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was giving me numbers, and methodically explaining two options to me as if she were translating Greek*. Basically, these magical programs are an FRM with PMI (we're putting down under 20%) or a 1st for 80% and then a second for the rest. I'm sure she's on autopilot, presenting this in a similar manner regardless of the client.

I, of course, said "wait, let me get to my computer, I've got Excel up", and calc'd the payment numbers to the penny, then informed her when it came up that PMI deductibility phases out between 100K and 110K for MFJ filers. She knew it phased out at some point but didn't it exactly.

Of course, that part is in my spreadsheet.

I think it also surprised her when I asked for the exact PMI rate. because yes, that too is in my spreadsheet, for all down payment percentages from 3% up to 20%.

Because I have an illness, that's why. But it's nice to input everything and then just solving for max home price with the click of a mouse.

-synchronicity

*- right, I know, syncspouse could've translated for me in that case. IT'S AN ANALOGY!
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I think it also surprised her when I asked for the exact PMI rate. because yes, that too is in my spreadsheet, for all down payment percentages from 3% up to 20%.

BTW, what is the PMI rate that she quoted you? DW and I are considering a possible refi, and we can get below 80% by bringing some cash to close. I'm trying to decide whether to do so, but I haven't been able to get good estimates of the cost.

Albaby
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BTW, what is the PMI rate that she quoted you?

0.70% on 10% down, 0.57% on 15% down.

-synchronicity
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0.70% on 10% down, 0.57% on 15% down.

Thanks, Sync.
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Also, I think if you get more than 15% down but less than 20% the amount might be in the range 0.32%, but am unsure on that.

I know you can get rid of PMI once you hit >20% equity, although it usually costs you an appraisal (anywhere from $250 to $600 depending on part of the country and cost of your place and whatnot), and there may be some minimum time period after you get your loan before you can ashcan the PMI (I'm thinking "3 years" but could be pulling that out of my backside, might have read it somewhere sometime).

Just found out that if I go with one loan and PMI and the one loan is a jumbo, it would be a 30/15 (amortized as a 30 but with a balloon payment at the 15 year mark. That's, uh, kind of a BIG deal. A bit ticked she didn't mention that immediately. Yeah, yeah, I know "how often do you live in a house 15 years?" Doesn't matter, TELL ME! Have I not shown that I can handle math and something beyond simple concepts?

-synchronicity
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Have I not shown that I can handle math and something beyond simple concepts?

Doesn't mean SHE can handle the math. . .Just because she's the "professional" doesn't mean she knows it half as well as you do.

Ishtar
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didn't we just have a similar conversation about lava lamps?

peace & artihmetic
t
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I know you can get rid of PMI once you hit >20% equity, although it usually costs you an appraisal (anywhere from $250 to $600 depending on part of the country and cost of your place and whatnot), and there may be some minimum time period after you get your loan before you can ashcan the PMI (I'm thinking "3 years" but could be pulling that out of my backside, might have read it somewhere sometime).

Of course YMMV but with my lender (PenFed), you can get rid of PMI once you reach 78% LTV based on the value at the time the loan was given. A new appraisal was not required. There was also no minimum time required.

-Steph
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Of course YMMV but with my lender (PenFed), you can get rid of PMI once you reach 78% LTV based on the value at the time the loan was given. A new appraisal was not required. There was also no minimum time required.

Yup, that's under Federal law since ~1999, IIRC. THBS, if we assume (I know, I know) home values that don't decline (I know), 80% LTV should be hit considerably sooner than that default amount.

-synchronicity
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Doesn't mean SHE can handle the math

But it's not about the math, it's about disclosing the nature of the loan. A 30/15 is a MUCH different creature than a 30FRM, because you've got to plan for that contingency on the off chance that, ya know, you just MIGHT still be living there 15 years hence.

She could have told me that. And me being me, she wouldn't have had to explain how it works in detail.

didn't we just have a similar conversation about lava lamps?

She didn't understand the specific gravity of the situation.

-synchronicity
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"Yeah, yeah, I know "how often do you live in a house 15 years?""

My mother has lived in her house for 46 years.

A guy I used to work with bought the house he grew up in from his parents when he got married. This year will have lived in that house almost continuously (except for a few years during college) for about 57 years.

Some people do live in their homes for more than 15 years.
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Yeah, yeah, I know "how often do you live in a house 15 years?"

My dad died at age 87 in the same house that he was born in.

Leana
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"Yeah, yeah, I know "how often do you live in a house 15 years?""

Lived in the first house (a condo, actually) 4 years. Next house 5 years. Next house 7 years. This house 16 years and counting.

Think we just got tired of moving it all again.
 
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hey Balloons!


peace & years
t
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Off on a tangent, but it's mortgage related. My brother wrote a book!


The Fateful History of Fannie Mae: New Deal Birth to Mortgage Crisis Fall by James R. Hagerty.

He was on the CSPAN book show!

Gail
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Yup, that's under Federal law since ~1999, IIRC. THBS, if we assume (I know, I know) home values that don't decline (I know), 80% LTV should be hit considerably sooner than that default amount.

-synchronicity


Fear of our home value having even further declined (down 7.5% from purchase price when we refi'ed) was why I waited until 78% LTV. I was afraid of what I might find out if we actually had to get it appraised again. I was actually surprised it appraised for what it did during the refi.

-Steph
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She didn't understand the specific gravity of the situation.


From my last experience with a mortgage broker, they don't care to understand the gravity or specific requests. I believe they are used to people who don't ask questions or aren't aware what to ask. Until you call them out on it, they will not tell you.

Like anything, you have to protect your own interests and she has no experience with an excel guru like you. I highly suggest you keep everything documented over e-mail. that way she cannot say she never told you. After my refinance, I wrote a timeline of every issue we had with her and sent to to the president of the company.

-jacalyn
but that's a whole long story of a refinance under HARP with a Fannie guaranteed loan that was underwater
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Off on a tangent, but it's mortgage related. My brother wrote a book!


The Fateful History of Fannie Mae: New Deal Birth to Mortgage Crisis Fall by James R. Hagerty.

He was on the CSPAN book show!

Gail


What an amazing family you have!
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But it's nice to input everything and then just solving for max home price with the click of a mouse.

Putting my LBYM hat on.

Is the max home price near the price you want to pay? I like the flexibility in my finances due to buying a home at 1/2 of the calculated max price.
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Putting my LBYM hat on.

Is the max home price near the price you want to pay? I like the flexibility in my finances due to buying a home at 1/2 of the calculated max price.


Yeah, for clarification, "max home price" is the amount I informed the broker was the max home price that WE would want to pay. Actually, it's the max LISTING price for houses that we're looking at, so max purchase price would almost definitely be less, at least by a little.

The assumptions on Ye Olde Excel House Budget Workbook include both syncspouse and I maxing out 401(k)s, Roth IRAs and the ESA, as well as a certain amount per year to the 529. It also assumes zero annual bonus and certain conservative assumptions regarding syncspouse's compensation.

I was told, no surprise, that we qualify for a LOT more house than our max. Hell, I feel a little uncomfortable with the idea of even paying our max for a house...which would explain why it's our "max", right?

-synchronicity
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"I was told, no surprise, that we qualify for a LOT more house than our max."


All they care about is getting you to take out the absolute maximum. After closing its your problem, not theirs. We got the same routine -

Agent: "why don't we look at some more expensive houses?"

Us: "No."
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Hi Sync,

Haven't talked with you for a while, hope all is well, and you're enjoying Texas. I think that's where you moved. Was back in Chicago recently for a cousin's funeral, still love that town and great to see how the city has grown, but the weather hasn't improved.

an FRM with PMI (we're putting down under 20%) or a 1st for 80% and then a second for the rest.

Will trust your spreadsheet, what did you determine the break point for doing one loan with PMI or splitting it into two loans and not having PMI? I would find that answer helpful. While I'm comfortable with numbers, I would go with my gut instinct on this one and go with the two loans. I think there are other variables in play besides the economic / cost analysis of how it impacts the monthly payment.

One suggestion, the PMI rates you quoted elsewhere in the thread are as negotiable as the interest rate and do differ among various lenders. I'm a little surprised a broker would give hard and fast percentages on PMI, it's really a function of which PMI company issues the insurance. As a broker chooses which end lender to place the loan, each lender may have a different PMI factor. At the bank where I originate loans, I see various PMI costs. However I do not get to choose which PMI company is used, my bank makes that selection after the loan funds. The bank prefers to minimize risk by spreading PMI insurance over many different providers. When someone asks me specific PMI factors, I quote the highest cost provider. After the loan funds, I've received phone calls as to why the PMI is less than I quoted.
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Heya! Long time no talk.

Haven't talked with you for a while, hope all is well, and you're enjoying Texas. I think that's where you moved. Was back in Chicago recently for a cousin's funeral, still love that town and great to see how the city has grown, but the weather hasn't improved.

Yup, Texas. It's like "the land beyond O'Hare" EVERYWHERE, which...well, takes some getting used to.

Sorry to hear about your cousin. Yeah, the city keeps growing. The weather still sucks. Texas winters are about the only thing I prefer (in general, still miss the snow) over Chicago.

Will trust your spreadsheet, what did you determine the break point for doing one loan with PMI or splitting it into two loans and not having PMI?

At 2% annual home price appreciation and 4% cost of funds, it takes 3 years before we can get rid of the PMI, and 5.5 years for the "one loan with the earlier PMI" to be better than 2 loans. This is assuming a 25% marginal tax rate on the interest that's deducted (assume for the moment that I've done the legwork to determine that that is a very close to accurate number currently).

Cost of funds has little impact on the results, home price appreciation (or the lack thereof) is what really moves things. If we assume housing stays flat, the years change to roughly 5.5 and 9.5. Obviously if housing drops from current levels, one could also use a "how long til it gets back to current" as the question. FWIW, the Case Schiller indices have DFW home prices up ~4% for the 12 months ending Oct 2012, and DFW prices never dropped as severely as in other areas. They tend to be less volatile overall both up and down.

For various reasons my gut is thinking one loan rather than 2, mainly because I like locking in low interest rates. But maybe my gut has eaten too much pepperoni pizza. I'd be curious what your thinking is re: two loans instead of one and PMI.

One suggestion, the PMI rates you quoted elsewhere in the thread are as negotiable as the interest rate and do differ among various lenders. I'm a little surprised a broker would give hard and fast percentages on PMI, it's really a function of which PMI company issues the insurance. As a broker chooses which end lender to place the loan, each lender may have a different PMI factor. At the bank where I originate loans, I see various PMI costs. However I do not get to choose which PMI company is used, my bank makes that selection after the loan funds. The bank prefers to minimize risk by spreading PMI insurance over many different providers. When someone asks me specific PMI factors, I quote the highest cost provider. After the loan funds, I've received phone calls as to why the PMI is less than I quoted.

As you can guess, I've looked up the rate cards from several PMI providers in the past (yes, I'm sick, I know, I KNOW), although I haven't done so since the middle of last year. In general the PMI rates were all within the same general ballpark, so I just went with an "average" and figured that was good enough for my purposes. I neglected to adjust my PMI rates for a jumbo mortgage and now note (looking at the pdf for a rate card I'd saved) that there's an upward adjustment to the rates for jumbos for that provider. (the pmi provider was "pmigroup.com" for that one, it was a +25 bps adjustment).

My guess is that the broker was ballparking the PMI (the exact rate she was using in her example was .70%)

Thanks for the insights on PMI, it is much appreciated. Feel free to SEC me, or I might SEC you with a couple questions.

-synchronicity
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The Land Beyond O'Hare. That's funny, I remember making that reference, or possibly it was you, on another thread years ago. Of course, it was probably Mike Royko who made the original reference.

Leaving work now to toss some steaks out on the grill. But yeah, let's follow up on that discussion of one loan vs. two loans. That comes up in my work frequently, most people will make a gut decision, yet I know no one better than you with a spreadsheet. I am curious about the math. Very detailed that you would you use home appreciation as a variable, of course, that means you've also used the cost of a new appraisal in factoring when PMI can be dropped.

I touch base to let you know reasons outside of economics for going with two loans. As most on these boards hate debt, the second loan genearlly gets paid back quicker than a spreadsheet may guess. Funny how debt will be paid more aggressively down to zero vs. building savings. Also, think Texas is unique in the U.S. about opening up a second trust HELOC. Once you close on the new property, I'm not so sure Texas allows a 2nd Trust to be opened with a combined LTV greater than 80%. I'm a big fan of having a HELOC for emergency purposes. This is outside the regular emergency fund, something your Peabody (or was it Salem) wife may say is a Wicked emergency. Have one myself with a $0 balance. It's the only way I know that I can walk into a bank and walk out the same day with $50,000. cash, and not use a gun.
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