November 1994 Edition

"Special Mortgage Issue"

More House And Less PMI?

I want to get the most house for my money and not “waste” any dollars on Private Mortgage Insurance (PMI). Any ideas?

For the homeowner, PMI is a valueless expense. The most obvious way to eliminate the PMI requirements is to apply a 20% down-payment when the house is purchased. However, if you need (or prefer) to put 10% down, you can accomplish the same objective by using a Purchase Money Second Mortgage. Purchase Money Seconds are available with the convenience of a single closing for an “80-10-10” combination.

The major advantages of Purchase Money Seconds:

An 80% first mortgage plus a 10% second mortgage and your 10% down-payment buys your new home...with no PMI!

Interest paid on second mortgages is usually tax deductible!

How can you get the most house for the money?

Shop patiently and negotiate a super deal!

Finance your new house with an Adjustable Rate Mortgage (ARM)!

Most buyers don’t realize that by simply using an Adjustable Rate Mortgage, they can buy approximately 10% more house. For example:

The monthly payment for a $100,000, 30-year fixed rate mortgage at 8.875% is $795.65. In the same market, the start rate for an ARM will be approximately 5.875%. Since you must qualify at the worst case second year rate (7.875%), you could borrow $109,735 for the same $795.65 monthly payment. With a 10% down-payment, this approach gives you the option of purchasing a house at $121,900 rather than the on selling for $111,100. Now you know how to get the biggest “bang for your buck” when buying a new house. Talk about having your cake and eating it too!

For more information contact Carl Newell at AmeriQuest, Inc., 1025 Killian Hill Road, Lilburn, Georgia 30247, or call 925-4288.

Typical Mortgage Questions?

How come there are not more people buying homes today?

It is my opinion that for two main reasons more than 50% of apartment dwellers do not take steps toward Home Ownership. First they do not understand or believe they can qualify for a mortgage. Second, they believe they cannot come up with the cash to buy a home. Many times we see the excitement of our clients as we go through the mortgage planning and show them just how they can qualify for their own home.

What’s the best loan today?

The best loan today is the one which best fits the buyer’s particular mortgage needs. We are amazed at the new programs which are surfacing almost daily. That is why mortgage planning is so important. People are looking for the best possible rate and desire to know what options they have. With FHA and the new Community Home Buyer programs, you can move into a home for as little as a 3% down-payment. Where the conventional 5% down loan used to be offered only on fixed rate products, now you have many attractive adjustable rate products with as little as 5% down.

How can you minimize the required funds to buy a home?

The buyer can go on a FHA loan which allows the seller to pay up to 6% on a 95% LTV. The seller can always increase their sales price by the extra dollars needed to lessen the buyer’s cash outlay. FHA will also allow 100% gift funds. The Community Home Buyer allows 3% down-payment with the other 2% coming from a gift, grant or the Lender. The Allowable Gold programs allow just 3% down-payment for the buyer, however, the interest rate would be approximately one half percent higher than the current rate. We are seeing lower funds required today at closing than in the past.

Why do we see such a wide range of closing cost percentages?

The cost to close a loan are generally the same regardless of the Lender as long as you are comparing apples to apples. Closing costs of 3% are typical for a $100,000 loan with the percentage decreasing on a larger loan and increasing on a smaller one. We can offer the 1.9% closing cost loan for a slightly higher rate.

For more information contact Janice Lloyd, Cornerstone Mortgage Corp., 3949 Holcomb Bridge Road, Suite 201, Norcross, Georgia 30092 or call 441-0707.

Varying Interest Rates And The Importance Of A Loan Officer?

We have seen the interest rates fluctuate over the last couple of year. What’s going on?

For the last two years, many borrowers have seen interest rates at 7.5% for 30 years fixed. Some are first time home buyers and are in semi-shock that the rates are around 9.25% to 9.50% with no discount points. Truthfully, these rates are still low versus the last 20 years. However, in some minds the buyer still thinks 7.5% or 8.0%, so in order to wet their appetite, two ways of financing have been popular in today’s market:

l Financing the closing cost. Most sellers will pay 3% for closing costs. If we ask the seller to pay 3% towards discount points then the selling agent can advertise a 9% 30-year fixed mortgage with 0 points to the buyer.

l Several buyers have selected the 2-1 buydown in order to have the starting rate at 7.5% to 8.5% second year and then ending at 9.5% the third year. The reason for selecting this program was to give the buyer a two year break on the mortgage payment and extra time to eliminate another debt.

Other programs are available to buyers with smaller down payments or higher debt ratios.

Why is it important to select a Loan Officer?

The main reason in the 90’s is that the borrowing has become very complex. The programs available to the Realtors and borrowers have tripled. Therefore, a knowledgeable Loan Officer has to match up the multitude of programs with the borrower to best fit the specific need(s). Many loans have come into our doors in a rejected status to end up at the closing table.

For more information contact Gary and Donna (Mongold) Gonzalez, Sunrise Mortgage Corp., 2799 Lawrenceville Highway, Suite 206, Decatur, Georgia 30033 or call 414-0661.


If you have a question, change of address, comment, home tip or would like to send Home Tips to your clients, send your letter to Home Tips, Christian Building Inspectors, Inc., 3697 Habersham Lane, Duluth, Georgia 30096. You can E-Mail your questions to us at We reserve the right to edit questions for length.

Quote of the Month

“If a man is called to be a streetsweeper, he should sweep streets even as Michelangelo painted, or Beethoven composed music, or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, here lived a great streetsweeper who did his job well.”

- Martin Luther King, Jr.

A Tip Of The Hat To:

Tom Luna

Re/Max Elite Properties

Marietta, Georgia

**** Thank You****