02-22-2011 08:11 PM
I read on the forum for the Indland Empire that you can get a conventional loan without PMI for as little as 10% down. Is that true in LA County? I don't have 20% down payment and probably won't for at least another two years but I could probably put down 10% in about a year and change. I have been thinking about FHA and Fannie Mae as options too but am a bit frustrated with the limited options available when I look at houses (especially Fannie Mae).
Anyone know whether or not this is true or have any experience with buying a home for less than 20% without going the FHA or Fannie Mae route?
I am a first time home buyer and am really confused and frustrated by this whole process.
02-22-2011 08:56 PM
You can obtain a conventional loan with 10% down. There is MI factored in somehow, probably in the rate
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02-23-2011 09:28 AM
AshH thanks for responding. I am not quite sure I understand this. Don't most banks only loan 80% I feel like I am getting such conflicting info on this subject.
02-23-2011 11:18 AM
I'm afraid to say anything because I know everyone on the forum is going to hammer me ("don't buy a house until you have 20% down!") BUT we are getting a conventional loan through our credit union with 5% down. My understanding is that not many banks have underwriters who are willing to take on 95% loans these days, but it is possible. We do have to pay PMI, but in the end our payments and fees are way less than what we would be paying with a FHA loan. That said, and I'm sure lots of other people will say the same thing, I seriously doubt home prices will go up in the next two years, so there's really no hurry to buy a house now.
The irony is although we're going with a conventional loan - we're in escrow, and hopefully closing this week, on a Fannie Mae house. I see now why they have so much trouble unloading their inventory - they are so ridiculous! Every time we ask for something (repairs, etc) I feel like Dorothy taking a trip to see the Wizard of Oz. Maybe that's just me.
02-23-2011 11:19 AM
I just applied for a conventional loan in LA County. I asked if I could get a 2nd to avoid a 20% down and PMI and was told that those loans aren't available anymore.
02-23-2011 11:32 AM
The availability of less than 20% down loans may vary by lender and locale. One of Redfin's preferred lenders (LoansbyJW) has mentioned several times that these loan are available. Perhaps they aren't offered by your lender?
02-23-2011 12:55 PM
All loans with less than 20% down have some form of mortgage insurance. Either it's paid monthly (Standard), paid in single premium (lump sum) or a mortgage insurance contract is paid by the lender when you close at a higher rate (LPMI). Anyone who says their loan does not have PMI is simply not telling the whole truth.
If you are considering a loan that requires PMI, there are several important issues your mortgage professional should discuss with you.
1) Do you plan on owning the home for more than 10 years? If so, then perhaps a Standard PMI payment is best. Given that you're amortizing the loan and may hit that magical 78% loan to value, the PMI may be terminated.
2) Do you have a large seller concession, or a Redfin Rebate? Perhaps paying a lump sum premium would be best. Most single PMI premiums can be paid by the concessions you have. In some cases it's less expensive to raise your rate by .25% and use a lender rebate to pay for it.
3) Is a particular lender offering a great LPMI rate? Some lenders push their rate up by .50 to .75% for some LPMI mortgages. Other's move the rate by .25 to .50%. Ask around within the lending companies your pricing your loan through and compare LPMI rates. You might find a deal through one company over another.
4) FHA insurance is expensive now (1.0 up front, .90 to .85 monthly), but it's going to get more expensive in April. FHA rates tend to be lower than conventional however so comparing these programs together with a conventional loan is a smart thing to do. If you're shopping for a 15 year loan, for now there is no monthly PMI on these mortgages, only the Up Front Mortgage Insurance Premium. That's quite a deal.
Make sure after you've examined the type of PMI or MMI that works best, if your going with a conventional loan have your lender also shops the PMI. Each MI company has fractionally different monthly rates. Lump sum premiums prices also vary company to company.
Thanks for reading,
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02-23-2011 01:15 PM
Thanks for your info. I belong to three credit unions and none of them offer 5% down. What Credit Union do you belong to? Also how much are your PMI payments?
I could wait a few years to get my 20% down and maybe the home prices will not go up but I think the interest rates will. I am still debating how long to wait and what option to go with but either way I go it is still a lot of money up front.
02-23-2011 01:19 PM
There are still some programs in LA that offer down payment assistance but I don't qualify because they have income limits and I exceed them unless I adopt a bunch of kids in the next few weeks
LA City has a program (that is funded by HUD) that will pay up to $50,000 of your down payment costs and you don't have to pay the loan back until you sell the home. It also has to be owner occupied. Again the income limitations rule me out.