is it better to buy PMI upfront rather than getting a piggyback loan to avoid PMI?

Question

What's the typical cost of PMI?

Answer 1

If you can't afford to put 20% down on the house, you shouldn't be buying the house. Avoid both.

Answer 2

It's usually better to split your loan into an 80% first and a second, removing the rationale for PMI. However, right now second mortgages don't want to lend where you've got less than 10% equity, so it's PMI or no loan.

And the finance says it works best as a leveraged investment when you put as little cash into the property as possible. The catch is you need to make certain you can afford the fully amortized payments on what you're borrowing, so be careful about that. Here's an article on computing what you can afford

http://www.danmelson.com/2007/01/from-how-much-you-make-to-a-pa.html

(And to the answerer after me: I get paid a flat fee or nothing for seconds, but get full commission for every dollar in that first mortgage. You have it precisely backwards as far as where there's more money for the loan officer. Yet I advise people to split their loans into two rather than paying PMI, where the choice is available)

Answer 3

Don't listen to the loan brokers here (good grief)... the 80/20 thing is what makes them money...and the whole big real estate-mortgage snafu is about half their fault... the other half belonging to the consumers who wanted something for nothing...then who were surprised to see their ARM payments go "up"! To answer YOUR question it is BETTER to get the PMI UPFRONT ( but have 10% down, okay?) .. do not piggy back it into the loan amount. Google Suze Orman, author and public figure in consumer money advice. She mentioned this exact Q&A on Larry King on 10/04/2007.

Answer 4

Never go for either .
Go for a place where you can put the 20% down for real . . .
Unless you like flushing bucks on PMI or loan shark rates on a 2nd .

>