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FHA VS. 80/15/5

I was given two scenarios/ estimates by a lender. One included a an FHA loan with a payment of around 1900 a month( Due to PMI) and another 80/15/5 loan with a payment of around 1760 with no PMI. Of course I am attracted to the lower monthly price, but I am unfamiliar with an 80/15/5 mortgage loan option. Are these loans beneficial or is better to go with the FHA loan. I plan on staying in this home around 10-15 years. Thanks for the help!
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December 27 2013 - Houston
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Wayne and Tom make a great point, get pricing on buying the MI out too.
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December 28 2013
It depends on the terms of the 2nd mortgage. If the 2ND mortgage is a Fixed rate then it is a much better deal to use the 80/15. If the 2ND mortgage is a Heloc and the total payment is based on an interest only payment then it is still cheaper than the FHA loan but not as attractive as the payment difference appears. If principal is added back to the Heloc payment then it is probably around $100 difference, if the Prime Rate goes up in the future to say 7%, the payment difference will decrease to around $50/month, still better than an FHA loan though. If the 2nd is a Heloc ask if there is a conversion option and if so, ask what the Fixed rate is today if converted. It could also be a 30/15 Fixed Rate 2ND which would have a balloon payment due in 15 years, list the 2ND mortgage terms. 
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December 28 2013
I agree with Tom and you should review the 5% down with PMI, the Single Premium PMI, and Split Premium MI. Usually the payback on the Single Premium is less than 4 years and less than 6 years on Split Premium.  All three MI options woud likely be lower payment than 80/15/5 option. Probably biggest benefit of 80/15/5 is interest on second is tax deductible and MI is not, but that could change if tax code is revised. Biggest benefit of monthly MI option is possibility of MI being eliminated with decent appreciation and amortization without having to refi as would be required to eliminate or lower second lien balance. All of this is based on credit score of 680+, as MI rates are very credit score driven but so are second lien rates.
If you want to compare options contact me through my profile as I am a Texas lender.
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December 28 2013
Would you mind posting who's offering the 80/15/5?  I haven't seen this product for years.  Without knowing the specific terms, it's hard to tell but chances are the 80/15/5 will be much cheaper than the FHA loan.  

Just make sure the 2nd mortgage doesn't have a balloon payment, or if it does that you are prepared to deal with it when it comes up.  
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December 27 2013
You pay a higher interest rate on the (15) but it beats FHA PMI by a long shot. FHA PMI is for the life of the loan.
Your loan officer should have compared a 95% conventional loan with PMI to the 80/15/5.... I see no reason to bring FHA into it.
I did an 80/10/10 when I bought my house... best decision I ever made.
Retired the (10) early and am loving my payment.


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December 27 2013
 
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