We have had a conversation about PMI going on for a couple days but, I am wondering if this is a good time to talk about another Myth or Fairytale about mortgages.
Many people are convinced it is better to buy PMI rather than putting more money down as part of the down-payment. The logic goes this way……….., “….it’s only a couple bucks each month and we get to hold on to some of our hard earned money.” So, does that make sense to you?
Like everything else it all depends. For example:
- FHA Loans will require that your PMI stay with the mortgage for the entire life of the loan. Yup, if you have an FHA loan and PMI the PMI never goes away. So if you are paying about $300 a month for PMI over 30 years that comes to a tidy $108,000 just for PMI. Take a long look at that one!
- A Conventional Loan that has PMI the PMI will stay with you but only until you have paid down the outstanding balance of the mortgage equal to the 20% needed as a down-payment.
If you think it is a good idea to hold on to your money and pay less as a down-payment it probably is going to cost you a lot more in the long run. So, here’s our advice again, shop around, not all mortgages are the same; you should look for the best deal.
The fairytale about holding on to your money can be very costly!
Here’s another interesting tidbit of information that most people think they understand. We all know that there are great programs out there for “First-Home-Buyers.” And this fairytale isn’t always what you think it is.
Obviously a First Home Buyer is someone that has never owned a home. Right? Well, no that is not necessarily true. All of the First Home Buyer programs are for people who have never owned a home and for those people that haven’t owned a home in the previous four-years. I’m willing to bet that most people didn’t know that. This type of situation is relatively common with today’s unconventional modern family.
Ask the banker, they know all this stuff and can help you. You just need to know what what are the good questions.
What are your thoughts about PMI ????