Question: > So i’m thinking of getting a house in the $325K up to maybe $360K range here > in Fremont, CA (near SF bay) which i plan to keep at least 7 years (BTW > thats only a small 3bed 2 bath type in okay area). I’ve already been > pre-approved for that amount assuming 5% down with e-loan on a 7/1 ARM with > a few points (are they any good? i’m also talking to leanding tree)
> So my question is that it seems like i’m getting doubly screwed here since I > have to pay PMI and get a jumbo rate. Now i’ve heard of 80-15-5 programs > which seem like they might be a good idea but i’m having trouble finding > info about them, is it that common of a loan or should I just suck it up? I > realize that the higher interest rate on the 15% shorter term loan may not > make it worth while but in this case I will also get a better rate for the > 80% loan i believe since it won’t be considered jumbo (275K is the limit > right here in CA it seems for most banks?)
> I have excellent credit but since I just graduated a year ago and got > married don’t have too much saved up yet but i’m sick of renting and i like > to do home repair. there seem to be gems in need of care in the price range > i’m looking at so i’m trying to get something! Also i’d probably want to pay > any points on the loan in the year 2002 for tax reasons, are these paid at > the end of escrow? > thanks!
> (BTW i’m also trying to consult some pros so if you have recomendations they > are welcome, I’d prefer local to San Fran, eastbay, CA or online!)
Answer: I have a friend who just purchased a home in the Boston area for $360k. He was able to put 10% down, and did a “split mortgage”:
$274k @ 7% $50k @ 8.5%
…and of course $36k down. This works to his advantage in many ways:
1) first mortgage of $274k is < 80% LTV, therefore avoiding PMI and is less than the $275k cutoff for jumbo loan rates 2) the higher rate on second mortgage, when combined with first mortgage, amazingly still has payments that are *lower* than if a single Jumbo loan with PMI was taken out. 3) the interest paid on the 2nd mortgage is also fully tax dedcuctible, whereas paying PMI is not. 4) paying off 2nd mortgage early is easier, and perhaps cheaper than refinancing an entire mortgage later.
This idea of the “split mortage” is brilliant…IMHO. The only apparent downside is that you’ll have to write 2 checks every month, instead of one – because there are 2 lenders involved (that are most likely different)….if that can really be called a downside.
Also, you probably won’t get this type of arrangement from lenders like e-Loan or LendingTree. I suggest going to a local mortgage broker.
-11cents
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