What are my options Not to pay PMI with 10% down.

I am about to buy a home and can pay only 10% downpayment. I dont want to Pay PMI and hence am trying to see what are my options. Since 2nd Mortgages are almost impossible to get, what are my options now to finance another 10% to avoid PMI.

Here are some details.

1. Home in BayArea CA.
2. I am a First Time Home buyer
3. Very good Credit Score.
4. Over 100k Salary.
5. Loan under process.
6. Home Appraisal by the lending bank came up 3% above the purchase price.So the home already has about 3% equity apart from the 10% downpayment I will be making.

Thanks for your suggestions.
Hans23

The appraisal for a purchase has nothing to do with your LTV. The value of the home is what you're paying for it in the eyes of lenders. That 3% doesn't exist.

There are no other options to get out of paying MI other than 1) putting 20% down or 2) getting a 2nd lien. Lenders offer Mortgage Insurance or a 2nd Lien to mitigate their potential risk over 80% LTV.

Find a bank or other source to loan without PMI. (few and far between i know)

I maybe wrong but GOVT loans are the only ones that legally require PMI. Others just do it because it protects them (its smart). Search around ... good luck.

PS: any rich relatives?

owenscott said:
I maybe wrong but GOVT loans are the only ones that legally require PMI. Others just do it because it protects them (its smart).


Since Fannie, Freddie, and FHA are all owned by the government then pretty much your only choices for loan qualification is through government sources. There are no Sub-prime lender anymore because the secondary market has collapsed.

All the above programs require mortgage insurance with a 1st lien Loan to Value about 80%.

Ask your lender if they have lender paid MI. You may pay a higher rate though to get rid of the PMI.

Guys,
Thanks for your advices.
As many of you stated, all the current programs require PMI be it Govt or Private. I am still trying to see if I can get a second mortgage.
The PMI for me wont be tax deductible since my wife works too and we are above the income limit for the PMI to be tax deducted.

Hans

Since I work for a FDIC insured bank I need to yell: "NO NO NO, FRAUD, FRAUD, FRAUD". This is loan fraud and it doesn't meet the No Oral Agreements Clause/Disclosure in ALL Mortgage Loans Paperwork signed at closing.

The other thing is that the above scenario just doesn't work. The buyer has to have bonafide funds in your own account for downpayment. A seller who is not family can in no circumstances give the buyer the down payment before closing. Probably 40% of the work on every file I do now is proving whether 100% of the funds to close is the buyer's bonafide funds. It makes my head spin and adds to my stress level how many times I see un-explained deposits in a buyers accounts. We look for it for 90 days in some cases on your bank statements. We as banks are actively looking for these types of transactions.

You may have to do this the old fashion way, wait until you can afford the house.

Hans23 said: Once again, Thanks for your advices. I am only looking for legal ways of getting rid of PMI.

Hans

There really are none. Your options are to buy a cheaper house, wait until you have more money saved up, or pay off the loan as quickly as possible at first so that you get below 80% LTV.

ppatin said: Hans23 said: Once again, Thanks for your advices. I am only looking for legal ways of getting rid of PMI.

Hans

There really are none. Your options are to buy a cheaper house, wait until you have more money saved up, or pay off the loan as quickly as possible at first so that you get below 80% LTV.

Even that won't get rid of PMI usually. It's required to be held for several years in many mortgage agreements regardless of LTV.

woowoo2 said: Join the Army.....
VA loan = No PMI

Not entirely correct. On VA there is no Monthly Mortgage Insurance but they have a VA Funding Fee for 2.15%-3.30% of the loan amount.(Waived with 10% Disability or can be reduced in some cases)

This is essentially a Mortgage Insurance Policy that is being paid upfront to VA to insure your loan. You pay a big chunk upfront but dont pay a monthly fee.

ppatin said: brettdoyle said: ppatin said: Hans23 said: Once again, Thanks for your advices. I am only looking for legal ways of getting rid of PMI.

Hans

There really are none. Your options are to buy a cheaper house, wait until you have more money saved up, or pay off the loan as quickly as possible at first so that you get below 80% LTV.

Even that won't get rid of PMI usually. It's required to be held for several years in many mortgage agreements regardless of LTV.

I'm pretty sure the law requires that PMI be removed once the LTV ratio hits 78%.

Actually what the law states is that it has to be removed at 78% LTV of the "original amortization schedule". This means that PMI legally has to be removed when you were originally scheduled to pay your loan down to 78%. If you read the law it is not clear about early pre-payment. What it does say is that you as the buyer can request it to be removed when your current value is below 80%LTV and with 2 years of Good Payments. The mortgage servicer does have the ability to remove it earlier at their discretion if you pay the LTV down but they do not legally have to "cancel" with less than 2 years of good payments.

Colt2001 said: woowoo2 said: Join the Army.....
VA loan = No PMI

Not entirely correct. On VA there is no Monthly Mortgage Insurance but they have a VA Funding Fee for 2.15%-3.30% of the loan amount.(Waived with 10% Disability or can be reduced in some cases)

This is essentially a Mortgage Insurance Policy that is being paid upfront to VA to insure your loan. You pay a big chunk upfront but dont pay a monthly fee.

Nice work cherry picking information. Here is the real info from the VA website.

Type of Veteran Down Payment First Time Use Subsequent Use for loans from 1/1/04 to 9/30/11
Regular Military None 2.15% 3.3%
5% or more 1.50% 1.50%
10% or more 1.25% 1.25%

Reserves/
National Guard None 2.4% 3.3% *
5% or more 1.75% 1.75%
10% or more 1.5% 1.5%

Good luck getting a deal with no PMI in this environment.

Avoiding PMI for the sake of avoiding PMI is misguided.

Your concern should be the total cost of credit, which is a combination of the fees to close, plus the portion of your monthly payment that does not reduce the balance. Whether a dollar goes to PMI or interest is irrelevant - it is still a dollar you must pay to carry the loan. At least with PMI, amortization, reappraisal, and additional principal payments can help eliminate it.

Are there loans out there without PMI at that LTV? Yes, but unless you want to take a variable purchase money HELOC, and can find it at a local bank or credit union, or you happen to have a private banker, then you are out of luck. I don't know why you wouldn't want to lock in a fixed rate with PMI, given how absurdly low rates are now, both on a historical basis, and relative to the inflation outlook. Depending on your credit profile, the cheapest loan in the long run will be either FHA or Agency (Fannie/Freddie).

VA loans do have "PMI", but by another name.

Just how much is this home that you make $100,000 a year and don't have 20%?

Do an 80-10-10 mortgage.

FIrst mortgage for 80%, 10% 2nd mortgage or HELOC, 10% down.

the first mortgage (the 80%) sees the other 20% as a traditional downpayment so there's no PMI. and the interest on the 2nd mortgage is tax-deductible too.

Not sure exactly what your asking .... but my loan NON FHA had option for paying the PMI upfront or monthly. So i guess the answer to what i thought you were asking is other mortgage products do have differing options for PMI.

Yep ... what mine was called TAMI, tax advantage mortgage insurance, but you have to realize you can never get that back, Its paid and no refund if if you pay down below 78% ahead of schedule ...

Yes, but this is better than paying the monthly premiums. You have to pay them for, at a minimum, 24 months. Then you have to pay for an appraisal once you think that the LTV is <=80. Assuming that the equity will be there in 2 years from appreciation, the upfront premium is still 10/mo cheaper than the monthly premiums. I have not calculated the breakeven interest rate, but it would have to be above average to make the monthly premiums a better deal.