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Old 02-04-2008, 08:17 PM   #1
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Default Buying 1st House.. need help

Well, the wife and I are going to be buying our first house this year, which is exciting,...

but also scary.

Anyone ever heard of taking out 2 mortgages (80%/20%) in order to avoid paying PMI?

Any other things you much wiser fellows out there have learned over the year would be great also..

We are looking at 175,000ish with 5% down, and a 30y fixed rate mortgage..

thanks!

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Old 02-04-2008, 08:22 PM   #2
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i did a 80/20 with zero down last summer on my house, fixed rate 30 year mortgage.

I am happy with how it turned out, although I need to start thinking about refinancing with the rate drops.

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Old 02-04-2008, 08:24 PM   #3
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I know it's a LOT harder to get banks to do that these days. It used to be pretty common to get both loans from the same bank, but lending standards have tightened up a lot. Some banks do offer first-time homebuyer "specials," we got into one from one of the local credit unions that offered 100% financing without PMI and paying us up to $2,000 towards closing fees. So, we borrowed the entire amount (we actually walked out of the closing with a check in OUR hand), but we also bought a place at a 20% discount to its appraised value.

The risk of not having a ton of equity in the place, I believe, is mostly related to if you need to sell the place fairly soon (moving across country, etc). Otherwise, mortgage debt is not "bad debt" in the sense that CC debt is. Being able to deduct the mortgage interest is REAL nice, your effective interest rate's a lot lower than the nominal rate. The people who are boned today are the people who can't sell because they're underwater - but if it's a given that you'll be there for ten years anyway, I wouldn't stress about 5% down versus 15% down except for the issue of PMI.

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Old 02-04-2008, 08:24 PM   #4
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That's not an uncommon scenario. Fortunately I get the VA guarantee on my home loan, so I didn't have to do that, but it was mentioned by more than one lender who didn't want to do VA loans.

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Old 02-04-2008, 08:26 PM   #5
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I did an 80/10/10 (10% down) and both are fixed. I'm a happy camper with it.

No PMI and the sum payment is cheaper, plus you get the interest deduction (you can't deduct PMI fees).

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Old 02-04-2008, 08:32 PM   #6
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glad to hear so many of you have done the split and are happy with it. I was first told about it a few weeks ago, and was kinda sceptical about it. But it makes sense.

I was told that most banks wont offer both loans though, so you do have to get it from 2 different sources.

Were all your lower loans fixed?

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Old 02-04-2008, 08:32 PM   #7
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You can avoid PMI by doing an 80/20 but the rate on the 20% portion is typically alot higher than the 80% portion so you should make sure that doesn't add up to more than what you would pay on one loan w/ PMI.

Also, you should check into First Time Buyer programs through Fannie Mae and FHA programs. You may qualify for an FHA loan which will have PMI but will also have low rate and no pre-payment penalty. The FHA programs go up to 97% of the purchase price and allows for seller concessions to help you pay closing costs leaving you with only a 3% down payment to come up with.

If you are able to make a larger down payment, do it, you get better rates.

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Old 02-04-2008, 08:32 PM   #8
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Quote:
Originally Posted by aekdbbop
...Anyone ever heard of taking out 2 mortgages (80%/20%) in order to avoid paying PMI?
That's called a "combo" or piggy back loan.

Definitely has it's advantages. Many banks are backing off of those now since there is much less equity in the housing market. (And equity is required for that 20% portion).
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Old 02-04-2008, 08:35 PM   #9
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My mortgage is 30yr Fixed not ARM. We put 10% down IIRC. My interest rate was amazing (and not adjustable) so it'll offset the PMI. Two things, try to enjoy the process and see the big picture AND make sure you get a very good real estate lawyer. You want them watching your back...

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Old 02-04-2008, 08:36 PM   #10
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What the hell's a "Fixed ARM"?

BTW - congrats! It's a LOT easier to write a check to the bank than to the landlord!

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