Rodkin Discusses Saving for a Home Versus Alternate Loans and PMI

Readers ask questions, and our real estate expert answers. This week, Stephanie from the Northwest Side asks whether she should save for a down payment or opt for alternate loans and pay private mortgage interest.

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3 years ago
Posted by EileenChicago

I think the answer is just missing a few points. I've seen buyers get 95% conventional financing, and not to mention the FHA loans that only require 3.5% down. Of course, you still pay the PMI, but these options are out there.

Also, you mention that home prices may not spike in the 4-6 years from now that it will take them to save their downpayment.... BUT... will mortgage rates be as low as they are today? For example, a $200k loan at 4.5% today will cost you just over $1000/mo in P&I. But a $190k loan (let's say prices continue to drop) at a 5.5% rate (let's say rates go up in that time)will cost closer to $1100/mo. So.. home affordability isn't just dependent on home price, but also rates. And rates today are at an unprecedented low.

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