noir’s Story
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So, long story short...
noir made the mistake of
Not putting 20% Downpayment on the loan
My Advice to You is
Have at least 20% money down
Here's the whole story
Buying a house, we decided to use the downpayment money for furniture. This meant we would have to pay a PMI, which is like Insurance on your loan that your bank demands. This is so that if you default on your loan, the bank won't have to eat the value of your loan. Fair enough.
Except, you pay PMI and it ends up being about $150-250/month. If your house gains in equity (value), you can eventually apply to remove the PMI payment (when your home is worth more than 20% of what you borrowed on it). What they don't tell you is that banks won't remove PMI on their own. Hell, it's free money! And, if you happen to make ANY 30 day late payments on your mortgage, they have the right to charge you PMI for up to 18 months afterward. That's the kicker.
So, even though our home was worth 100% more than when we bought it, we were still paying PMI because of some stupid late payment we made about a year prior. In the end, we should have just put 20% down on the home. THis would have guaranteed us a lower interest rate (and payment) and we could have done away with paying any PMI, which is just like giving money to the bank). All because we wanted a stupid couch and dining room table.
Comments (4)
Thankyou for this advice, I will be sure to put it into practice when it comes time for me to buy my first home!
I swear buying a house has so many little things that can just screw you out of money. I'm going to definitely have a question of the month about buying your first house. Thanks for the idea.
Good tip. I'll buy my first house next month.
I think you have to get a good mortgage broker that can help you get through (and explain) all of these small details. I just purchased my first house and only put 10% down. I took on a second mortgage (80/20) right away to make the lowest monthly payment possible because I know the house is going to go up in value. I spent the extra money that could have made it 20% and fixed the house up, adding value that will help the sale.
There are so many different options, you just need someone to help you along the way. I know that I am only going to be in my house for 2-3 years and will make upwards of 50-60k on the house in that time.