About Private Mortgage Insurance

Zero Down Payment Mortgages Debate

The IndyStar.com, in their May 21st 2006 edition of their Your money column, asked several industry experts whether or not “no down payment mortgages” were worth it. The resounding response was …. “it depends.”

Julie Scheers, Bedel Financial Consulting mentions the two types of no down payment mortgages – piggybacks (80-20) and 100% LTV loans (which would require private mortgage insurance). She also smartly mentions that the savings can and be used to pay down the balance or saved in a 401(k). She also smartly warns that if you’re looking at zero-down-payment because you don’t have the discipline to save, you should get your finance sin check first.

Scott K. Ferguson, Halter Ferguson Financial brings up the statistic that 10 years ago, the average down payment was 20% of the selling price. Now, lenders advertise mortgages with 5% to zero down payment. He also brings out actual numbers with respect to how much PMI you’d pay.

The smaller the down payment, the higher the mortgage insurance. A zero-down $100,000 mortgage would have a $1,090 annual PMI premium, amounting to $91 per month more.

Bryan K. Hanner, Hanner Financial Services reminds everyone of the financial pitfalls of a small or zero down payment. A larger percentage of your payments go towards interest and not principal, so you’re not paying off the loan as quickly. He also says that most of the homes he’s seen being promoted as no down payment are in areas where the home is overpriced. Plus, if you’re that strapped for money, you should remember there are maintenance and utility costs associated with owning a home outside of the mortgage payment.

Overall I think this “debate” covers a lot of good ideas and thoughts very lightly and that you should do more research to figure out if the decision is right for you.

This entry was posted on Thursday, May 25th, 2006 at 7:29 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.