If you want to finance more than 80% of the purchase price of the home you are buying, do not despair. While the media is all ablaze with news that banks are not lending money, it is not true. Two options are available for high Loan to Value loans; FHA loans and private mortgage insurance (PMI). Here are the characteristics for both:
FHA loans:
- Generally for single family or two family homes. Very difficult for condos.
- Points are charged upfront and can be added to the purchase price.
- Up to 97% financing.
- Insurance premiums are added to the monthly mortgage amounts.
PMI:
- Private mortgage insurance companies must approve the loan.
- Available for condos.
- When value of residence increases and Loan to Value is 80% or lower, you can request an appraisal in order to get PMI removed.
- Downpayment must be a least 5% borrower's own money. Gifts as total downpayment are not allowed.
Again, funding is available for all kinds of loans. Do your due diligence.
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