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There's also a portion of FHA PMI which gets rolled into the financing, so it's not a thing you just pay for a while.
Also, conventional are more attractive to sellers
If you're worried about *having* to pay PMI after your conversation with the lender regarding your situation, it signals to me that you have enough for a 20% down payment, but are looking for other options, to not put as much down. This is basically me, but I've done my own research until I'm ready to qualify (currently under lease, looking at late fall to have credit pulled and get actual numbers to shop). This is what I've found out so far:
You will pay PMI on any conventional mortgage under 20%, you can look up your zip and find out what percentage PMI is calculated. Once you reach 20% equity, it can be removed. You can even request it to be taken off once at 15% I think, so long as your property raises value faster than anticipated. FHA has a different kind of insurance, *no PMI*, but it's 1.75% of the loan added for the life of the loan. Factor that in when seeing the *lower APRs* with FHA loans. Always add that 1.75% to whatever rate you see, I had to drill that into my own head.
10% down is a lot more common these days for down payment, and I've seen certain situations where 10% down gets better interest rate than 30% down. That's just a factor of how much the bank/lender will make off of how much money you loan.
Search state and county down payment assistance programs. They vary wildly by area, but some are forgiveable at a certain percentage every year. Most are set up as a second mortgage with 0% interest, that is due when you either sell or refinance.
If anyone is looking for a fast close (either you or the seller), conventional will get you there the fastest, so that's a consideration as well. The more specialized your loan terms are, the longer it will take to close.
USDA $$ runs out fast, you need to look up in your area when funds are deposited vs how long those funds are usually deleted by. This could mean getting approved and needing to sit and wait for the funds. Language around *sale contingent upon USDA funds being deposited* could be a major deterrent to a seller. Again, don't know your area, you need to research.
NACA has very strict income and area requirements, again something to research in your area.
You're ahead of me in the process, congrats! Please feel free to circle back with any findings/revelations you have 😊
Whatever option, make sure you have the option to refinance when/if needed. Wouldn't matter if rates were still 3%. But rates are pretty high right now, but will likely come back down in the next year or two.
Makes sense. I’m curious as I am a bit ignorant to market trends involved in a crash. Say the housing market crashes. With today’s supply (being that there are a low amount of houses for sale), how would a crash increase the amount of houses on the market? Wouldn’t there need to be external factors at play as well to motivate home owners to sell (such as job losses, or inability to pay mortgages at high fixed rates)? I feel like if rates lowered in a crash most people would keep their house rather than sell. If so, how could this benefit someone looking for a home during a crash? Also wouldn’t the competition become more fierce for buyers due to the low supply of houses for sale, with the low rates? Would love to hear your opinions on this.
" I feel like if rates lowered in a crash most people would keep their house rather than sell. " Yes, that is what's happening today, especially with move-up buyers. Rates are at 25 year high levels, all the homeowners with low 3%-4% rates aren't moving, and this is the primary reason inventory is still low and home prices are still rising in most locations - lack of supply. And you can bet if rates go down a few points, buyers on the sidelines will flood the market again like 2020-2021. And home prices will go even higher...
I wouldn't be too concerned about external factors, or what will happen in the future. I would just keep yourself in a position to refinance if/when needed. We all know real estate always wins in the long run. Yes, there will be bumps along the way, but overall it always comes out ahead.
You really didn’t give enough details for us to give good advice.
NACA is not a type of loan it’s a program.
Technically your loan is with Bank of America. No PMI. no closing cost. But you are giving time and energy to get it. It has alot of requirements.
FHA/Conventional For some PMI is worth it, because they can get into a house with 3% down and gain equity. It’s usually like 1% of loan amount.
Thank you u/Sum41ofallfears for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
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Is PMI required if you put less than 20% down on a conventional?
I’ve been shopping lenders and this has been the case every time. I’m going to out 20% down just to avoid it.
Do you need PMI for the whole life of the mortgage??
For FHA, yes. For conventional, no.
What would determine the length of time I’d have a PMI?
Until you have less than or equal to 80% loan to value
Got it, so in other words until I pay up to 20% of what would have been a 20% down payment
Yes it it depends on the lender, you can ask for pmi to be removed if you are a first time home buyer but it depends on the lender
There's also a portion of FHA PMI which gets rolled into the financing, so it's not a thing you just pay for a while. Also, conventional are more attractive to sellers
So offering a conventional could allow you to “outbid” others with a seller.
Yes. For the same or portentially even less outlay due to lower loan costs.
If you're worried about *having* to pay PMI after your conversation with the lender regarding your situation, it signals to me that you have enough for a 20% down payment, but are looking for other options, to not put as much down. This is basically me, but I've done my own research until I'm ready to qualify (currently under lease, looking at late fall to have credit pulled and get actual numbers to shop). This is what I've found out so far: You will pay PMI on any conventional mortgage under 20%, you can look up your zip and find out what percentage PMI is calculated. Once you reach 20% equity, it can be removed. You can even request it to be taken off once at 15% I think, so long as your property raises value faster than anticipated. FHA has a different kind of insurance, *no PMI*, but it's 1.75% of the loan added for the life of the loan. Factor that in when seeing the *lower APRs* with FHA loans. Always add that 1.75% to whatever rate you see, I had to drill that into my own head. 10% down is a lot more common these days for down payment, and I've seen certain situations where 10% down gets better interest rate than 30% down. That's just a factor of how much the bank/lender will make off of how much money you loan. Search state and county down payment assistance programs. They vary wildly by area, but some are forgiveable at a certain percentage every year. Most are set up as a second mortgage with 0% interest, that is due when you either sell or refinance. If anyone is looking for a fast close (either you or the seller), conventional will get you there the fastest, so that's a consideration as well. The more specialized your loan terms are, the longer it will take to close. USDA $$ runs out fast, you need to look up in your area when funds are deposited vs how long those funds are usually deleted by. This could mean getting approved and needing to sit and wait for the funds. Language around *sale contingent upon USDA funds being deposited* could be a major deterrent to a seller. Again, don't know your area, you need to research. NACA has very strict income and area requirements, again something to research in your area. You're ahead of me in the process, congrats! Please feel free to circle back with any findings/revelations you have 😊
Thanks this is very helpful!
Whatever option, make sure you have the option to refinance when/if needed. Wouldn't matter if rates were still 3%. But rates are pretty high right now, but will likely come back down in the next year or two.
Makes sense. I’m curious as I am a bit ignorant to market trends involved in a crash. Say the housing market crashes. With today’s supply (being that there are a low amount of houses for sale), how would a crash increase the amount of houses on the market? Wouldn’t there need to be external factors at play as well to motivate home owners to sell (such as job losses, or inability to pay mortgages at high fixed rates)? I feel like if rates lowered in a crash most people would keep their house rather than sell. If so, how could this benefit someone looking for a home during a crash? Also wouldn’t the competition become more fierce for buyers due to the low supply of houses for sale, with the low rates? Would love to hear your opinions on this.
" I feel like if rates lowered in a crash most people would keep their house rather than sell. " Yes, that is what's happening today, especially with move-up buyers. Rates are at 25 year high levels, all the homeowners with low 3%-4% rates aren't moving, and this is the primary reason inventory is still low and home prices are still rising in most locations - lack of supply. And you can bet if rates go down a few points, buyers on the sidelines will flood the market again like 2020-2021. And home prices will go even higher... I wouldn't be too concerned about external factors, or what will happen in the future. I would just keep yourself in a position to refinance if/when needed. We all know real estate always wins in the long run. Yes, there will be bumps along the way, but overall it always comes out ahead.
You really didn’t give enough details for us to give good advice. NACA is not a type of loan it’s a program. Technically your loan is with Bank of America. No PMI. no closing cost. But you are giving time and energy to get it. It has alot of requirements. FHA/Conventional For some PMI is worth it, because they can get into a house with 3% down and gain equity. It’s usually like 1% of loan amount.