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When most individuals want to buy their dream house, they usually need what is known as a huge mortgage. A mortgage is deemed huge when it exceeds a certain dollar limit as set by Fannie Mae and Freddie Mac. These two secondary market lenders will only cover cash advance values under $729,750, which is the new conforming cash advance limit set by President Bush in February of this past year. Most huge cash advances will carry a higher interest rate as the risk of default is generally greater on a cash advance of such value. With a good credit score the difference in rates is usually not that high, maybe a difference of half a percentage point or three quarters of a point. However, when markets are skittish, rates can vary by as much as 100 basis points.

In today’s market, huge cash advances with no down payments are not commonplace. Nor are cash advances with a very small percentage down. More risk for the borrower requires more down payment. More specifically, a lender will be looking for about 5% down to mitigate their risk. With a huge cash advance, your PMI is going to be inherently higher as you are dealing with a larger dollar amount. However, there are techniques that can be used to finance the property with two cash advances, as is done with cash advances of lesser value, namely, taking out one cash advance to cover the down payment, and another to cover the remaining value of the purchase. If you want to save cash on the PMI, this is a strategy worth considering.

When considering saving cash on PMI with two cash advance amounts, a lender may mention something known as Lender Paid Mortgage Insurance. This is basically injecting your insurance into your core interest rate. This isn’t really an unscrupulous practice, because it is known to be insurance that you are paying, however, while PMI usually disappears after twenty percent equity is obtained by the buyer, this lender paid mortgage insurance that is a percentage of your rate, may never really disappear. So, in the long run, you may end up paying more than if you had just paid PMI. Make sure that you think about both payment options when you are offered the ability to pay no PMI with a simple increase in your interest rate.

Another recent offer of lenders of huge cash advances is to have Arm cash advance that has a fixed rate for five or seven years and then adjusts annually. However, these cash advances have rather low rates in these fixed periods and then the cash advances can fluctuate to higher levels. Due diligence is required as usual.