Is there such a thing out there?

just123me · Joined: 26 Aug 2005 Posts: 12

I'm first time home buyer with excellent credit.

I'm trying to avoid PMI. I don't want to put 20% down. That would take a lot of my savings. I can put 5% down easily and still have some for closing, setting up house, moving expenses, and still have a little nest egg.

All I get offered from lenders is the 80/15/5. To me even if I'm avoiding PMI, isn't it a catch 22 where they are getting me with the 15% at higher interest? Sure I can take both loans off taxes because paying interest on both...but why can't I get 95% fixed at the lower interest? Is there such a thing out there?

Is it rule of thumb for most that unless you can put 20% down, you will have to pay higher interest loan,

m2c · Joined: 03 Aug 2005 Posts: 937

Sometimes borrowers shoot themselves in the foot just to avoid MI. MI is not necessarily the “devil” presented in the sales pitch. Tax savings are marginal, you have a small amount of closing costs on the 2nd, and, yes, the rate on the 2nd is usually higher than that of the first.

A lot depends on your circumstances – FICO, debt ratios, projected appreciation in your housing market, how long you project keeping the loan and home. With monthly MI and assuming “standard” coverage percentage, you’re looking at an annual MI factor of 0.78% continuing (without action from you and depending on the circumstances) for 120 months and then 7 months at a much lower factor. This is at today’s mortgage rates – higher the interest on the mortgage, the longer the MI coverage normally lasts. 0.78% factor can be reduced if you have above average FICO scores and broker has access to discounted rates.

Then there’s lender paid MI. For above 700 FICO, you’re looking at a one-time increase in closing cost of 1.15%, mix and/or match with a rate increase.

Rule of thumb of 20% down is not 100% correct. Some true no-MI programs out there at 15% down. Typically there is some small trade off in rate/point combination.

Point is “don’t blindly trust conventional wisdom”. Determine what’s available for you; have your LO run the numbers for you and then choose what’s best for you.

just123me · Joined: 26 Aug 2005 Posts: 12

Thanks m2c,

You state a lot depends on my circumstances. My circumstances are that I have excellent FICO. Lender pulled my scores and said they were PERFECT. I also owe nothing and hadn't in awhile. I pay for rent and utilities and that's it....no credit card debt or loan debt at all. I am looking to buy to own for a good while. I hate moving so not a house hopper. I've been in this apt. for 9 years so that should tell someone I don't like moving. lol

Knowing these facts, should or can I get better rates out there and possibly 95% from somewhere?

I heard of this one first time buyer girl going to a small town bank in her area. She said they offered her a 5% doen and 95% 5.5 interest loan with no PMI. Her mother worked in big bank and couldn't even do better deal than that so she went with smaller bank. She stated sometimes smaller banks can offer better deals because they keep their own loans and don't sell to 3rd parties. This true?

Thanks

m2c · Joined: 03 Aug 2005 Posts: 937

I you can get 5.5%, 95% LTV with no MI on a 30-year fixed (APR should vary by more than 5 or 6 bps, e.g., APR = 5.56% +/-), TAKE THE DEAL IN A HEART BEAT.

Not selling into the secondary market does not necessarily translate into a better deal for you. I should be more convenient since you tend to “stay put” in your resident and you will be dealing with only one servicer throughout the life of your loan.

Small banks can do some dumb things but why not take advantage of them. Be at the banks doors when they open Monday BUT make sure the deal is as indicated.

If the deal is “bragger’s fiction”, you can count on 6 to 8 bps off standard monthly MI rates, once again, if the broker has access to these rates. 700 FICO is a toggle switch for LPMI and you won’t get an additional advantage if you’re 750 or 800. LPMI cannot be cancelled. Monthly MI is theoretically around for a minimum of 2 years but many lenders will cancel earlier if your housing market is “hot” and a new appraisal shows sufficient equity.

just123me · Joined: 26 Aug 2005 Posts: 12

Thanks for your response M2C.

That's the deal I'm looking for. I hope to get close. This was maybe a year ago she got this deal...when interest was lower. I'm going to check a couple small banks in the area and even a mortgage company or two and some other banks and see what kind of deals I can luck up on. Don't know until you try.

I have a trusted person I know who will look over the numbers for me and let me know if I'm getting screwed or not so won't sign anything unless it's a trusted good deal.

Thansk again for your thoughts!

m2c · Joined: 03 Aug 2005 Posts: 937

Ah ! Strangely enough a “required net yields” are about the same as a year ago. Google on “required net yield” and look at the historic Freddie or Fannie sites. This is NOT the same as current interest rate but will give you perspective.

Don’t count on getting the same deal but it’s worth checking. Community Banks do some dumb things ONCE IN A WHILE or strange things if there are other banking “relationships”.

I suspect you’ll see more typical quotes with MI or LPMI. I have nothing against a 80-15. Just think it’s used to much as a marketing tool and can end costing you more. I think a more valid approach for a 80-15, is equity accumulation. Term of 2nd is usually shorter and so your equity via debt reduction is greater. Higher the rate on the 2nd , the slower the reduction in principal. Graph amortization in Excel – rate on y axis and remaining balance on x. At 0.00% interest rate, line is a 45 degree thing. Higher the rate the more parallel the line is before plummeting to a $0.00 balance. I’m too old to remember what’s that called in calculus. Begins with an “a”. Whatever … it’s an interesting exercise.

chow · Posted: Mon Aug 29, 2005 5:55 pm Post subject:

gawd- here is the "nut's and bolt's of the No MI system loan"

you pay for a no MI loan with the rate. Countywide calls it a

"Tammi" loan

Fannie and freddie let manyof us call it a "what ever loan"

Here is the honest truth.

If you are more than 80% Loan to value on a home loan-you will not get the "advertised" best rate. And the best rate will not always be the best loan for your home-beacuse too many of you don't tell us everything!

So, you want to know the truth about your loan, and you go on the internet and ask us for honest responses------when we need to bacially you LO or Lender to anwer it.

I guess If you're in a cookie cutter world, that would be fine. :shock:

please-let me inhale more grass seed. Really-I'm planting seed in three acres of lawn-and can't see past the scum in my eyes.

just123me · Joined: 26 Aug 2005 Posts: 12

Sorry Chow, didn't mean to get you upset. Just ignor me and my stupid questions. I'll talk to a loan officer whenever I get one. Sorry I bothered you in here.

chow · Posted: Mon Aug 29, 2005 9:07 pm Post subject:

I'm not upset at all.

8) I'm challenging you to ask questions, and think about the knowledge you ask us.

A no MI loan is going to be a higher rate, because the MI is figured into the rate. so-if you want a no MI loan, and you're in a lower tax bracket-the higher rate would help your tax deduction on the start up.

What consumer's need to understand is the money business changes daily, and even hourly.

I would like to ask most of the real consumer's or CAR buyers, when they whipped the sales person around about the rate of the loan.

don't you usually bargin in price or payment?

Now-enter in home value....We give you an appraisal-the car lot and the teaming millions on line give you a best guess.

What is the bottom line? payment? price or rate?

Bother me? Upset me? Never. :wink: I just gave you some honest things to look at.

m2c · Joined: 03 Aug 2005 Posts: 937

Well, Chow’s “honest” answer is really not what I consider honest but is true in what usually passes for honesty in the mortgage world.

A “no MI” loan is one WITHOUT MI; not MI that you’re not paying through some other means. No MI certificate, no payment to a MI company by ANYONE, etc. These are available through deals cut with the GSEs and many times do not involve a GSE-imposed fee but rather some risk assumption arrangement. If the latter is the case, it is up to the broker whether to charge. No charge, then the rate you see is this “best” rate in Chow answer. A more normal situation is that the lender will pass on some fee for the additional risk assumed. For example, we typically charge ½ discount point for 85% LTVs with no MI.

There are various other arrangements where the lender pays the MI on a monthly or one-time basis and, yes, the rates are higher to compensate for this. But these are not “no MI” loans – there is insurance and there is a MI certificate – and really should not be presented as such.

A 95% no MI loan may exist but I have never seen one.

chow · Posted: Tue Aug 30, 2005 1:06 am Post subject:

oh. please edikate mr and mrs and ms and master borrower with more "double speak."

I'm playing my Devil's Advocate role...What is a Discount point? and why do we have to pay that in the price? how much is that worth, and why does the lender get to charge that in pricing?

The rate today for a loan is 4.5%

So....