Might sound stupid but, if my wife doesnt find a full time job down here before we buy, I think im going to put ~15% down even though I have over 20% for the price range we are looking at. I'll have to eat PMI for a bit but I'll get to keep some extra money in the savings/emergency fund just because you never know how secure your job is in this kind of market. If she gets a full time job i'd probably dump the other 5% in to clear off the PMI and just start saving up again.

someone at work was saying to go ahead and put down 20% and then get an equity line of credit that is there in case of an emergency but I'm just a little weary of that

[Edited on December 17, 2009 at 12:49 PM. Reason : ]

12/17/2009 12:47:30 PM

Would PMI go away if you just paid down 5% of the loan? Like, maybe you put down 15%, your wife finds a job, and you drop another 5% to get rid of PMI?

12/17/2009 12:53:00 PM

As far as I understood it from the bit I have read about it: yes, for a conventional loan it is not a penalty over the life of the loan. Anyone with more knowledge than me on this subject (not hard to surpass haha) feel free to correct me. Because I could be completely incorrect and don't want to mislead anyone.

[Edited on December 17, 2009 at 12:57 PM. Reason : ]

12/17/2009 12:55:25 PM

Quote :

"someone at work was saying to go ahead and put down 20% and then get an equity line of credit that is there in case of an emergency but I'm just a little weary of that"

I've been tempted to set up an equity line for that very purpose.

12/17/2009 4:45:40 PM

I got an equity line when I refi'd. It cost me nothing and they sent me a checkbook and and ATM card good for quite a bit of money (think new mid-range Honda, not new Bimmer). I've never used it, but if it made the difference on me getting in on a great investment I'd consider it. I'd never use it for depreciating goods like a lot of people though.

[Edited on December 17, 2009 at 8:17 PM. Reason : l]

12/17/2009 8:17:18 PM

What are the pros and cons of FHA and conventional loan? I don't know if I should get FHA or conventional. With the conventional, I have to pay about $150 PMI/month.

12/24/2009 10:54:57 AM

PMI goes away as soon as you pay off 20% of the home's value. If you put down 15%, you will be paying PMI until you pay off an additional 5% of the principal (remember, most of the early payments go towards intrest).

If you put down 15% now and a year or two from now the house value goes up 5%, you can have a new appraisal done and send it to the mortgage company and they will remove the PMI as long as you have 20% equity in the house.

12/24/2009 11:12:24 AM

You really need to do your homework if you're going to consider peeing away $150 a month in PMI. I know in the initial years, your total payment is going mostly to interest anyway, I just couldn't get happy with the idea of having to pay $150 in "insurance" even though I could afford the home just fine. Unless you're in some sort of situation where you HAVE to have a house right now (ie, you're paying a ton in rent and don't want to move to a smaller more affordable place), it's better to just wait until you have the down payment saved up.

12/24/2009 11:37:43 AM

At least you can write it off now. It didn't used to be that way.

12/24/2009 1:39:02 PM

It helps, but in a 30% tax bracket you're still forking over $100 a month to...nothing.

12/25/2009 12:02:07 AM

After reading up on PMI, I think I'll probably go with the combo loan route. What's the disadvantage of combo loan?

12/25/2009 12:31:42 AM

You didn't read up on that, too?

12/25/2009 12:58:53 AM

I don't see anything else beside the higher interest on the 2nd loan.

12/25/2009 1:19:38 AM

There isnt a disadvantage to having a second loan, besides the terms of the second loan. I recently did a combo of 80-15-5. 80% first, 15% down, 5% Home Equity Line of Credit. It helps to keep the amount out of pocket down, while still qualifying for things like: lower loan interest rate on the first, the option of not doing escrow accounts for items like taxes and HOA, not having PMI, and if you get a Home Equity Line of Credit its like haveing a line of credit at whatever interest rate terms that you decide on at purchase. You could buy a car or home improvements with it without going through setting up a new loan.

After shopping a while I found most of the terms on the second loans are variable interest rates but you can find a few with fixed rates. They are typically higher than the first and most of the ones I saw were prime plus 1% with a set minimum % rate that it couldnt go below ( I believe prime was at 3% when i locked and most offers out there were minimum 5%. I also remember seeing most of the second loans were interest only so be sure to make a plan to pay principle back.

I went with the combo i talked about above (85-15-5) with the 5% kept within my bank and the 80% was sold to " A big stage coach " company soon after closing. The Bank still offered a better rate on the 80% than when i shopped with the " Fells Wargo " company before decideing on my lender.

12/26/2009 2:41:19 PM