MrTed46 Posted January 25, 2012 Share Posted January 25, 2012 Does TheHuddle have any resident mortgage brokers? I am curious to how PMI works. I'd love to PM an expert Quote Link to comment Share on other sites More sharing options...
matt770 Posted January 25, 2012 Share Posted January 25, 2012 Does TheHuddle have any resident mortgage brokers? I am curious to how PMI works. I'd love to PM an expert I'm not a mortgage broker, but I did stay in a Holiday Inn Express last night! Heeeyoooo! Try the veal! Ahem, so basically you pay PMI if your equity in the house is less than 20% of the appraised value of the house. There have been loopholes around this, not sure if they still exist after the mortgage fiasco...one loophole is to take out a first mortgage for 80% of the value, and a second mortgage for 20%. Why this would ever be allowed I have no idea, but it was, back when they were handing out mortgages like condoms at a high school. Cue the real mortgage guys to tell me this is all outdated info...3...2...1... Quote Link to comment Share on other sites More sharing options...
cliaz Posted January 25, 2012 Share Posted January 25, 2012 I'm not a mortgage broker, but I did stay in a Holiday Inn Express last night! Heeeyoooo! Try the veal! Ahem, so basically you pay PMI if your equity in the house is less than 20% of the appraised value of the house. There have been loopholes around this, not sure if they still exist after the mortgage fiasco...one loophole is to take out a first mortgage for 80% of the value, and a second mortgage for 20%. Why this would ever be allowed I have no idea, but it was, back when they were handing out mortgages like condoms at a high school. Cue the real mortgage guys to tell me this is all outdated info...3...2...1... And of course that 80/20 deal, the 20% mortgage is at a much higher interest rate. I hated the PMI on our first house. It was set at either 20% or 5 years in the house before we could streamline the loan and get rid of it. When we hit 20% in our house they told us that it is 20% and 5 years to qualify. I showed them where in the contract it stats either/or but, of course (f*cking lawyers) there are all of these industry technical terms and clauses spread out among the contract that nulled that out. Our lawyer stated it didn't hold water so we can fight it. Instead, I just went with a complete refi. Quote Link to comment Share on other sites More sharing options...
MrTed46 Posted January 25, 2012 Author Share Posted January 25, 2012 This is what I understand, 99.99% of the time you purchase a house and put anything under 20% of the appraised value towards the 1st mortgage you most likely need PMI. I also understand how PMI is calculated to your monthly payments and how by law it goes away once your equity hits 78% LTV by law, and in some cases you can ask to get it pulled off once it hits 80% LTV but that is up to the loaner. What I am confused about is if there is a upfront cost (% of the mortgage) AND the monthly premiums or it just monthly premiums? Quote Link to comment Share on other sites More sharing options...
I Like Soup Posted January 25, 2012 Share Posted January 25, 2012 I don't think you can do the 80/20 thing anymore, which is unfortunate since creative financing/accounting helps so many people. If you qualify, a VA loan is the way to go. No mortgage insurance whatsoever and you can pretty much do a streamline refinance whenever you feel like it with no appraisal, and no income or job verification. Also, worst case scenario if you are going to lose your house, your VA loan is assumable if the other buyer qualifies (and you can use your badass loan interest loan as a bargaining chip). Quote Link to comment Share on other sites More sharing options...
I Like Soup Posted January 25, 2012 Share Posted January 25, 2012 This is what I understand, 99.99% of the time you purchase a house and put anything under 20% of the appraised value towards the 1st mortgage you most likely need PMI. I also understand how PMI is calculated to your monthly payments and how by law it goes away once your equity hits 78% LTV by law, and in some cases you can ask to get it pulled off once it hits 80% LTV but that is up to the loaner. What I am confused about is if there is a upfront cost (% of the mortgage) AND the monthly premiums or it just monthly premiums? I believe it is a monthly premium paid only. But I'll let matt answer since he stayed at a Holiday Inn Express last night! Quote Link to comment Share on other sites More sharing options...
Missoula Griz Posted January 25, 2012 Share Posted January 25, 2012 Im a mortgage guy. Happy to answer any questions you may have. PM if you want my phone number. Quote Link to comment Share on other sites More sharing options...
sundaynfl Posted January 25, 2012 Share Posted January 25, 2012 PMI for FHA mortgages is paid up front and monthly... you pay an upfront mortgage insurance premium of 1% and it is typically rolled into an fHA loan. The monthly MIP is 1.15% per year divided by 12. You have to pay this premium for 5 years or refinance into a conventional loan to get rid of it. It goes away once the LTV goes to 78% Conventional loans require 20% down to avoid MI or you can do an 80 percent 1st and a 15% second and avoid mortgage insurance. There are no longer any 80/20 loans that I am aware of. IF you improve yoru home and can demonstrate that the LTV is 78% they will remove your MI... You can also do a one time premium that you pay up front on a conventional mortgage or it can be rolled into the rate. Quote Link to comment Share on other sites More sharing options...
MrTed46 Posted January 25, 2012 Author Share Posted January 25, 2012 PMI for FHA mortgages is paid up front and monthly... you pay an upfront mortgage insurance premium of 1% and it is typically rolled into an fHA loan. The monthly MIP is 1.15% per year divided by 12. You have to pay this premium for 5 years or refinance into a conventional loan to get rid of it. It goes away once the LTV goes to 78% Conventional loans require 20% down to avoid MI or you can do an 80 percent 1st and a 15% second and avoid mortgage insurance. There are no longer any 80/20 loans that I am aware of. IF you improve yoru home and can demonstrate that the LTV is 78% they will remove your MI... You can also do a one time premium that you pay up front on a conventional mortgage or it can be rolled into the rate. How doe MI work for conventional loans? Same way as you stated above for FHA? Quote Link to comment Share on other sites More sharing options...
detlef Posted January 25, 2012 Share Posted January 25, 2012 Just went through this exact thing this afternoon. We're doing a refi and, unfortunately, our house appraised out lower than we were hoping. Enough so that it would have pushed us up above 80%. One of the brokers were were working with said there were programs for people with excellent credit that allowed you to take out more than 80% and avoid PMI. Thing is, her loans weren't as good in general than the guy we went with. Knowing this might be the case and shifting from a 30 to a 15 because we wanted to pay the house off sooner, we were prepared to simply bring cash to the table at closing to get the loan in line. After all, it's not money lost like PMI would be. It's money we apparently already lost do to our house apparently losing value recently. At any rate, we had two options. Either pay the cash up front or pay about 30% of that same amount, spread over the next 2 years. I'm leaning towards just nutting up with the cash at closing because we have it and, again, it's not like we're throwing it away. The principle will decrease accordingly, thus saving us money on interest right off the bat. On a related note, I effing hate my appraiser even more now. I had to bite my freaking tongue the entire time of the walk through because he was spouting crap like he'd been listening to Rush Limbaugh on the drive over. "It's a well known fact that..." Quote Link to comment Share on other sites More sharing options...
matt770 Posted January 25, 2012 Share Posted January 25, 2012 Im a mortgage guy. Happy to answer any questions you may have. PM if you want my phone number. Quote Link to comment Share on other sites More sharing options...
sundaynfl Posted January 25, 2012 Share Posted January 25, 2012 How doe MI work for conventional loans? Same way as you stated above for FHA? Conventional loans require 20% down to avoid MI or you can do an 80 percent 1st and a 15% second and avoid mortgage insurance. There are no longer any 80/20 loans that I am aware of. IF you improve yoru home and can demonstrate that the LTV is 78% they will remove your MI... Quote Link to comment Share on other sites More sharing options...
sundaynfl Posted January 25, 2012 Share Posted January 25, 2012 Just went through this exact thing this afternoon. We're doing a refi and, unfortunately, our house appraised out lower than we were hoping. Enough so that it would have pushed us up above 80%. One of the brokers were were working with said there were programs for people with excellent credit that allowed you to take out more than 80% and avoid PMI. Thing is, her loans weren't as good in general than the guy we went with. Knowing this might be the case and shifting from a 30 to a 15 because we wanted to pay the house off sooner, we were prepared to simply bring cash to the table at closing to get the loan in line. After all, it's not money lost like PMI would be. It's money we apparently already lost do to our house apparently losing value recently. At any rate, we had two options. Either pay the cash up front or pay about 30% of that same amount, spread over the next 2 years. I'm leaning towards just nutting up with the cash at closing because we have it and, again, it's not like we're throwing it away. The principle will decrease accordingly, thus saving us money on interest right off the bat. On a related note, I effing hate my appraiser even more now. I had to bite my freaking tongue the entire time of the walk through because he was spouting crap like he'd been listening to Rush Limbaugh on the drive over. "It's a well known fact that..." I would suggest doing a HELOC and make up the difference that way. If HELOCS scare you then just pay it off, but keep it open for emergencies! Quote Link to comment Share on other sites More sharing options...
detlef Posted January 25, 2012 Share Posted January 25, 2012 I would suggest doing a HELOC and make up the difference that way. If HELOCS scare you then just pay it off, but keep it open for emergencies! HELOCs don't scare me but, again, we're sort of in "pay off the house" mode anyway, hence the switch from a 30 to a 15. So, this is sort of an extension of that theory IMO. We were about to start just overpaying our monthlies when I decided that we may as well get a better rate and get into a shorter loan if that was the case anyway. Quote Link to comment Share on other sites More sharing options...
Big Country Posted January 25, 2012 Share Posted January 25, 2012 HELOCs don't scare me but, again, we're sort of in "pay off the house" mode anyway, hence the switch from a 30 to a 15. So, this is sort of an extension of that theory IMO. We were about to start just overpaying our monthlies when I decided that we may as well get a better rate and get into a shorter loan if that was the case anyway. Not that it applies to your particular situation (and I just recently went from a 30 year to a 20 year in October time frame and am already looking at the no cost options out there to refi again and lower the rate on another 20 year), but, especially for people with varying monthly income, one could always go with a 30 year loan but pay it off on a 15 year schedule (either extra principal monthly or a yearly lump sum extra, etc.), but in the months when things are lean, they have a lower required expenditure. Granted, you would be paying a slight premium on the rate for the longer term. Quote Link to comment Share on other sites More sharing options...
detlef Posted January 25, 2012 Share Posted January 25, 2012 Not that it applies to your particular situation (and I just recently went from a 30 year to a 20 year in October time frame and am already looking at the no cost options out there to refi again and lower the rate on another 20 year), but, especially for people with varying monthly income, one could always go with a 30 year loan but pay it off on a 15 year schedule (either extra principal monthly or a yearly lump sum extra, etc.), but in the months when things are lean, they have a lower required expenditure. Granted, you would be paying a slight premium on the rate for the longer term. Understood, but even at 15 years, our mortgage payments amount to about 10% of our pre-tax income, so we didn't figure it was any sweat. If we lived in a place where the income: cost of housing was not as favorable as where we are (read: where we were living before we moved here), we'd likely consider doing that very thing. Quote Link to comment Share on other sites More sharing options...
MrTed46 Posted January 25, 2012 Author Share Posted January 25, 2012 Conventional loans require 20% down to avoid MI or you can do an 80 percent 1st and a 15% second and avoid mortgage insurance. There are no longer any 80/20 loans that I am aware of. IF you improve yoru home and can demonstrate that the LTV is 78% they will remove your MI... I am not understanding. Is it possible to get MI AND a conventional loan (15% down)? If so, how is the MI calculated. Quote Link to comment Share on other sites More sharing options...
Big Country Posted January 25, 2012 Share Posted January 25, 2012 I am not understanding. Is it possible to get MI AND a conventional loan (15% down)? If so, how is the MI calculated. Based on my non-professional understanding of this (ie, I'll let the professionals on the board confirm/correct if needed): To avoid MI you need to have 20% down. If you don't have 20% down, you can take a loan for 80% and a secondary loan for whatever percent above 80% you need in addition to your downpayment, up to 15%, in order to avoid paying MI. If you do not have 20% to put down and choose to go the route of just a single loan for greater than an 80% LTV, MI will generally be required. According to the description here, it is calculated based on: Every lender sets its own mortgage insurance rate amount relative to the total amount of your mortgage. Rates vary by the length of your mortgage, the size of your down payment and sometimes even your credit score. Mortgage insurance premiums vary from 50 BPS, or half of 1 percent, to 600 BPS, or 6 percent. The average private mortgage insurance annual premium is 60 BPS, according to "The New York Times," while the average FHA mortgage insurance annual premium is between 25 and 90 BPS. So, in theory, if you only have 15% to put down and have a loan for 85% of the value of the house, you'll pay PMI based in part on the amount of that loan for 85%. The PMI would be less than the amount paid if you only had 5% to put down and took out a loan for 95% of the value of the house. Quote Link to comment Share on other sites More sharing options...
Big Country Posted January 25, 2012 Share Posted January 25, 2012 Understood, but even at 15 years, our mortgage payments amount to about 10% of our pre-tax income, so we didn't figure it was any sweat. If we lived in a place where the income: cost of housing was not as favorable as where we are (read: where we were living before we moved here), we'd likely consider doing that very thing. Just curious, with the 15 year only come to about 10% of your pretax income, and your primary goal being "pay off the house", did you consider options such as a 10-year fixed or even a 7/1 ARM and paying on a 7 year schedule? Assuming you would consider your income to be relatively secure (hard to do in the current economy for most), I would think that one of those options could provide you with more bang for your buck and get your mortgage paid off with a lot less interest paid. My intent is not to pry into personal details of your overall budget, just throwing out some options that may fit in with your income/expenses level and save you a significant amount of money over the long run. Quote Link to comment Share on other sites More sharing options...
detlef Posted January 26, 2012 Share Posted January 26, 2012 Just curious, with the 15 year only come to about 10% of your pretax income, and your primary goal being "pay off the house", did you consider options such as a 10-year fixed or even a 7/1 ARM and paying on a 7 year schedule? Assuming you would consider your income to be relatively secure (hard to do in the current economy for most), I would think that one of those options could provide you with more bang for your buck and get your mortgage paid off with a lot less interest paid. My intent is not to pry into personal details of your overall budget, just throwing out some options that may fit in with your income/expenses level and save you a significant amount of money over the long run. Now that we've got the home loan locked in at 3.375%, we're happy with the rate that we're paying it off and will be looking to do other things with our money. So, in other words, paying off the house is a priority, enough of one to move from a 30 to a 15, but not at the complete exclusion of other investment avenues. Quote Link to comment Share on other sites More sharing options...
sundaynfl Posted January 26, 2012 Share Posted January 26, 2012 I am not understanding. Is it possible to get MI AND a conventional loan (15% down)? If so, how is the MI calculated. Yes... MI is calculated based on the LTV 90-95%, 85-90% and 80-85%... Credit scores, property type and where the property is located are huge factors in calculating the MI. Quote Link to comment Share on other sites More sharing options...
MrTed46 Posted January 26, 2012 Author Share Posted January 26, 2012 Yes... MI is calculated based on the LTV 90-95%, 85-90% and 80-85%... Credit scores, property type and where the property is located are huge factors in calculating the MI. Thanks. I guess I will talk to a broker and see which makes sense, 80-5-15 loan or 85 w MI I do not want FHA loan Quote Link to comment Share on other sites More sharing options...
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