Posted: 8/30/2007 7:14:06 PM EDT
|
On a conventional loan why are they listing a Mortgage Insurance bill each month? Also there is a over 2k item required to be paid in advance for Mortgage Insurance. The last time I bought a house all I had to pay for was the hoause payment plus the homeowners and taxes. So, I don't understand this Mortgage Insurance. Please educate me, I need the answer! |
On conventional loans, where you dont put down 20% equity - *most* of the time you must pay PMI (Private Mortgage Insurance) www.bankrate.com/brm/news/mtg/20010601b.asp
This is likely to fund the mortgage escrow... but I dont know why that much would be required in advance. How much is this loan?? $2K - even for a year in advance - sounds high. I did a conventional 80/15/5 loan, to avoid any PMI. There are also 95/5 and 100% loans that avoid any PMI... because of a newer structure where the lender covers the insurance, but this isnt as common and typically results in higher interest rates.
You might have had a special type of loan, or you had over 20% equity in the home up front... see the link above. |
|
I would bet that the 2k item was for pre paid Homeowner insurance. If it is due within 90 days of closing most lenders require it to be paid (usually rolled into the loan so you dont have to come out of pocket) If it is on line 903 (to be paid) or 1001 (escrow)on your HUD-1 form then it is for your homeowner's. If is is line 902 or 1002 then it is mortgage insurance |
| That does seem quite high now that I think about it. You could have the type of mortgage insurance that is financed into the loan but then you wouldnt have to pay a monthly amount as you mentioned. Call your LO and have him explain it like he should have done well before closing. |
| After researching this a bit further it appears that you did a buydown of mortgage insurance. This means that you finance a specific amount in the loan so that the monthly amount that you pay is less. This can be good because it saves you monthly but the drawback is that you are of course paying interest on this at the rate you have. Keep in mind that new legislation allows you to deduct mortgage insurance if your GROSS ADJUSTED INCOME for the household is less than $110,000 |
He's referring to his self-proclaimed alleged superiority to the original poster. |
| that would be a loan that I would not want to be in right now(unless you are moving soon). 10 yr IO is an arm. With house values dropping and arm rates climbing the last thing I would want to be paying is only interest. It could make it much harder to get out of when the time comes. Seems great now but technically you are renting. |
The mortgage value is based on the LTV (Loan to Value) ratio. For many loan programs, if the LTV is over .80, the lender requires insurance. Some lenders are changing these requirements for some loan programs. For example, NFCU will now lend 1.01 LTV (that would be 101% of the value of the house) without PMI, to allow buyers to roll in closing costs and cover a finance fee. The insurance could be a lot of things, it could be hazard insurance which you are MUCH better off finding on your own than working through the lender. Hope this helps, shooter |
If your lender won't do this, you might be able to do a double mortgage. You have a mortgage for 80%LTV and another for 20%. |
Maybe it's not too late for him to get a mortgage that makes more sense for him...one in which he doesn't tie up a lot of cash and in which he pays no PMI. |
How high? Mine was 5.75% on the first, and 6.75% on the second.... 2 years ago. A friend just got one... 6.25% on the first, and 8.25% on the second. The balance on the second is lower, plus the tax break on the interest paid needs to be taken into account. But I agree - you need to run the numbers to be sure. |
Why does that HAVE to be an I/O loan???? A smart fixed rate, 80/20 loan, 100% financed - would meet your exact same criteria... except you would actually make headway with that, and have the security of a non-adjustable rate if the market tanks. |
Even the 10yr interest only has PMI over 80% LTV .Every conforming loan is insured by Fannie Mae if it is underwritten to their guidelines (99%) up to 80% of the value of the home. Above that you are required to insure yourself. This is PMI. Some subprime products can be interest only as well but once you get in the higher LTV's you are in the 9-10% interest rates. We all know how the subprime mortgage market is doing and many of these programs arent even available now due to tightening of guidelines. |
No, it wouldn't meet the same criteria. Chances are, he doesn't have the 20% down, and why would anybody want to tie up a lot of unnecessary cash in a mortgage, anyhow? |
How about a simple explanation that even we of the ignorant proletariat might understand? 
|
Well, you and I have been through this in several threads.... along with Tamron... which is why I keep misunderstanding the whole PMI thing. You can do a 80/20 conventional fixed loan - where you get two loans.... The first loan at 80% of the home... then the second loan at 20%. This gives the primary mortgage holder his 80%, and the PMI requirement is gone. The cost - is the second loan is typically at a slightly higher interest rate. So.... I am making a couple points: 1. There are easy ways around paying PMI that will save you money, unless you have a type of loan that requires it. So the whole PMI thing is pretty negligible. 2. Your posted requirements were "one in which he doesn't tie up a lot of cash and in which he pays no PMI." However - you often reference this as an I/O loan. My point was simply to point out - there are other options out there, where you (1) don't tie up any of your own cash up front, and (2) don't pay PMI. All that, without the risk of getting stuck with an adjustable rate I/O loan gambling on the real estate value increasing enough to cover your butt. Not all of us live in a market where this specific type of loan is applicable or sensible. |
|
I was afraid that I DID understand the 80/20 loan, but was hoping that you were speaknig of something other than the OP's obtaining a 2nd. Don't know about Tamron, but there are a bunch of us for whom IO loans make a lot of sense. (Might not make a lot of sense to somebody who's selling mortgages, but make a lot of sense to a bunch of others.) The only way real estate investment makes sense is when the real estate appreciates. Paying down a debt on a piece of real estate doesn't, of course, make the real estate appreciate, it just shifts money from your pocket to the mortgage company's. If one is unfortunate enough to be caught up in an IO loan and one's property is depreciating, then one might wisely refinance with a "conventional", "made for the unwashed masses" loan. 
|
It is interesting.... Reaganstein got an account right after Tamron stopped posting (account locked?) AND - they both post frequently in the Glock, B&I, Photography, and the Georgia Hometown forums. AND they both LOVE interest-only home mortgages. Crap - they even use the same camera and lens!!! www.ar15.com/forums/topic.html?b=1&f=121&t=586907 www.ar15.com/forums/topic.html?b=1&f=121&t=595590 Holey moley.... they even modify their glocks the same way!
But.... of course, just a coincidence. (luv ya Tammy  )
|
you guys are on arfcom way too much if true, what a toolbox... |
Win a FREE Membership!
Sign up for the ARFCOM weekly newsletter and be entered to win a free ARFCOM membership. One new winner* is announced every week!
You will receive an email every Friday morning featuring the latest chatter from the hottest topics, breaking news surrounding legislation, as well as exclusive deals only available to ARFCOM email subscribers.