@noviceattax on the lending aspect.... let's say you are going to put down 20% which consists of 10% of your own money and 10% of your brother's savings.
First, the bank is going to ask the source of the downpayment. You are going to have to say 1/2 is borrowed. That is going to cause underwriting issues and could cause the loan to be denied.
Even if you get the loan approved under those circumstances, it is quite unlikely any bank is going to offer you a 10% second mortgage shortly after closing on the first.
The scenario you describe is EXACTLY what got the mortgage industry into trouble (among other things) leading up to the financial crisis in 2008: Banks were originating 80% first mortgages and then taking back a "silent secord" for 10% so that PMI was avoided. It was a disaster! When real estate prices crashed, those silent 2nds were worthless!
PMI is not a "bad thing" is let's people get into homes with little down. Have you looked at the cost of PMI versus the cost of a 2nd mortgage?
with 10% down and excellent credit, and 12% coverage, the cost of PMI is 22 b.p. per year on a fixed rate mortgage or $198 per year on a $90,000 loan (10% down).
If instead of a $90,000 loan, let's say you take out a $80,000 loan and then a 2nd loan for $10,000. At 11% on the 2nd, it would cost $1100 per year (less the cost of the first mortage or $750 per year on that $10,000.). So even if you could get a bank to lend you the 10%, it would be approx $350 more expensive in interest costs and PMI would only cost $198 per year. The PMI could be cancelled once the loan amortises below 80% but the interest is locked in for the life of the mortgage.
Why try to avoid PMI???????
