Avoiding PMI

[Dmitriy P.]

Hey BP,

Im looking to purchase a 2 Family home which I plan on residing in and renting out the other unit. I was going for an FHA loan with 3.5% down b/c i didn't want to tie up my money in this one property as I am planning on purchasing some investment properties in the near future. After speaking extensively with my realtor, what we came up with to avoid the PMI is this...

Take out a conventional mortgage for 80% of the purchase price. Then taking out a second mortgage for another 10% (such as a line of credit) to be used as a down payment along with 10% of my own cash to fulfill the 20% down payment, in all avoiding the PMI as the 20% down payment would be satisfied.

Does this make sense to anyone? If not, why? Looking for some feedback. 

[Wayne Brooks]

Talk to a lender, as your agent should have suggested, not an agent.  What they allow, under what specific circumstances, is hard to keep track of.  And different banks will have additional, different, overlays on top of conventional secondary market requirements.