Quick question for MJ or anyone else in the know about LTV ratios and PMI. The house we are trying to get right now is too much for us to put a full 20% down. I noticed in one of MJ's posts that you can do a second mortgage to avoid PMI. We are using a 90% LTV 1st mortgage to get into the house. Should we try to negotiate the second mortgage with the same company now or do it later after we are in the house? How does that all work?
Ask them about an 80-10-10. They became more common in recent years for just the reasons you mention.
Hope is right, an 80% 1st and a 10% 2nd will eliminate the need for PMI. You need to get the 2nd along with the 1st at the time of closing or you'll still have PMI and it will take some effort (and expense) to get it removed after closing. If you ask for an 80/10/10 your loan officer will arrange it for you. David W Mortgage Specialist david.wacaser@bankofamerica.com
We built a new home 1.5 years ago. Refinanced after 11 months -- when they appraised, we had more than 20% & were able to drop PMI. Before you do an 80-10-10 or 80-15-5, check out the real estate market for where your're buying/building your home. Sometimes you can get away with paying your PMI for only a year (or less), and then refinance & get an appraisal that puts you over the 20% equity line and are able to drop PMI without the burden of a first AND second mortgage. But you have to have a good idea about how much you'll gain in value during the first year or so -- new construction usually picks up a bunch of equity during the first couple of years, depending upon the location, community, surroundings, etc.
I got a 75-15-10 and it worked great for me. The builder arranged the first with their in house lender and the second through Chase. The second was at just a little higher interest.
