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Discussion Starter · #1 ·
I know that they recommend 20% savings for a downpayment but how bad is it if you are not at that amount? If you don't have a lot of savings what is the best kind of loan to go with....
 

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Having a 20% down payment means that you don't have to pay private mortgage insurance. You will pay the private mortgage insurance every month until you have payed off 20% of your loan. You can also get 2 loans one for 20% and one for 80% and be able to not have PMI.
 

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Discussion Starter · #3 ·
Is that true for no matter how much you put down?...ie we put down 10% then i only have to pay the 10% pmi...Sorry for all the questions...
 

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PMI rates are less the more you put down.<br><br>
Also, consider FHA loans. They are less likely to get you into trouble than subprime lenders.
 

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Discussion Starter · #5 ·
THanks for the help, when i got home from work today i did some research and I found out that PA offers downpayment and closing cost assistance depending on your income. Now its a loan but anything under $14,999 is forgiven at the rate of 20% a year.
 

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We've purchased 3 houses, and we've never put 20% down.<br><br>
The first 2 mortgages were for 90 and 99% of the purchase price, and we paid PMI. Although PMI did add $100 or so to the payment, our mortgage was similar to the cost of renting, so it wasn't a big deal to us. We were still paying PMI when we sold the first house. With the second house, we payed extra towards the principal, and the house appreciated quickly. We refinanced the mortgage after a couple of years, and no longer had to pay the PMI (the loan to property value ratio was now less than 80%).<br><br>
With our third home, we took out two mortgages to avoid PMI. The first mortgage was for 80% of the purchase price. The second mortgage was for 20% minus our down payment. Yes, the mortgage rates are higher for the 2nd mortgage. BUT our monthly payment is less with 2 mortgages than it would've been with one large mortgage + PMI. We got quotes from a couple of different mortgage brokers before we decided to choose this type of mortgage. Our mortgage is our only debt, and we pay extra towards the 2nd mortgage (with the higher interest rate) so that we can pay it down more quickly.
 

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<div>Originally Posted by <strong>sonrisaa29</strong> <a href="/community/forum/post/8001604"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">I know that they recommend 20% savings for a downpayment but how bad is it if you are not at that amount? If you don't have a lot of savings what is the best kind of loan to go with....</div>
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When you have no equity in the house, you put yourself at greater financial risk, so it's not a good idea if your income isn't secure, if you don't have any emergency savings, if the mortgage would stretch your budget, or if you only plan to stay in the house a few years. However, if none of those things are true, low down payment programs can be a good thing, but like a PP said, you're safer going through FHA. We bought our house through a FHA First-time Homebuyer program, and it has worked out well for us.
 

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<div>Originally Posted by <strong>annethcz</strong> <a href="/community/forum/post/8013192"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">we took out two mortgages to avoid PMI. The first mortgage was for 80% of the purchase price. The second mortgage was for 20% minus our down payment. Yes, the mortgage rates are higher for the 2nd mortgage. BUT our monthly payment is less with 2 mortgages than it would've been with one large mortgage + PMI. We got quotes from a couple of different mortgage brokers before we decided to choose this type of mortgage. Our mortgage is our only debt, and we pay extra towards the 2nd mortgage (with the higher interest rate) so that we can pay it down more quickly.</div>
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This is what we did, too. And now that our house has appreciated we are taking out a home equity loan to add on a bedroom. It is at a lower rate than our 2nd mortgage (which is very small now) so we will be paying that off with the loan. I wish we didn't have to take more money on loan, but we only have 2 bedroom for the 5 of us to sleep, play, study in...
 

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<div>Originally Posted by <strong>annethcz</strong> <a href="/community/forum/post/8013192"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
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With our third home, we took out two mortgages to avoid PMI. The first mortgage was for 80% of the purchase price. The second mortgage was for 20% minus our down payment. Yes, the mortgage rates are higher for the 2nd mortgage. BUT our monthly payment is less with 2 mortgages than it would've been with one large mortgage + PMI. We got quotes from a couple of different mortgage brokers before we decided to choose this type of mortgage. Our mortgage is our only debt, and we pay extra towards the 2nd mortgage (with the higher interest rate) so that we can pay it down more quickly.</div>
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We did this, too. We paid 5% down, then financed 80% as the lower rate loan (5%) and 15% at a higher rate (7%).<br><br>
Paid off the 2nd mortgage 2 days ago! Now we owe less than $100K on our home. It's a nice feeling.
 

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Is there a good book on this kind of thing? Like "mortgages for dummies" because we are looking at buying a first house. Only $45k, but we don't have 10% down payment. I have student loans, and I mostly understand them, but all these mortage terms might as well be greek to me.<br>
I need somebody to say, this much you owe this much, this much interest and this much payment - in plain english.
 

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Our house has been increasing in value--if your house is appraised for a higher value as collateral then you may find yourself owing less than 80% of that value much sooner than you get your loan paid down to 80% of the purchase price.<br><br>
A new appraisal can work to your advantage if you refinance as well. Not that you should definitely refinance but when we did our house's value had increased more than from 72,000 to 84,000 in less than 2 years. That's 14% right?<br><br>
OneKnight, if you know anyone personally who you trust in real estate then you should ask who to trust locally for home loans. There are mortgage calculators widely available on line and elsewhere. But there are also "hidden" costs beyond payments and interest and we have had the experience of having someone deliberately hide some to look more competitive. There are a lot of good books and I do recommend doing your homework.<br><br>
One loan officer made his payment calculations for us with no county property tax figured in--he had the documents we'd provided that showed exact amounts for it... He said he included our taxes but it turned out it was only the city's $30/yr but not the county's $800/yr. It was a deliberate lie to win our business.
 
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