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Should I do a 80/20 mortage or downpayment from line of credit? |
I want to buy a house, and I received a preapproved letter of credit from BOFA for 50,000 with a monthly payment of 735.00 for 96 months and a rate of 7.99% APR (there is also a 3% transaction fee) . do you think is this a good idea to put this money for a house down payment as opposed to do 80/20 mortgage with no down payment with the first being 7.00 and the second mortage being 8.99 APR?? will that make sense???? will my score (773, 745. 698) go lower if i do this and maybe my APR will be higher???? Assuming you live in the US: If you use an 80/20 mortgage for financing. and you live in the house, you may be able to deduct the interest on BOTH mortgages from your taxes. If you use the credit line, that interest is not tax deductible. Also, the type of credit you have does affect your credit score. Loans like a mortgage or car loan have less negative impact on your credit score than unsecured credit lines. One more thing to consider: Your payment for your second mortgage may be lower than the credit line because you are spreading your payments out over a longer period of time. Yes, the interest rate will be higher, but the payment will be smaller. This will affect your debt to income ratio and may adversely affect you getting either mortgage. Last but not least: Most mailed pre-approvals from credit companies are an attempt to get you to actually apply for a loan. They may not actually approve you for that amount or after you complete an application, slightly change the terms of the loan. Either way, if you apply, they will have permission to pull a credit report and THAT will drop your credit score as well. I hope this helps! Please e-mail at amkornele@yahoo.com with any further questions. Best of Luck! Anne Source(s): I am a Mortgage Consultant. Don't use the line of credit for the downpayment. Be an American and put some real equity into the home! I'm having a hard time figuring out how you, with your credit score, were unable to get 100% financing for your house? your score is A paper rate and your rate could be better than what you were approved for. with an 80/20 the mortgage insurance (usually required) will kill you. something is seriously wrong here. you should be at a par rate with a rate at least 1 point lower. I believe you may be getting ripped off here. loan officer There are too many factors left out to properly analyze this series of questions... Value of the home to be purchased, value of the home you already have, what the LTV's would be if you were to use the HELOC, etc, etc....I would need to talk with you over the phone to evaluate your entire situation to make an appropriately educated plan of action for you and your specific needs. Also, in reference to one of the above answers, you wouldn't be paying PMI (private mortgage insurance) on an 80/20 loan. That's the WHOLE purpose of using an 80/20 loan program, so no one loan is more than 80% which would trigger the need for PMI. Using that equity in your primary residence to fund the down payment on a second property, is not an inherently bad idea, but there is definitely a course of action and many facets to be considered. Your APR or annual percentage rate is based upon the total cost of your mortgage loan expressed as an annual interest rate. This includes the base interest rate, mortgage insurance, origination fees, and some other related fees. You should not take any significant hit to your credit scores for having a second mortgage, just don't miss the payments :) Also, with those credit scores, those interest rates seem higher than normal, you may want to shop around for rates a little. One thing as well is the types of loans each of yours would be...I have some thoughts on that, but would be too much for the context of this question and answer session. I hope I helped answer your questions, if not feel free to drop me a line. Reginald Whitcomb - Mortgage Planner 978-998-7157 - reggie.whitcomb@redwoodfp.com |
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