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One More Time: YOU DON'T HAVE TO HAVE 20% DOWN TO QUALIFY FOR A MORTGAGE!

Wednesday, May 8, 2019   /   by Vanessa Saunders

One More Time: YOU DON'T HAVE TO HAVE 20% DOWN TO QUALIFY FOR A MORTGAGE!

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If you're interested in buying a house in the Hudson Valley but don't have 20% of the cost of a property to put down to qualify for a mortgage, don't worry. According to the National Association of REALTORS, "There are thousands of down payment assistance programs around the country and many of them offer funds to relatively high-earning households, in some cases those earning as high as 200 percent of the area median income." More often than not lenders and banks will require private mortgage insurance (PMI) for home buyers when making less than 20% down payment.

That being said, buyers should realize that that making a low down payment will not likely result in a higher interest rate. They should also be aware that PMI increases mortgage costs with little benefit to the buyer. Private mortgage insurance is required by a lender to protect THEM, not the buyer if anything happens that compromises repayment of the loan.

PMI is a form of mortgage insurance that's often required of less-than-20 percent down conventional loans. Most policies are paid monthly and usually bundled with the monthly payment to the lender. A few options will allow the buyer to pay the entire PMI premium with a big upfront payment at closing. Buyers will choose the lump sum payment option because the amount of the premium is discounted significantly compared to monthly payments over the time period where the PMI Insurance would be required. There is no set premium for all buyers. The cost is determined by any perceived risk to the lender. Credit score, the amount of down payment and the mortgage amount all affect the monthly PMI premium that the consumer would pay.

Here are three things buyers should be especially aware of:

1. PMI can be cancelled.
Typically, PMI can be stopped as soon as the principal balance of the mortgage falls to 78 percent of a home’s original value. As we mentioned earlier, PMI can be paid off up front, but if the mortgage value reaches 78 percent and the lender cancels the insurance, there is no refund of the balance of the one-time payment.

2. 80/10/10 mortgages are alive and well.
Buyers have the option to divide their mortgage financing into 2 loans to avoid having a monthly PMI payment. This is a creative way to enable someone to purchase house for a higher amount than they might be believe they are qualified for. It also allows the option for someone purchasing up to a $2 million property while making a 10% down payment.

3. PMI and MIP are different
There are different types of mortgage insurance. PMI is associated with conventional loans. A mortgage insurance premium (MIP) is what borrowers pay toward FHA-insured loans.

The most important thing for buyers to remember is that the rules governing PMI and MIP differ. While borrowers can cancel PMI, refinancing is often the only way to eliminate MIP on FHA mortgages.

Buyers should be sure to use the services of a knowledgeable loan officer to advise of all the available financing options to find the one that suits the client’s needs in the best way financially. While real estate agents should understand what loan options are available to buyers, staying on top of the changing rules regarding mortgages just isn’t realistic for REALTORS®. By referring buyers to a knowledgeable, competent loan officer, REALTORS® can safely assume that their buyers will get the guidance they need to make an informed decision when applying for a loan.

Barry Goldenberg, Senior Loan Originator for Luxury Mortgage contributed to this article. He can be reached via email at bgoldenberg@luxurymortgage.com.


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Global Property Systems
Vanessa Saunders MBA MIMC CIPS - NYS RE Principal Broker
56 Lafayette Avenue Suite 320
White Plains, NY 10603
914-290-5258

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The data relating to real estate for sale or lease on this web site comes in part from MHMLS. Real estate listings held by brokerage firms other than Vanessa Saunders - Global Property Systems are marked with the MHMLS logo or an abbreviated logo and detailed information about them includes the name of the listing broker. The information appearing herein has not been verified by the Mid-Hudson Multiple Listing Service, Inc. or by any individual(s) who may be affiliated with said entity, all of whom hereby collectively and severally disclaim any and all responsibility for the accuracy of the information appearing at this web site, at any time or from time to time. All such information should be independently verified by the recipient of such data. This data is not warranted for any purpose. ©2019 Mid-Hudson Multiple Listing Service, Inc. All rights reserved.
The data relating to real estate on this website comes, in part, through the IDX of the Multiple Listing Service of Ulster County, Inc. Real estate listings held by brokerage firms other than Vanessa Saunders - Global Property Systems are marked with the IDX logo and detailed information about them includes the name of the listing broker.