Trying to start the home buying process.

[colleyvillesooner]

I am done throwing money away on rent for a townhome, and they want to raise it! I know I can get a house for cheaper than I pay now. I went through a trusted realtor and he gave me a mortgage guy who ran my application. I don't have any money to put down. I am also a USAA member if that matters. I have heard that their mortgage rates are beatable, but there homowners insurance is pretty good.

I just got off the phone with him, and he said I could qualify for the range I am looking at. Basically a house that is in the $120,000-$145,000 range is what I need to get my monthly payment where I need it. I have never done anything like this before so I thought I would throw out everything I heard in the phone conversation to you guys and see what is what, or get direction on where to head to learn more about it.

He talked about 3 scenarios:

1) an 80/20 loan so there is no PMI (private mortgage insurance).

2) a 100% finance loan. I would have to self insure and all the interest is deductible. (is this more expensive per month)

3) a 100% loan w/ PMI - only a portion of the interest is deductible.

I could have messed some of that up, but I tried to write it down as he said it. Feel free to say "There's no way that's right" or "you're an idiot". :D

Again, any advice, knowledge, or directions on where to go to find more info would be great. I am a house noob. Be gentle. :D

[Mjcpr]

On an 80/20 you're going to have to come up with the 20 yourself aren't you? And you said you had no $ for a down payment.

I've never heard of self-insuring instead of paying PMI.

I thought all of the interest was deductible always.

I'm not an expert. YWIA.

[NormanPride]

I am curious about this as well. What % would one look at for a down payment, if that was an option?

[Mjcpr]

Somebody around here will know way more than me about it, but 20% is the number where you can drop the PMI and save yourself some payment $.....so if you can put 20% down, I'm guessing you don't have to carry PMI.

[colleyvillesooner]

In his scenario, the 20% is in a second loan. This is because you only have to have PMI if the loan is over 80% of the home value, I believe.

He said there was a new law passed (maybe only in Texas?) that affected the PMI and amount of interest deducted. That sound right?

here it is
http://money.cnn.com/2006/12/20/real_estate/tax_deductible_mortgage_insurance/index.htm?postversion=2006122012


The alternative to PMI is an equity loan "piggybacked" on top of the first mortgage. According to Moulton, extremely low interest rates on home equity loans (HELs) and lines of credit (HELOCs) encouraged buyers to use piggybacks instead of PMI the past several years.

[TopDaugIn2000]

I'm doing the 100% cause I want to use what savings I currently have on the repairs, and I don't have the whole 20% anyway. I'll carry the insurance as part of my payments until I get 20% of the loan paid off (I think mine figured to be about $70/month). They also figure in your taxes & house insurance with your payments. Also, if you are a first time home buyer (like me) you can get an extra 3% assistance that goes towards your closing costs (mine are in the $4K range, so that really helped).

[JohnnyMack]

80/20 you don't come up with anything but the closing costs. And the interest on both loans is deductible. With an 80/20 you don't pay PMI. If you do end up paying PMI, you're eligible to get some of the premium back once you get to 20% equity in the home, but it pales in comparison to the interest you can deduct off your income tax. Problem with an 80/20 is that the 20% payment every month is pure interest unless you add principle to the check. Kinda like making a minimum payment on a CC.

Also, shop around the rate. A quarter of a point matters. Be a mortgage whore.

[Beef]

Even if you're going with a $0 down loan, make sure you have nice chunk of dough saved up for a cushion before you buy. **** breaks in houses.

[stoops the eternal pimp]

lots of options. i did the pmi no money down. i took the money in hand and did house improvements. got the property re appraised at a 20 % higher value after the improvements and had the pmi removed.

[landrun]

I just hope you got a fixed rate loan.

And, enjoy your new home. Its probably one of the greatest investments you'll ever make. ;)

[usmc-sooner]

on my first house I opted out of the VA Home Loan and to simplify it since it was the first house I bought, they paid the down payment and as long as I live in the house for 7 years I don't have to repay down amount.

[jk the sooner fan]

i have no clue on those types of loans, i've got a VA fixed for 30 years at 5.75%......i wont be refinancing anytime soon

no such thing as PMI with a VA loan