5/18/2023 – I wanna move up and keep my house, but I need a down payment

I was talking with a client yesterday, and they were considering taking money out of their current condo, holding the condo as a rental, and putting 20% down on the new house.

I explained that it makes more sense to pull out 5% on the house they are about to buy rather than the 20% down because PMI rates are cheaper than second mortgage rates!

Here is how that looks:

New Purchase $750,000.00 - 20% down PITI = $4499.70

New Purchase $750,000.00 - 5% down PITI = $5351.59 – when PMI goes away, you drop payment by $178.00 per month

2nd mortgage payment for 5% down = $329.09

2nd Mortgage payment for 20% down = $1316.36

The savings above may seem small $5351.59 +329.09 = 5680.68 vs. $4499.70 + 1316.36 = 5816.06 = $135.38 plus the PMI ($178.00 = total $313.38) will go away someday.

When interest rates drop, it will be easier to refinance the mortgage on your primary residence than it will be to refinance the second on your investment property. If rates drop by 1% and you have the 20% equity, you will now have a $625.00 drop in your payment. Your rate will be higher on the 2nd mortgage still because that property is now an investment property.

Lots of numbers, but it makes more sense to put less down on the new owner-occupied property when you have to get a second from your current owner-occupied house.

The last five days have been crappy when it comes to interest rates! I don’t make the rates, so don’t shoot the messenger!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• Government Loans (FHA / VA) are in the low to mid 5’s.
• Conventional Loans up to $726,200.00 are in the mid 5’s to low 6’s.
• High Balance Loans $726,201.00-$ 1,089,300.00 are in the high 5’s and low 6’s
• Jumbo loans above $1,089,300 are in the low to mid 6’s
• 5/1, 7/1, 10/1 Arms are in the 5’s and 6’s.
• Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
• Stated income loans – 20% down with reserves! In the 8’s and 9’s!
• 0 down loans are in the high 5’s to low 6’s- 620 credit score min right now! Low 6’s, for the most part, up to $740,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 6.99% with limited fees – But they get you where you need to go!
• 0 down California Dream for all Equity Share – Postponed until 2024!
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am around all weekend if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!