.jpg){kind=avatar}
Pay Full Price For A Home In Denver
If you've been considering purchasing a Denver area home, have just 5% to put down, and don't want to pay monthly private mortgage insurance, consider offering the total price. Why, you ask?
Here's Why:
In today's market, homes are priced to sell. Sellers have very little wiggle room to negotiate. Most are willing to deal with 3% of the home's purchase price or give you 3% towards closing costs, but not both.
If you have a little down payment, you are often stuck paying expensive monthly mortgage insurance. For example, with 5% down on a 250k home purchase, this insurance can run cheaply, around $130 monthly. And the expensive end is well over $200 a month. The monthly premium for this insurance is based on down payment and credit scores.
Ready to find your dream home in Denver?
Let us help you. Call or Text Kenna Real Estate Group at 303-955-4220 to get personalized assistance from our expert real estate agents.
What is It?
This insurance is mandatory on conforming and FHA mortgage loans that exceed 80% of the purchase price. It pays the mortgage loan down to 80% in cases of default or foreclosure, making the home more salable. This insurance stays in effect until the loan to value reaches 78%, often staying on the loan for 10 years with a 5% down payment.
How To Avoid Paying It?
We've all been taught that negotiating a little off the purchase price is smart. I disagree.
I've prepared a mortgage spreadsheet that shows 3 different options for a 250k home purchase. The first is a scenario where 3% is negotiated off the price, and you'd pay all the closing costs and would have approximately $129 a month mortgage insurance.
Ready to find your dream home in Denver?
Let us help you. Call or Text Kenna Real Estate Group at 303-955-4220 to get personalized assistance from our expert real estate agents.
Option #2 is the total price with 3% from the sellers for closing costs. 2% of this is used to pay for the mortgage insurance premium upfront, yet get the same interest rate as option 1. Most closing costs are paid from these funds; the overall payment is $91 a month cheaper.
Option #3 is an FHA loan in which the down payment is 3.5%, and the interest rate is much cheaper at 4.375%, but the monthly mortgage insurance is a whopping $231 a month. Even though this one has the most affordable interest rate, it is the most expensive payment by far.
In this spreadsheet, I have taken the $91 savings from option 2 compared to option 1 and applied it to the payment, which pays the 30-year term off in just under 26 years. I then set up the spreadsheet to show the difference in 10 years on the loan (typically how long one would pay mortgage insurance), which indicates option 2 as the winner.
Ready to find your dream home in Denver?
Let us help you. Call or Text Kenna Real Estate Group at 303-955-4220 to get personalized assistance from our expert real estate agents.
Spreadsheet link: http://mcedge.tv/169x5o
Most of us, on average, do not stay in homes for more than 10 years. If you are putting less than 5% down before you make an offer for a home purchase, consider this strategy. It can make your payment much more comfortable.
If you'd like a free, no-obligation customized spreadsheet for a particular property zap me an email at [email protected] or call me at 720-988-5404.
