should I do a 80/20 mortage or downpayment from line of credit?

Question

I want to buy a house, and I received a preapproved
letter of credit from BOFA for 50,000 with a monthly payment of
735.00 for 96 months and a rate of 7.99% APR (there is
also a 3% transaction fee) . do you think is this a
good idea to put this money for a house down payment as opposed to do 80/20 mortgage with no down payment with the first being 7.00 and the second mortage being 8.99 APR?? will that make sense???? will my score (773, 745. 698) go lower if i do this and maybe my APR will be higher????

the price of the house is 350,000

Answer 1

Assuming you live in the US:

If you use an 80/20 mortgage for financing. and you live in the house, you may be able to deduct the interest on BOTH mortgages from your taxes. If you use the credit line, that interest is not tax deductible.

Also, the type of credit you have does affect your credit score.
Loans like a mortgage or car loan have less negative impact on your credit score than unsecured credit lines.

One more thing to consider: Your payment for your second mortgage may be lower than the credit line because you are spreading your payments out over a longer period of time. Yes, the interest rate will be higher, but the payment will be smaller.
This will affect your debt to income ratio and may adversely affect you getting either mortgage.

Last but not least: Most mailed pre-approvals from credit companies are an attempt to get you to actually apply for a loan. They may not actually approve you for that amount or after you complete an application, slightly change the terms of the loan. Either way, if you apply, they will have permission to pull a credit report and THAT will drop your credit score as well.

I hope this helps!

Please e-mail at [e-mail] with any further questions.

Best of Luck!

Anne

Answer 2

There are too many factors left out to properly analyze this series of questions... Value of the home to be purchased, value of the home you already have, what the LTV's would be if you were to use the HELOC, etc, etc....I would need to talk with you over the phone to evaluate your entire situation to make an appropriately educated plan of action for you and your specific needs.

Also, in reference to one of the above answers, you wouldn't be paying PMI (private mortgage insurance) on an 80/20 loan. That's the WHOLE purpose of using an 80/20 loan program, so no one loan is more than 80% which would trigger the need for PMI.

Using that equity in your primary residence to fund the down payment on a second property, is not an inherently bad idea, but there is definitely a course of action and many facets to be considered.

Your APR or annual percentage rate is based upon the total cost of your mortgage loan expressed as an annual interest rate. This includes the base interest rate, mortgage insurance, origination fees, and some other related fees.

You should not take any significant hit to your credit scores for having a second mortgage, just don't miss the payments :)

Also, with those credit scores, those interest rates seem higher than normal, you may want to shop around for rates a little.

One thing as well is the types of loans each of yours would be...I have some thoughts on that, but would be too much for the context of this question and answer session.

I hope I helped answer your questions, if not feel free to drop me a line.

Answer 3

You need to see another Broker - you can get a 1 loan, at a jumbo and not have the 2 payments.

Your 80 percent at 280,000 7.99 % = 2052.58 mo
Your 20 percent at 70,000 8.99%= 562.73 mo
For a total of 2615.31 month. You did not mention if this was an adjustable or a fixed rate.

The market is still good -

350,000 @ 7.25 % = 2,387.61 month 1 loan no MI - that is at 100 percent - go 95 percent - bring in 5 percent = 17,500 and get even a lower rate....Depends on some more information, but you could even get a lower rate - have 15 companies I underwrite with. But you do not need the 80/20 combo. The person is taking you conforming and normally on a conforming deal, you are charged MI insurance for anything over 80 percent LTV (Loan To Value). Some company's do not charge MI - or you can add .25 to the rate and not have MI - lots of variables to consider - Get a 2nd oponion - ok.....check your options...

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.


Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

Good Luck, and if I can help in any way check out my web site, for links to all the credit reporting agency's and other useful information. This is not an advertisement - just helpful information for you...

There are also, interest only loans - adjustable loans, option arms (where you pick the payment, from 4 payments, including interest only). Interest only are lower payments, but nothing is being paid on your home. Some self-employed ppl like the payment options, in a lean month when money is tight., they can pay a lesser amount.

As I mentioned to you, Good Luck - the Loan Process can be fun - at least I love being a Broker, getting to help my clients is rewarding to me. Find a Broker who cares and will go over the full loan process with you and be in contact with you daily. The one on one customer service is important, to you, the client, to let you know the whole loan process.

Answer 4

I'm having a hard time figuring out how you, with your credit score, were unable to get 100% financing for your house? your score is A paper rate and your rate could be better than what you were approved for. with an 80/20 the mortgage insurance (usually required) will kill you. something is seriously wrong here. you should be at a par rate with a rate at least 1 point lower. I believe you may be getting ripped off here.

Answer 5

I work for United Lebders Group and i can get you alot BETTER rates than that dont go through BofA. I work with 45 differ banking companies so no matter what your credit i can beat those ugly rates.
916-606-1090
keyon

Answer 6

It is better to go with 80/20 it is not effect your credit if you pay on time, and you can also deduc your interest payments from your tax

Good luck

PS. I think you should call Mrs. Palmer, I read her ansver is the best one she looks she know what she doing.

Answer 7

Don't use the line of credit for the downpayment. Be an American and put some real equity into the home!

Answer 8

sure by way of fact the two the preliminary mortgage and the fairness line are secured via a lien on the valuables. in case you pay the indoors maximum loan and not the fairness line, and the two duties are with different banks, in basic terms the financial business enterprise that holds the unpaid mortgage can take your place.