Houses (You really pay for location dont you)

[MassHavoc]

Yeah it's terrifying to me too, and that's why I was curious. I feel like the larger down payment is the way to go, but if I can't do that I'm trying to figure out a way to mitigate the difference.</p>

 

[TSD]

<blockquote class="ipsBlockquote" data-author="MassHavoc" data-cid="196696" data-time="1369147687">
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Yeah it's terrifying to me too, and that's why I was curious. I feel like the larger down payment is the way to go, but if I can't do that I'm trying to figure out a way to mitigate the difference.</p>
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 </p>


 </p>


Just an FYI though a bigger down payment barely does crap for your monthly payment, taxes are a much bigger factor....because of the ranges  I think grimson said his taxes were 5500, If his house was 160k or lower Hed be paying more for taxes each month than for his house.  </p>


 </p>


put 20k Down on a 150k house  mortgage = $361         5k down on a 150k house mortgage = $402.   So the difference in keeping a little nest egg and not is 40 bucks a month.</p>

 

[The Count Dante]

I hear ya. For me, the larger down payment would be to lower the PMI costs. The conventional wisdom is if you have the credit score and the money to put down, dont go FHA. I had both the money and the credit score and still went FHA.</p>


 </p>


When I saw the numbers laid out for me with both, the increased overall costs for the FHA will be mitigated by my making more than 12 monthly payments a year. So rather than putting it all down up front (which would have cut HARD into any liquidity I would have), I decided to space it out. I am required to pay the insurance premium for 5 years, so I worked my budget to be right at the 78% loan to value ratio and ditch the MMI portion of my insurance. Basically, I chose to space out my "PMI" prevention 20% down over 5 years instead of right up front. There is also some risk here in that I am banking on the value of my place to maintain and increase (which I have been good with thus far) in order to hit my 78% mark.</p>


 </p>


For me the FHA was the smarter overall decision, if not completely the smartest financial one. But that decision was made based on me, the amount, the property, and the unit itself. If I was to go into say a sky-rise with 20 other units open, the risk of the place maintaining value would not be as sound. But in my building, there has not been an open unit but mine since I bought.</p>


 </p>


I would have it laid out in front of you and work the numbers so you can see. Also be completely honest with yourself (and family) and what is the best thing for you. I could be in a situation where a 20% down would be cheaper in the long run for me. But my piece of mind is worth more than I might save or earn over the long haul when I never look at my life that far in advance. The FHA, coupled with the ability and discipline to make additional payments over making the initial increased down payment, was the best solution for me.</p>

 

[MassHavoc]

<blockquote class="ipsBlockquote" data-author="The Count Dante" data-cid="196706" data-time="1369149834">
<div>


I hear ya. For me, the larger down payment would be to lower the PMI costs. The conventional wisdom is if you have the credit score and the money to put down, dont go FHA. I had both the money and the credit score and still went FHA.</p>


 </p>


When I saw the numbers laid out for me with both, the increased overall costs for the FHA will be mitigated by my making more than 12 monthly payments a year. So rather than putting it all down up front (which would have cut HARD into any liquidity I would have), I decided to space it out. I am required to pay the insurance premium for 5 years, so I worked my budget to be right at the 78% loan to value ratio and ditch the MMI portion of my insurance. Basically, I chose to space out my "PMI" prevention 20% down over 5 years instead of right up front. There is also some risk here in that I am banking on the value of my place to maintain and increase (which I have been good with thus far) in order to hit my 78% mark.</p>


 </p>


For me the FHA was the smarter overall decision, if not completely the smartest financial one. But that decision was made based on me, the amount, the property, and the unit itself. If I was to go into say a sky-rise with 20 other units open, the risk of the place maintaining value would not be as sound. But in my building, there has not been an open unit but mine since I bought.</p>


 </p>


I would have it laid out in front of you and work the numbers so you can see. Also be completely honest with yourself (and family) and what is the best thing for you. I could be in a situation where a 20% down would be cheaper in the long run for me. But my piece of mind is worth more than I might save or earn over the long haul when I never look at my life that far in advance. The FHA, coupled with the ability and discipline to make additional payments over making the initial increased down payment, was the best solution for me.</p>
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Thanks for this, that is more to what I was asking cause I can't see the numbers in my head without it being out in front of me and there are still too many pieces for me to work with that I don't know about. The problem I keep going over in my head is that the FHA with the PMI ended up being about as much as the mortgage with the 20% down, so I am having a hard time deciding if I want to just bite the bullet and figure it out. What is the 78% significance? Like I said, I've never done this before, is that the PMI mark? And this is going to sound even worse, but what is MMI?</p>

 

[winos5]

For me it was all about getting rid of the PMI and escrow account with the mortgage lender.   I just hated sending sending $4-500 a month to the bank so they could pay my home owners insurance and property taxes for me and then the PMI charge on top of it.   Why let them do that if you don't have too?   I just save that money and pay the bills myself.   I think the worst part about the escrow was the mortgage company arbitrarily adjusting the amount higher and higher every year.</p>

 

[The Count Dante]

I will respond as if I actually know, but I really dont and regurgitating at best... Any and all comments showing me where I am inaccurate are HIGHLY welcomed.</p>


 </p>


As it was explained to me and my understanding of all this...</p>


 </p>


If you put a down payment of less than 20% of the value or sale price, to protect the lender if you dont pay your bills, mortgage insurance will be required. There are two types of this, P(rivate)MI and Govt (FHA). PMI is calculated by how much you put down. FHA it is 3.5% I believe. PMI is usually more than the FHA rate. FHA is usually easier to qualify for and I believe you can even finance the 3.5% down as well (dont hold me to that). FHA was to allow for easier home loans for less than perfect credit and without the huge cost for a downpayment.</p>


 </p>


Once the principal hits 20% paid, lenders must cancel the insurance, PMI or FHA. This means that if you have PMI but the following month walk into a huge sum of money and pay off the principal to 80%, PMI is stopped. With FHA, it is a minimum of 5 years, no matter how much you pay to the principal. Some FHA require it for the life of the loan (which is a bad way to go in my opinion).  </p>


 </p>


For me with the amount I wanted to put down, the PMI would have been very costly. While I could have put 20% down to avoid any MI, I did not want to cripple my liquid money, as the majority of other money was tied up. I had been shopping for awhile and the place I got was the one I wanted and I didnt have time to shuffle moneys, didnt want to pay penalties, and didnt want to expose myself with money woe should I have lost my job or the like. So rather than put 20% down and avoid any insurance, I went with FHA with 3.5% down, smaller monthly insurance and a 5 year mandatory insurance payment. It allowed me to keep the other money I would have used as a down payment invested in short term and available for the "oh shit" moments, should they have come.</p>


 </p>


I also wanted flexibility, should I need to move the place and if I had 20% tied in down payment and took a bath on the property, I was out serious money AND didnt have the protection I wanted (but that was more me being a scared punk too). If you know for a fact that you will keep your place for the long haul and feel ok with the 20% down, any insurance concerns are gone. I wasnt comfortable doing that, but more for personal reasons than really financial ones.</p>

 

[winos5]

I knew I'd be in the house long term.  </p>


 </p>


Renovating and refinancing actually is what allowed me to drop the PMI and escrow account, not my down payment.   We put down 10%, enough to get conventional mortgage and a better rate.   The additional equity we got by renovating, allowed us to drop the PMI/escrow account and has paid huge dividends, even with the housing market crash.</p>

 

[The Count Dante]

See how complicated this shit is?!?</p>

 

[The Count Dante]

<blockquote class="ipsBlockquote" data-author="winos5" data-cid="196750" data-time="1369158034">
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I knew I'd be in the house long term.  </p>


 </p>


Renovating and refinancing actually is what allowed me to drop the PMI and escrow account, not my down payment.   We put down 10%, enough to get conventional mortgage and a better rate.   The additional equity we got by renovating, allowed us to drop the PMI/escrow account and has paid huge dividends, even with the housing market crash.</p>
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 </p>


And yet another way. Since I have a condo, some of this is not an option for me. Unfortunately the bank doesnt care if I upgrade my refrigerator and stove so I can sell the place easier...</p>


 </p>


But Mass, that gives another option as well.</p>

 

[winos5]

Now if I had only been as shrewd in hiring a renovating contractor it would  all be golden.    Lessons learned.</p>

 

[MassHavoc]

How does refinancing help? Just by lowering the rate? Did the reno's raise the value of the place? How does that affect the original loan amount if your place is worth more then?</p>

 

[winos5]

Refinancing caused my property to be appraised again after the renovations giving me a significant jump in value and increased equity in the home.  Yes I also dropped my interest rate as well.</p>

 

[MassHavoc]

How does the increased value of your home drop the PMI and escrow?</p>

 

[winos5]

It gave me more equity.    You need 20% equity in the property value to drop the PMI with a conventional mortage, either as a down payment, or re-appraisal and gained equity during the refinance.   Without the PMI obligation you are not required to have an escrow account as far as I know.   Your just responsible for providing proof of home owners insurance to the lender.  </p>

 

[MassHavoc]

I'm an idiot sorry, I guess I just don't understand how raising the value gives more equity if you have still only paid the same amount in. In my head all I see is 20k paid of 200k loan, and a refi raising the value of the house, but the loan still being the same. What am I missing? I still only own 20k worth of the house even if it's work 250 now?</p>

 

[winos5]

No, if you got 200K mortage on a home worth 200K, put 20K down and refinainced a year later the remaining amount (lets just say 178K for giggles) and the property was valued at 250K on that appraisal then you then you now gained 72K in equity (about 30%) of the value of the home, enough to drop the PMI on the re-financed amount.</p>

 

[MassHavoc]

Interesting... It's not something to bank on, but the area we would look at is sure to be going up a boatload in the next few years.</p>

 

[BlackHawkPaul]

<blockquote class="ipsBlockquote" data-author="winos5" data-cid="196798" data-time="1369163448">
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No, if you got 200K mortage on a home worth 200K, put 20K down and refinainced a year later the remaining amount (lets just say 178K for giggles) and the property was valued at 250K on that appraisal then you then you now gained 72K in equity (about 30%) of the value of the home, enough to drop the PMI on the re-financed amount.</p>
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</blockquote>


This.

We made sure to put down the 20% when we bought.

For some people that can be difficult because 20% of 100K is still 20K.  

It made a huge impact when we refinanced twice to slash our monthly payment by nearly 250 per month. 

We made sure to put our savings on the home back into it so that when it appraised we would receive more equity. 

 </p>

 

[MassHavoc]

How long did it take you guys to refinance? And what are the contributing factors in order to do it?</p>

 

[Tater]

<blockquote class="ipsBlockquote" data-author="MassHavoc" data-cid="196836" data-time="1369172232">
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How long did it take you guys to refinance? And what are the contributing factors in order to do it?</p>
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 </p>


Rates are so low now, you may not even want to refinance a couple years from now.</p>