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There is a thing called PMI buyout. I just bought a 500k house with 10% down and paid only 3k to buy out the PMI for the entire mortgage loan, saving thousands of $ I would have paid through monthly PMI. Also, the $ I would have put towards the down payment to get to 20% is much better off in the stock market, higher returns (or you can invest in something else, like a 2nd property). The monthly mortgage payment difference with 20% or 10% down is really not noticeable.
You talked about getting a better rate of return in the market than putting the extra money down to avoid PMI. There’s a cost associated with both the amount of the PMI (3k) and to finance the 50k not put down at the loans interest rate (2.5%).
Putting it a different way, you have 50k and have 2 options:
option 1 - use it for your down payment - you save the interest of 2.5% on that amount and also don’t have to pay PMI save (3k). All 50 k goes to your equity.
Option 2 - you have the same 50k But choose to keep it and invest. In this option you have to pay PMI of 3k and only then have 47k left to invest. You need the investment to appreciate to more than 50k before you make anything above what you started with, But you also need to take into account that your monthly payment is higher by the interest rate on your loan which means your investment actually has to make that much more for you to make anything.
If PMI is unavoidable you determine a break even point and measure it against when your equity will hit the 20% threshold where PMI is no longer necessary to determine the best option.
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With interest rates so low, I say you get the house and put as little down as possible. PMI is only going to be like 50 a month. Market is pretty good right now and you can get higher returns there. This is coming from someone that's HATES real estate. It's such a freaking hassle that I feel it makes it a terrible investment. So take it for what you will.
If you have good credit and low debt to income your PMI will be really low. Mine is just .2%/year with 10% down. I invested the other 10% and am much better off with those returns and paying PMI than if I had paid 20%. And that was before interest rates were this good.
I bought a place in your price range, put 5% down, locked in my 2.875 30/yr and didn’t look back.
I paid the PMI up front. It was 5 grand...
PMI seems like a real waste if you’ve got the cash for a down payment.
PMI on a $300,000 house will be about $150/month assuming you’re going 3.5% FHA, so you’ll pay about $15k over 8 years to hold onto 70k.
My PMI for 5% down on a 570k house was $100 a month. It was acceptable for me since I didn’t want to pay rent anymore.
Overly simplistic analysis but I’m happy with it. Certainly spent more for less before.
With what lender? I was quoted .0035% for 5% down at $470K. Worked out to ~$135
PMI is negligible. We only put 5% down, paid pmi for a year, and with market increases and some renovations are well past 20%. Getting rid of PMI is easy, just pay for a broker price (bpo) review. The bpo only costs us $100 and took less than an hour. Well worth getting on the real estate ladder earlier.
I negotiated to have the seller pay PMI on my first home when I put just over 10% down; they did an up front payment of ~5k. I had a >20% down the second time, so it was a non-issue. You have more than 20% saved for a $300k house and you'll have money leftover for the closing costs, so I'd increase your 401k and HSA contributions if you aren't maxing them out.
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I advise against PMI because not only does it add to your monthly payment there is a hefty upfront payment due at closing as well.
Also pmi is not tax deductible anymore.
If you’re not planning to move in next 3-5 years just buy now if you’re comfortable with monthly payment (able to save for retirement plus have buffer each month)? I purchased my first home in June ($475k, 15% down) and my PMI is $33/mo until I get 80% LTV (20% equity). I have no problem paying that amount in PMI. 20k in savings would be a good emergency fund unless you know you have large upcoming expenses (new car, furniture for new house, etc.)