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Old 05-16-2015, 10:11 PM
 
23 posts, read 20,639 times
Reputation: 14

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I am purchasing a home in a rural area and have 4 different quotes. I am trying to figure out which one is the best bet without considering adding to downpayment. I have about $25K to work with. I am assuming that the line that states "Cash from/to the borrower" is what I have to pay upfront as closing costs and/or down payment. Please correct me if I am wrong.

Loan Type: USDA Rural @ 3.00% interest

LTV: 100%
Closing costs $7,204.78

Monthly Principal & Interest $582.93
Mortgage Insurance $57.06
Hazard Insurance $22.58
Total Monthly $662.57


Loan Type: USDA Rural @ 3.25% interest

LTV: 99.63%
Closing costs + Down payment $4,326.70

Monthly Principal & Interest $599.52
Mortgage Insurance $56.87
Hazard Insurance $22.58
Total Monthly $678.97


Loan Type: Conventional @ 3.50% interest

LTV: 95%
Closing costs + Down payment $12,035.42

Monthly Principal & Interest $575.90
Mortgage Insurance $66.26
Hazard Insurance $22.58
Total Monthly $664.74


Loan Type: FHA @ 3.50% interest

LTV: 96.49%
Closing costs + Down payment $7,165.01

Monthly Principal & Interest $597.43
Mortgage Insurance $91.81
Hazard Insurance $22.58
Total Monthly $711.82

At first glance the Rural @ 3.00% seems the best deal in terms of monthly payments, but would have to give a bigger upfront cost. Conventional is the runner up, but the upfront is even higher, but I will be adding it to principal. Also, how would the insurance fees affect me in the future.

I would like for you guys to weigh in and help me out.
Thanks.
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Old 05-17-2015, 05:38 AM
 
Location: MID ATLANTIC
7,598 posts, read 17,618,792 times
Reputation: 8078
$3000 for $17 per month savings doesn't compute. Not sure why that's even in the mix. Ditto on FHA - waste of money unless you need the program. Conventional is 3x the cash @ 5% down. Did you explore the 3% down conventional?

Winner = 3.25% USDA
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Old 05-17-2015, 12:45 PM
 
23 posts, read 20,639 times
Reputation: 14
These were the ones I was offered and can get approved for from my bank. I forgot to mention that the home sales price is $135,500.

The following is a small table indicating the the accumulated costs over the different loans. I am not taking into account that the insurance fees might increase over the years.

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Old 05-17-2015, 10:14 PM
 
Location: MID ATLANTIC
7,598 posts, read 17,618,792 times
Reputation: 8078
Something you need to look at (and really think about), how long will you be in this home?
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Old 05-18-2015, 10:11 AM
 
Location: New York
2,251 posts, read 4,161,023 times
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Quote:
Originally Posted by SmartMoney View Post
Something you need to look at (and really think about), how long will you be in this home?

SmartMoney again is on the money!!!

I was thinking the same thing.... There will by a point when you get to 78% LTV, can remove the mortgage insurance (FHA loan has lifetime M.I.). Even though the interest rate is good, as your equity grows it may be advantageous to refinance in the future.


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Old 05-18-2015, 11:10 AM
 
Location: Boise, ID
8,011 posts, read 22,505,069 times
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Quote:
Originally Posted by SmartMoney View Post
$3000 for $17 per month savings doesn't compute. Not sure why that's even in the mix. Ditto on FHA - waste of money unless you need the program. Conventional is 3x the cash @ 5% down. Did you explore the 3% down conventional?

Winner = 3.25% USDA
I agree. I'd go with the slightly higher payment (under $20) and put a whole lot less money down given these as choices. If 20% down to avoid PMI isn't in the cards, I'd take the 3.25 Rural also.

Question though. Your total monthly payment numbers do not include taxes. Does this rural area have no property taxes? It wouldn't affect which loan you should do, I was just surprised to see insurance there, but not taxes.

Oh, and on the 0% down Rural loan, I don't come up with a purchase price of $135,500 giving a P&I payment of $582.93 at 3% interest. It takes a purchase price if $138,265 to get that payment. A purchase price of $135,500 at 3% is a P&I payment of $571.27. So something is either off in the numbers, or they are building in additional expenses on top of the $12k closing costs.

Same is true for all the loans, but to a lesser extent. They are rolling at least some additional closing costs into the loan amount. Maybe this is related to the PMI (which usually has up front costs as well as the monthly costs, but I would have assumed that was included in the down + closing costs you listed. You should make sure you understand exactly what you are building into the loan, and what you are bringing money to the table for.
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Old 05-18-2015, 11:30 AM
 
23 posts, read 20,639 times
Reputation: 14
That's a good question... I like the house and it's in a nice neighborhood, but the only downside is that it's a bit far away to what I am accustomed to: 30 mile country road drive vs 5 mile city commute. I am sure to stay at least the next 5 years, after that, not sure if I'll move and rent it out, sell or just stay. It is a good investment, because I got it as HUD with very minimal cheap repairs needed. Other homes in the area are going for $160,000+. That might affect my LTV...

I am leaning towards 3.25% Rural, mostly because of the lower upfront costs. In the end, the total difference between that and the 3.00% isn't much.
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Old 05-18-2015, 11:44 AM
 
12,404 posts, read 9,199,643 times
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Quote:
Originally Posted by Papote13 View Post
That's a good question... I like the house and it's in a nice neighborhood, but the only downside is that it's a bit far away to what I am accustomed to: 30 mile country road drive vs 5 mile city commute. I am sure to stay at least the next 5 years, after that, not sure if I'll move and rent it out, sell or just stay. It is a good investment, because I got it as HUD with very minimal cheap repairs needed. Other homes in the area are going for $160,000+. That might affect my LTV...

I am leaning towards 3.25% Rural, mostly because of the lower upfront costs. In the end, the total difference between that and the 3.00% isn't much.
Are you sure it's a good investment? If you add up gas, depreciation on car, added car maintenance, repairs, and lost earnings on your commute time, I'm not so sure about it.

You have to include transportation costs, you can't look only at housing.
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