Sunday, April 5, 2015

She Works Hard for the Money

Ryan Homes offers some pretty serious incentives if you choose to use their affiliated mortgage company, NVR Mortgage. In our community, the townhouse condos are selling pretty fast, so they don't offer building upgrades as they do in other neighborhoods, but they do give you $7,500 in closing cost assistance. But... I wanted to do my research and see if using another bank might save us more money in the long run.

Before I get into the number crunching, I actually have to give a shout out to NVR Mortgage. (No, really!) When we started our house hunt, we pre-qualified with USAA. It was a painless process, and they immediately FedEx'ed us a one page document outlining the basics: loan amount, APR, our monthly obligation. Our loan application meeting with NVR Mortgage was similarly painless, but in contrast to the one page document, we received about fifty pages (more?) worth of incredibly detailed documentation about the loan and closing costs. Not only do I have everything I need to know about the loan terms, they provide a detailed breakdown of closing costs down to the penny, well above and beyond the basics required by RESPA's Good Faith Estimate document.

Detailed breakdown of closing costs, down to the penny.

But back to the mortgage comparison. We don't have a money tree in our backyard, so we don't have the cash to put a full 20% down and have enough for closing costs. Therefore, we considered two different mortgage types: a traditional fixed mortgage with PMI, and lender paid mortgage insurance. (There is also a third option, an 80-10-10 mortgage, but that's a less common offering.)

Initially, we almost fell out of our chair when we saw that LPMI APR. Yikes! But here's the thing: while the principal & interest looks super high compared to the other two plans, the amount is tax deductible. So not only is the overall monthly obligation nominally lower, you're actually getting more money back in the long run because you can deduct more on your taxes.

The other thing to keep in mind for any of these options is that once you've developed 20% equity in your home, you can refinance and choose a conventional loan without the PMI. Given that interest rates are so low right now, I'm not sure if that's really a good bet, but it is something to consider.

Did anyone else choose an LPMI loan? Also, is USAA a great bank or the greatest bank? (We tend to think the latter.)


  1. Great post! We aren't doing a 80 10 10 but it sounds like you made a smart choice by swapping pmi for a higher interest rate.

  2. We are doing the LPMI. The best option for us too. I have never heard of this option before NVR.

  3. Starting to research the LPMI mortgage right now! Great post!