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Buying new home, need your thoughts on mortgage.

srp49ers

srp49ers

Senior member
We are buying a new home. The builder is offering a 5% down no pmi loan @3.5.
Is there anything to be aware of compared to just putting the 20% down to avoid PMI.

I understand that the lender is charging a slightly higher rate for this no pmi loan.

Any advise would be greatly appreciated. thanks.
 
3.5% is pretty decent.

Your monthly payment will be a bit higher than with a traditional 20% down loan...but your up-front costs will be considerably lower.

Make sure that the mortgage being offered is a fixed rate mortgage, not an adjustable...
 
That's a pretty competitive rate and depending on the cost of the home would take a long time to make up the difference paid in interest/closing vs what you pay in PMI.

PMI can be $100+ a month. An 1/8 of a point in interest could be like $15. You'll be hard up to get a much better rate than the 3.5% they are offering. It's not out of line with the market at all (assuming 30 year deal).

It really comes down to your comfort level and what the opportunity cost is of using 20% down. Do you have other loans (cars, student loans, ect) that you could use that extra 15% to pay off instead?
 
Is there a difference in closing costs in regards to 5% down vs 20% down?

If there is no PMI and the closing costs are the same, the 5% down sounds like a good deal. You can always pay more principal at any time on the loan if you like.
 
closing costs are $9,120. Payments also include a $32/mo bond payment (unsure of this charge).

vs BankOfAmerica with closing cost of $7,314. @3.25 interest rate.
 
That's not a terrible difference in closing costs. Have you tried to negotiate the closing costs with the builder? Many times, some items are very negotiable...

Have you asked for an itemized list of the closing costs?

Have you looked into something like an FHA loan? You can get in for as little as 3% down...but you WILL have to pay PMI until you reach 22% equity.
 
Something is not adding up at all there. Is that 5% down included in the closing costs? Or in addition to? Because that is an insane amount of closing costs. If it's new construction there should be no (or little)interest or escrow on taxes to include as you won't be full assessed yet. You'll basically be paying orientation fees, appraisal, first years insurance potentially....a couple grand of fees. But not $9,000.

And at 3.25% that has to be a 15 year rate. Not a 30. Unless those fees include a massive amount of points paid in which this case would take almost the life of the loan to repay.

You really need to look at the good faith estimates and see what is going on there. Those are very expensive closing costs.
 
vi edit said:
And at 3.25% that has to be a 15 year rate. Not a 30. Unless those fees include a massive amount of points paid in which this case would take almost the life of the loan to repay.
Click to expand...

Not anymore. I just refinanced to 3.25 on a 30 year loan for my house in August.
 
There is PMI. It is just paid for by the lender, with SPLPMI, or SPBPMI, with the rebate covering the upfront lump sum. Basically the same thing.
They can choose to do it monthly, or with one large buy-out.

Being in the business, you are paying some discount for that rate at 95% LTV. But since you are buying from a builder direct, I bet they are contributing to the 1-2 points that rate costs.
 
DAGTA said:
And at 3.25% that has to be a 15 year rate. Not a 30. Unless those fees include a massive amount of points paid in which this case would take almost the life of the loan to repay. Not anymore. I just refinanced to 3.25 on a 30 year loan for my house in August.
Click to expand...

What were your closing costs? They are building that back in somewhere. Rates hit a historical low of 3.5 a week or two ago for 30 year mortgages.
 
vi edit said:
What were your closing costs? They are building that back in somewhere. Rates hit a historical low of 3.5 a week or two ago for 30 year mortgages.
Click to expand...


I am doing a loan for my father right now, 3.25% with me crediting him 1% towards closing costs. There are ALWAYS closing costs.
 
My mortgage was similar. We had a small downpayment, and paid about $1,800 in PMI upfront. The lender then did not require it on the monthly payment.
 
vi edit said:
What were your closing costs? They are building that back in somewhere. Rates hit a historical low of 3.5 a week or two ago for 30 year mortgages.
Click to expand...

$3261.78 of which $1319.83 was for the initial deposit in the new escrow account, so $1941.45 that went to other people.
 
since new homes usually don't have property tax first few years, hence less closing costs; looks like you had to pay some points to get rate to 3.5% and no PMI.
Best rate you can get today is 3.125% with 20% down and 1 point origination fee.
So give us good faith estimate and then we can give you the answer.
 
That's a pretty good rate. How many years?

Make sure you have options to pay more if you want to. Go with something that wont be too tight, but when you can just put more on it or increase the payments a bit. And yes, go fixed. Variable is a gamble, it can be better, but it can be worse.
 
vi edit said:
Because that is an insane amount of closing costs. If it's new construction there should be no (or little)interest or escrow on taxes to include as you won't be full assessed yet. You'll basically be paying orientation fees, appraisal, first years insurance potentially....a couple grand of fees. But not $9,000.
Click to expand...

Not really...we don't know the cost of the house, or the local tax on the purchase, and you can bet that there is probably an origination fee in there somewhere.
 
jagec said:
Not really...we don't know the cost of the house, or the local tax on the purchase, and you can bet that there is probably an origination fee in there somewhere.
Click to expand...

err, you need to know all those things before you sign on the dotted line...
 
sdifox said:
err, you need to know all those things before you sign on the dotted line...
Click to expand...

We, as in, us people on the internet, don't know the OP's numbers, and so we can't make an educated statement on whether his closing costs are low or high. That was my point.
 
jagec said:
We, as in, us people on the internet, don't know the OP's numbers, and so we can't make an educated statement on whether his closing costs are low or high. That was my point.
Click to expand...

sorry, misread. thought you were op :whiste:
 
I just bought a new-to-me house. I put 5% down on a 15-year loan. I paid up-front PMI at about 2.5% of the purchase price, which was financed in the loan. My rate is 2.875% with no monthly PMI.

If you can afford a 15-year loan, I definitely recommend it. With a 30-year loan, I would be paying an extra $60k in interest over the life of the loan. Also, if I have to sell the house in a few years for some reason, I will have actually paid down the mortgage a decent amount. If you do require PMI, then it's much higher on a 30-year than a 15-year loan.
 
kalrith said:
I just bought a new-to-me house. I put 5% down on a 15-year loan. I paid up-front PMI at about 2.5% of the purchase price, which was financed in the loan. My rate is 2.875% with no monthly PMI.

If you can afford a 15-year loan, I definitely recommend it. With a 30-year loan, I would be paying an extra $60k in interest over the life of the loan. Also, if I have to sell the house in a few years for some reason, I will have actually paid down the mortgage a decent amount. If you do require PMI, then it's much higher on a 30-year than a 15-year loan.
Click to expand...

Depending on the rates, it can be worth it to get a 5-yr ARM instead of a 15-year loan (similar interest rates), but make payments as if you were on a 15-year. That way if money gets tight, you can drop back to the 30-year payments, but if not, you still pay it off in 15 years and save on interest.
 
jagec said:
Depending on the rates, it can be worth it to get a 5-yr ARM instead of a 15-year loan (similar interest rates), but make payments as if you were on a 15-year. That way if money gets tight, you can drop back to the 30-year payments, but if not, you still pay it off in 15 years and save on interest.
Click to expand...

Yes except for the fact that the cieling is going to be 5 points over your original rate, and you'll be shitting your pants after 60 months when you have to stay in your ARM due to rates climbing higher than your index+margin.

This is why I stay out of these threads, they make my head hurt with the bad info.

5/1 ARMs are for if you plan on staying in the home for about that amount of time or less, or if you have a very large loan that the difference in rate makes a tremendous difference in payment.
 
OCGuy said:
Yes except for the fact that the cieling is going to be 5 points over your original rate, and you'll be shitting your pants after 60 months when you have to stay in your ARM due to rates climbing higher than your index+margin.
Click to expand...

Considering that the Fed is going to keep rates around 0% for the foreseeable future, and that even if the ARM did rise by the maximum amount EVERY year (unlikely) it still wouldn't exceed the 15-year payment, your concerns aren't entirely warranted. Obviously it's a risk, but so is the 15-year mortgage, in a different sort of way.
 
5% down is a red flag for me. If you can't afford 20%, you can't afford the home. That's my two cents anyway.
 
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