for roughly the same payment.

HOA's are unamerican, imo

 

[RallySonsOfND]

Just for reference, for every $100 of HOA (and property tax) you can afford 10k more house for roughly the same payment.

HOA's are unamerican, imo

None of the neighborhoods I'm looking at have HOAs.

I know my family that lives in areas with HOAs like them actually. But their houses are a bit more than I'm willing to spend at this time. haha

 

[Irish Insanity]

Isn't PMI based upon the appraised value of the house not the percentage of down payment. I thought it was when owing <80% of the value, not the owing <80% of the purchase price. Your purchase price won't necessarily equal the value of the property.

But I do agree, avoid PMI if at all possible.

 

[pumpdog20]

Join the military, get a VA loan, no PMI.

 

[RallySonsOfND]

Join the military, get a VA loan, no PMI.

lol.



no

 

[Junkhead]

I also advise to avoid pmi if you can. I am paying it, since I didn't want to fork over a 35k down payment. If you can afford the downpayment, do it!

 

[ACamp1900]

Had PMI, got refi'd and took out 20 k with no PMI,... Our payment was still 150 a month lower.

So yeah, avoid PMI if you can.

 

[BobD]

One big consideration should be what kind of safety net you'll have left by putting down the higher down payment. Avoiding PMI, saving interest and lower payments are all great, but if the higher down payment keeps you from having a 12 - 18 month safety net available, you might want to consider a lower down payment, then make higher than required monthly payments towards the principal whenever possible. Payments high or low both suck if you don't have the funds available to pay them. Things are too unpredictable these days.

Anyway that's just my opinion. Good luck and congratulations on the pending new home.

 

[phork]

Sink all that money into lotto tickets you can't possibly lose. Then pay cash for your house!

 

[tdbaum1]

I am a mortgage loan officer and will agree with everyone that 20% is what you want to put down if you can. Couple of points though...the 20% is not a state by state case, it is across the nation. Freddie Mac and Fannie Mae will not purchase a loan over 80% loan to value without pmi. Every bank or broker's end goal is to sell the loan to one of the aforementioned companies. The 80% is based on the value of the house, but when buying a house the lesser of the appraised value or contract price is used. After all, something is only worth what someone is willing to pay for it right?

 

[nsisk157]

Apparently struck a nerve..misspoke on direction of $

What I essentially meant was ..
Why pay more money that will not benefit you if you can afford the 20 percent...

 

[tdbaum1]

I didn't see your post and wasn't tying to rude. Hope it didn't come off that way. Just stating some facts...sometimes that can come off as rude. But on your note about PMI, that money is paid to a totally separate company. There are companies out there that offer mortgage insurance just like all state offers car insurance. The big one now a days is MGIC.

 

[nsisk157]

I understand. I own some property.

 

[RallySonsOfND]

One big consideration should be what kind of safety net you'll have left by putting down the higher down payment. Avoiding PMI, saving interest and lower payments are all great, but if the higher down payment keeps you from having a 12 - 18 month safety net available, you might want to consider a lower down payment, then make higher than required monthly payments towards the principal whenever possible. Payments high or low both suck if you don't have the funds available to pay them. Things are too unpredictable these days.

Anyway that's just my opinion. Good luck and congratulations on the pending new home.

Of course. Yeah I'm debating how much of my investments (which I have for this particular reason) to sell off to pay for this. I have a separate account for my safety net.

Thanks for everyone's opinion. Interviewing the builder I'm leaning towards tomorrow!

 

[ulukinatme]

Everyone's financial experience is different, but I concur with those that say avoid PMI if you can. Personally I don't care to throw money away if I can help it. My first few years after college I just lived and home and saved up $25k for a down payment on a house, ended up avoiding PMI that way.

It's unconventional, but I also went with a 15 year fixed loan instead of a 30 year loan so I wouldn't be paying so much interest. Yeah, I most likely won't be staying in this house for another 10 years to pay off the balance, but I've also knocked out $20k in principal and I've never paid more interest than principal since I've owned this home (Most people pay more in interest for the first x number of years). A few people have asked why I didn't just go with a 30 year and pay extra when money permits, that wasn't going to work with me though. If I have extra cash, I'm probably not going to dump it back into the house in my 30s, I'm going to save it or spend it on other things. It was only an extra $150 a month to do the 15 year loan, and that's less interest that goes into the bank's pocket, so I should be able to put a fairly large chunk into the next house when we decide to sell in a few years.

 

[BleedBlueGold]

To reiterate what a few others have posted: 1) Don't buy a house unless you have 20% to put down and avoid the PMI. 2) Make sure you still have 3 to 6 months worth of expenses saved in an emergency savings account. Or else your dream home will feel like a curse whenever things break. 3) Get a 15-year fixed rate. It will save you tens of thousands over the duration of the loan. 4) Your mortgage payment should not exceed 25%-30% of your take home pay.

On a different note: I'm one that learned things the hard way. Buy now, learn later. Anyways, I've heard the banks did away with the automatic removal of PMI on FHA loans that pre-date (I believe July 2009). I've been told that your PMI will stay with you for the duration. This contradicts something I just read: PMI automatically drops at 78% value AND after 60 months of payments. Is this accurate? If so, I'm coming up on the 60 months criteria and would love to dump a few extra grand at the loan in the meantime if I knew for sure this thing was going to go away.