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that's the benefit of being a first time home buyer here in the state of Massachusetts.
Here are some of the eligibility/benefits:
Lower interested rate, average 1.5% to 2.5% lower than conventional bank.
No Points
No PMI
No MIP
3% down payment (2% can be from gift money)
credit score of above 680
Income limits of under $82k
up to 75% of rental income
Debt to Income Ratio up to 41%
with this program I'm getting 3.5% interest rate, 3.5% APR, and my monthly payment (based on $360k with 3% downpayment) is just under $1,900/month (tax+home insurance included) or possibly lower. I will know the exact number by next week when I close.
now before I found out this program I applied for FHA which gave me interest rate of 4.9% with 3.5% downpayment + MIP (mortgage insurance) and the monthly payment would over $2,400/month based on $360k home.. that's over $500 PER Month i have to pay if i went with FHA.
but like I said.. first time home buyer program is varies from states.. your state may not even have such a program.. you would have to check out your city/state website to see if they have any
That would mean your property tax would only be about $2,200/yr. Is that correct for a $360k house?? Seems low for a high tax state like Mass.
The decision also rests with where your income is......if it's close to 100K, the deduction for PMI is at risk. (Every year, PMI deductibilty is evaluated - the last 2 years it's been stuck on only deductible 100% for < 100K year).
Looking at your options, it appears the lowest payment also has the PMI in the rate. In the grand scheme of things, 5.125% is traditionally viewed as a low rate (but on the high side if reviewing the past 16 months). But most PMI rates add as much as 1% (or more) to the rate. I think this is probably your best choice unless you can locate an 80/15/5, which will combine today's low rates with a second trust that is also 100% deductible. The 2nd trust rate will be higher, but no where near a PMI premium. But they are hard to find.
One thing you don't mention is the delivery date. The fact they know you are not going to close any time soon, there's no way to know if the rate quotes anyone gave you are accurrate. They could be playing the oldest game in the book for new construction, quote lower than what you could lock in at, today. Voluntarily going thru the application process (not!) a second time is what the lenders are counting on. The $3000 credit towards costs, helps seal the deal you will stay put from the get-go.
Look, what I am trying to say is - unless this property is going to be ready in 60 days, you're going to do the whole "what is best for us" when you lock in. It doesn't look like you were comparing apples to oranges (FHA to conventional), but you do need to select an option for the loan approval. But do not let them pin you down for your final program decision right now. Get the loan app in, pick a program and get the loan approved. But when it's time to lock in, that's when you need to look at all of your options before locking. That's the problem with new construction. They have you make some very important decisions very early on and they let you think you are stuck with your initial selection. I would recommend you be very clear, that for now, you are choosing option A (or whatever option), but very well may change your minds when the decision can be locked. Also, that is the time you want to compare what the builder's lender can offer compared to other lenders.
That would mean your property tax would only be about $2,200/yr. Is that correct for a $360k house?? Seems low for a high tax state like Mass.
tax for the house is roughly about $3,600 and we get over $1,500 discount as for residential exemption, since I will be living there. so it's about under $2,200 i will pay every year as long as i'm living there. insurance is $1450/year
The decision also rests with where your income is......if it's close to 100K, the deduction for PMI is at risk. (Every year, PMI deductibilty is evaluated - the last 2 years it's been stuck on only deductible 100% for < 100K year).
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would recommend you be very clear, that for now, you are choosing option A (or whatever option), but very well may change your minds when the decision can be locked. Also, that is the time you want to compare what the builder's lender can offer compared to other lenders.
Thanks a lot for your reply!
I think I made a typo the payment for option #4 should be $1606 not 1800
The house will be ready by the mid of this month and we should be closing by the end of this month. The builder said they will give $3000 towards closing and no origination fee. So we are thinking of taking this program and then deduct the org. fee as a part of incentive. So that will be 1/2% more for no PMI. Which I think is okay.
Thanks for advising that whatever program we choose now at the time of application can be changed at locking the rates later. But if we are closing in 30days do you think we will have more time to lock in the rates after loan application?
We are pretty close to 100K income level, so you think its wiser to avoid PMI by paying 1/2% more?
Thanks a lot for your advice!
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