Long story short, my girlfriend is buying a house (I already own one) and I've been helping her with the process since this is her first go around.
Being that she is a first time home buyer here in Virginia there are some pretty decent options available. Here is the breakdown of everything:
The house is a short sale with 2 lien holders. Agreed selling price is $260,000 + $5,000 towards closing costs.
Originally the selling agent said the closing date would be Dec. 31st and now the 1st lender is requesting Oct. 11th. (We guess they want to get rid of it asap). We're going to counter with Oct. 31st to avoid paying the interest for those 20 days.
On to the mortgage options:
Option #1: VHDA 3% down ($7,800) + No PMI loan. The rate is 5.375%
Option #2: VHDA 5% down ($13,000) + PMI. The rate is 4.675%
The house assessed for $300,000 the last two years so if the appraisal were to come back that the house is worth $300,000 (fingers crossed) the 80% LTV mark would be $240,000. We would be $7,000 shy of being able to request PMI to be removed if we went with the 5% down loan. If we had to wait until the 78% mark ($234,000), we'd be $13,000 shy. Either way we strongly feel that we could have it removed within 2 years.
The tax rate in the city is 1.15%
Option #2 Runthrough: Lower interest rate but higher downpayment req'd & PMI
Using the 5% down loan ($13,000) + PMI ($121/mo) and appraisal at $300,000.
Loan Amount = $247,000
Down payment = $13,000
Interest Rate = 4.675%
Looking at an ammorization schedule we would hit $240,000 (80%) owed in the 22nd month assuming we don't pay extra. If we had to wait until the 78% mark ($234,000) it would put us at the 39th month.
The PMI estimate from the GFE is $121/mo.
22 months x $121 = $2662
39 months x $121 = $4719
Total interest paid for the life of the loan = $208,011.61
Option #1 Runthrough: Higher interest rate but lower downpayment and NO PMI
Using 3% down loan ($7,800) and house appraises at $300,000.
Loan Amount = $252,200
Down payment = $7,800
Interest Rate = 5.325%
Total interest paid = $256,209.09
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So now you see the options but here is the curve ball that is making it more difficult to choose.
With the loan option #1 @ 5.375% we can buy 2 points ($5044) which would drop the interest to 4.875%. We plan on staying in the house for 6+ years so the payoff on points is there.
Does this sound like the better option?
Loan Amount = $252,200
Down payment = $7,800
Interest Rate = 4.875%
Loan #1 with 2 points ($5044), 3% down ($7800) with a rate of 4.875% and NO PMI brings our closing costs in at $12844. Total interest paid over the life of the mortgage would equate to $228,278.73
If I have lost anyone, I'm sorry
However any advice would be great on what you would do.