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80/20 Mortages or 3% down Conv - Are they out there?

We are looking to buy a condo/townhome in the $250K range and do not want to put money down - but want to avoid the pit fall off PMI.  We have enough to put down 10-15% but we would rather keep our savings/nest egg/rainy day fund (35k) for security. 

Our combined income is 135k with both of us having 800+ FICO scores.


We are not first time home buyers  - we sold our home last April to downsize and have had a difficult time finding something we like --- but now that we have we want to move forward but want to be realistic as to the products offered currently.

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February 19 2013 - Denver
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You can put down 5%. Instead of monthly mortgage insurance, ask you lender to find out how much Single Premium insurance is, and ask the seller to pay for if in the form of seller concessions.
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February 19 2013
If you are a Veteran, you may be able to purchase a home with no down-payment. If you are buying in a rural area, you may be able to purchase with a USDA loan with no down-payment. There is also a Colorado program which works with FHA called CHaFA which will grant you the down-payment of 3.5%. Conventional loans with Mortgage Insurance (PMi) still exist with 3% down-payments. There is also one bank I'm aware of which offers a single loan to 100% last I heard. Oddly enough, these do exist. I realize you are talking about no MI, but unless you out 10% down for an 80/10/10 there will be MI, either up-front, paid by you, monthly, paid by you, or up-front paid by the lender, who passes the cost on to you through a higher interest rate.
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February 19 2013

OP here...

Not a Veteran and not a rural property.

We got burned by the upfront MI - we only stayed in our last property for 3 years and of course no refund to the tune of about 7K.  Did not leave a good taste.

Looks like our income is too high for the CHaFA program for Arapahoe Co.
 

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February 19 2013
I would love to help. Let me know if you need more info.
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February 19 2013
You can put as little as 3% down and then avoid paying MI on a monthly basis by going with the Single Premium payment option, or nicknamed MI Buyout, and negotiating that the seller actually pay for the Single Premium is a HUGE bang for your buck, and it's much better to negotiate that with the seller vs. trying to beat them up on the price of the home.

80/20 mortgages are extinct along with most other 100% down-payment options.

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February 20 2013
You have a couple of options that I know of.

Both are conventional programs.

1st option: 5% down and buy out of the mortgage insurance for a fee. This fee can be paid by either the seller, you or through the yield spread of the interest rate. The higher the rate the more you get back as a potential lender credit towards your closing costs and/or prepaid items (taxes & insurance) and/or your one time mortgage insurance buyout. 

2nd option: CHFA offers a program called the Advantage program with a requirement of 3% down. This is a pretty amazing program and only came out this year. You will pay a slightly higher rate with CHFA, but heck it's 3% down with no MI. 

Even though my company is approved to do CHFA loans we have decided at this time to not offer that product However, if you call CHFA they can give you a list of qualified lenders who are. 

Take care and good luck. :)


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February 23 2013
Profile picture for mark_spinosa
Not sure if you've already made a decision or not, but as a recent homebuyer (actually, I had it built), I figured I would share my experience.

I, too, was looking to conserve cash for other things and the last thing I wanted to do was bury a 20% down payment under the house forever - especially with this ultra-low interest rate environment.  I had looked at the FHA loans with a 3% down payment requirement, but this required MIP (similar to PMI, but I guess FHA loans call it MIP) was a bit high.  They relatively recently changed the rules for MIP on FHA loans, which made this even less attractive.

As many others that have already responded mentioned, you can get a conventional mortgage with only 5% down.  That's what I ultimately decided to do.  The next question was whether or not to buy out the PMI that came along with this.  I crunched the numbers to figure out my break even point, etc., and decided it was well worth it to NOT buy it out and pay it monthly.  I'm glad I did that.

As you mentioned in your post, you bought it out in the past and it seems like, to your surprise, you weren't in the home as long as you thought you would be.  That's certainly one consideration.  Also, you have to put a price on your liquid savings.  You seem like a smart guy in the sense that you realize the importance of having a financial cushion; this should be a consideration.  Finally, there are other things (i.e., investing) that you could do with the money that otherwise would have gone to buying out the PMI upfront.  Couple this with the ability, but not obligation, to pay down principal faster to build up to 20% equity, and you can always have the mortgage insurance removed sooner than originally anticipated in the initial amortization schedule.  The bottom line: you have options.  It's always nice to give yourself options.

My advice: put the 5% down, pay the PMI monthly, give yourself a choice, and sleep at night knowing you have money in the bank.

Hope this helps.
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March 03 2013
Paying or having seller pay (you still pay in the sales price) upfront MI is not always the best option as you have experienced.  With your very high credit scores monthly MI is not as high as in the past for a 95% loan. Not aware if a 80-15-5 loan is available in Denver - 5% down 15% second - but hopefully a CO lender will reply.
The issue no one has mentioned is Condo vs Townhome. If a Townhome traditional single family financing options are available, but if a Condo Townhome then restrictions apply that you need to explore prior to going forward. Condo financing requires warrantable guidelines be met including owner vs investor owned %, reserve requirements, ins coverage requirements, % owned by one enity, possible MI restriction etc.
You seem to have a good handle on your finances and the buying process, but I think it is time for you to find a loan officer in your area/state to discuss your options and get pre approved. You can go to the FInd a Pro tab above and put in Denver CO  Mortgage Lender and read Profiles/About Me and Reviews to choose a loan officer or 2 to contact.
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March 03 2013
While there are options for 3% down loans, you will find far more aggressive pricing on both the interest rate and mortgage insurance fronts if you put at least 5% down.  Other than that, everyone is exactly on target with the single premium option. 

One thing I would look at further is going with a Lender Paid Mortgage Insurance program (LPMI).  You can either go with a higher rate or pay a "discount" fee instead of a mortgage insurance premium.  They will cost exactly the same, however, discount or origination fees are tax deductible as "interest" as opposed to mortgage insurance wich wouldn't be at your income.
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April 09 2013
We could do 5% down on a conventional going withlender paid MI just means your going to have a higher rate than if you had the MI on the loan.  Personally I would rather pay the MI and have the lower rate because the MI will fall of eventually where as you are stuck with the rate being higher with the lender paid MI perminanatly on the loan.  I would be happy to help, contact me through my profile if interested.

Regards,
Brynn
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April 09 2013
 
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