PMI or 80/20??

Question

Which is the best way to go when you have no money to put down on a house? :)

Answer 1

It's really best to talk with a mortgage banker, because you have more than just those two options. As of January 1, 2007, PMI is fully tax-deductible just like interest, if you make $100,000 or less per year. The deductibility then decreases up to $110,000. After that, it's not deductible. So you'd need to run some numbers. Lately, I'm finding the PMI to be the more beneficial route.

The 80/20 was such a great deal because your monthly payments would generally be lower, and you'd be able to deduct the interest on your taxes. Now, with rates up, especially on seconds (the 20), your monthly payment tends to be lower with PMI. And you get the full deductibility too! The one little tid-bit, is that it is only for mortgages (purchase/refinances) this year. I'll never understand Congress.

There are a number of different loan programs to research to determine what type of mortgage would be best for you. Your income, lifestyle, home price, expenses, taxes, credit rate, etc. all play a role in determining the best financing for you. Are you getting seller concessions? Do you have enough money to pay the closing costs and taxes?

Find someone you trust to work with, give him/her all your details, and they'll help you discover the financing that will be most beneficial for you.

One other pointer: Right now, you can still get an FHA loan using a down-payment assistance program. Only limited providers are still available. They'll all be pretty much gone after March 2007. FHA is no longer allowing them.

Good luck buying your home! I wish you the best!

NEW NEWS (11/07/07): This is to notify you that FHA is not permitted to implement the down payment assistance rule at this time. Judge Friedman of the United States District Court for the District of Columbia issued a ruling enjoining HUD from implementing the down payment assistance rule, which was to go into effect Oct. 31, 2007. This injunction is applicable to everyone affected by the Rule. HUD will provide further guidance as appropriate.

In other words, down payment assistance programs are not going to be eliminated at this time.

Answer 2

An 80/20. The interest on both the first (80%) and the second (20%) mortgages may be tax deductable for you. PMI is not tax deductable and with the recent fallout of the subprime mortgage market, PMI payments have gone through the roof even for borrowers with good credit. If you're not careful the added expense of PMI could effectively add several percent to the interest rate you pay.

Answer 3

Hi!

80/20's are generally far better than 100's for 30-year fixed loans, but it really depends on the rate you're getting for that 20% loan. Example: If you get 6.25% for a 100% with PMI vs. 6.25% on the 80% and 14% on the remaining 20%, the PMI clearly wins.

When you sit down with a lender, make sure you get them to compare the two loan types. (Heads up: a lot of smaller companies don't offer 80/20's anymore...)

PS I'm a Realtor, so I should know this stuff! ;-) Feel free to ask me any questions directly...good luck with your purchase! I hope it's one of the best experiences in your life.

Answer 4

IMO if you can't save up for a down payment on a house, then you can't afford it...
However, an 80/20 is still better than PMI. Pay off the 20% loan as soon as you can, paying extra, whatever it takes.

Answer 5

Your best bet is to speak with a lender and have him or her lay out the options side by side. What works out best for you will depend on your particular situation. There are also loans that you can get 100% financing with no PMI so ask the lender to give you a couple of scenarios. Bank of America or Wells Fargo have great plans for these types of loans.
Speak with two different lenders to get their information but do not give them your Soc Sec # and ask them not to pull your credit report until you have made a decision based on the information they give you.

Answer 6

look at mycommunity it's 100% financing with discounted PMI....or you can do Lender Paid PMI

Answer 7

Neither is going to help you if you don't have money to put down. If you put down less than 20 pct, you may be required to purchase PMI.

Answer 8

80/20 is the best way to go.
Put down whatever you have 5-10-20%
otherwise it will cost you a fortune in the
long run.

My advice, get the fixed rate. this way you
know your Bill and monthly payment and
what not.

PMI is a waste of your money.

Answer 9

RENT