Construction Update.. Week 19..

Changes this week.

1. The main change this week is the interior flooring. All the carpets have been laid. Great room, stairs, bedrooms, & closet.
2. The light bulbs have been installed.
3. Bathroom fixtures have been installed.

Next week, they plan on turning on the electricity and powering on the house. the A/C will also be turned on to make sure everything works.

Other than that the news has been on the loan. I had initially planned to go with 10% down, and finance the house by getting a 80% first mortgage and 10% second mortgage. But due to the recent financial market crisis, the market for 2nd mortgage have almost dried up. So my loan offices @ Pulte mortgage says the only option available is to get a single mortgage for 90%, and a PMI (Private Mortgage Insurance). The PMI is basically an insurance for the lender that I pay so in case I foreclose on the loan, then the lender gets paid anyways.

Now I am not a big fan of the PMI due to the following reasons.

1. PMI payments do not go towards paying off my loan. hence I never build equity from these payments. It is just an insurance payment.
2. PMI payments are not tax deductible. Recent legislation have made PMI payments tax deductible, but this is just for the year 2007, and I am not sure whether the bill will be extended forward, or whether the tax deduction will carry forward in the coming y ears if I get the loan in 2007.
3. By law, I have to continue making PMI payments until I have built a 22% equity value in the house. Now in a strong housing market, PMI is probably a boon, since the house price appreciates, and you might have the required equity level in as little as 1 year. But in the current market, where the housing prices are coming down, I might end up paying the PMI for ever.

In any case, i have talked to my loan officer to find out whether there are any other alternatives to PMI. He said he will try to find out whether he can find any deals from their in house warehouse lenders. So lets see how that goes. I have to get the loan details worked out and the rate fixed soon as the closing is just few weeks away now.