Attn: Flip & Fillip

[Eugenics 5,000+ posts]

I believe you discussed that with me a while ago.

 

[WhoSayWho? 5,000+ posts]

See, when you borrow money for housing, the lender wants some assurance you will pay. If you do not have 20% down with FHA housing, you have to pay private mortage insurance until you have 50% equity in the home. This insurance comes in the form of a slighly higher interest rate.
I can afford a house in the $120,000 range. My lender will loan me 95% of the appraised value of the home before I pay PMI. I am thinking that under current market conditions I can buy a house below it's appraised value; thus, my down payment would be less. If they appraised said house at $150,000, I wouldn't need a down payment.

A way around the PMI is an 80/20 loan. Where you borrow the downpayment at a slightly higher interest rate than the remainder of the mortage. This is generally cheaper than paying PMI.

Knowing more about your financial situation would allow me to provide better advice.

and the interest on the second is tax deductible.

 

[Flipx99 5,000+ posts]

PMI. Roughly --
Once it was difficult to get a loan if you did not have 20 percent down payment. PMI is one way of overcoming that. It is insurance on the loan (for the lender's benefit -- not yours) that insures the difference of the amount borrowed between 80-100 percent of the purchase price.

And Flip is right -- it is money right down the drain, but it does allow people to buy a home when they otherwise could not.

That is the key....I think the additional PMI I would have to pay by "buying now" is greater than I may have to pay in home price by holding off for a while.

 

[Flipx99 5,000+ posts]

and the interest on the second is tax deductible.

On the short form? or would he have to itemize to capture this benefit?

 

[WhoSayWho? 5,000+ posts]

On the short form? or would he have to itemize to capture this benefit?

I am pretty certain he would have to itemize.

 

[Eugenics 5,000+ posts]

See, when you borrow money for housing, the lender wants some assurance you will pay. If you do not have 20% down with FHA housing, you have to pay private mortage insurance until you have 50% equity in the home. This insurance comes in the form of a slighly higher interest rate.
I can afford a house in the $120,000 range. My lender will loan me 95% of the appraised value of the home before I pay PMI. I am thinking that under current market conditions I can buy a house below it's appraised value; thus, my down payment would be less. If they appraised said house at $150,000, I wouldn't need a down payment.

A way around the PMI is an 80/20 loan. Where you borrow the downpayment at a slightly higher interest rate than the remainder of the mortage. This is generally cheaper than paying PMI.

Knowing more about your financial situation would allow me to provide better advice.

I will most likely have $10,000 liquid to put towards it by the time i get there. So i will likely have to save up for a while longer.

Have you even talked to a lender?

Nope, just figuring out my options. I'm in Kansas for the next few months still.

 

[Flipx99 5,000+ posts]

You think someone in his/mine situation would benefit? I doubt he'd cover the standard deduction. I can't find any benefit in itemizing...even when I bought my truck.

 

[Flipx99 5,000+ posts]

I will most likely have $10,000 liquid to put towards it by the time i get there. So i will likely have to save up for a while longer.


Nope, just figuring out my options. I'm in Kansas for the next few months still.

That's a pretty good sum....but still not enough to escape PMI unless you are getting a cheap home.

 

[WhoSayWho? 5,000+ posts]

Here is another thing to consider -- one of the benefits of being young and having no kids is the you have greater freedom to pick up and move when an opportunity comes up. Owning a house is one way to get tied down and limit your options.

 

[Flipx99 5,000+ posts]

Here is another thing to consider -- one of the benefits of being young and having no kids is the you have greater freedom to pick up and move when an opportunity comes up. Owning a house is one way to get tied down and limit your options.

You couldn't do that if you were tied up in a lease either...

 

[WhoSayWho? 5,000+ posts]

You think someone in his/mine situation would benefit? I doubt he'd cover the standard deduction. I can't find any benefit in itemizing...even when I bought my truck.

To be honest, I am probably not very qualified to answer that. I know that for me it works.

And I think that absent some unusual cirrcumstances unless you have that interest deduction that you probably would not benfit more from itemizing than claiming the standard. IDK though, I really don't look in to tax situations other than my own.

 

[WhoSayWho? 5,000+ posts]

You couldn't do that if you were tied up in a lease either...

True, but the degree to which that lease ties you down decreases over the term of the lease.

 

[Flipx99 5,000+ posts]

True, but the degree to which that lease ties you down decreases over the term of the lease.

I don't know much about leasing...are you suggesting it is cheaper to break the lease on month 9 vs. month 3 of a 12 month lease?

 

[Eugenics 5,000+ posts]

You couldn't do that if you were tied up in a lease either...

I think he's trying to say i should come live in the guest house of his mansion for free. Or become a vagrant.

 

[WhoSayWho? 5,000+ posts]

I don't know much about leasing...are you suggesting it is cheaper to break the lease on month 9 vs. month 3 of a 12 month lease?

Yes, or at least the worst case scenario decreases. In month 9 you know at worst you owe 3 months to walk away.

Of course there is always the possibility to mitigate your liability by negotiating a buy out of the lease. I have done that before on commercial properties. (I am talking about after the lease was entered and I wanted to walk away early).