Mortgage Advice for 1st Time Homebuyer, Part 2 (PMI, loan, 401k)

[mjefferson1980]

For an earlier post, I gave my #s:
Starting job Dec. 1 with monthly income: $3,900
Checking balance: $4,000
Credit card debt: $5,000 (of $30,000 limit)
Student loan debt: $15,000 (will still be in school for more than a year, therefore not payable yet and not part of qualifying calculations, as I understand it)
Assets: $3,000 in 401k, $11,000 car I own fully
Credit score: 780
Pre-approved or qualified for $150k 5.0% FHA mortgage

Looked around at homes from $130-155k. Checked out a couple condos. Fell in love with a one-bedroom condo listed at $115k. Well under my price ceiling. Responsible, right? (Cue ominous music).

Then I found out the condo building is not on the FHA approval list, therefore an FHA loan cannot be approved for it. There was something called "spot approval" for condos not on the list, but the FHA apparently is not doing that anymore.

Now my only option for the condo is a conventional loan. Gone is 3.5% down. Closing costs are going to be higher. The rate will likely be up to 5.25%. And non-FHA pmi will be higher as well. My broker seems to think 10% down might not be an option and that I might need 20%. While my dad might "gift" me enough to get to 20%, it would be the kind of gift that would need to be informally paid back, and I think that's against the law, so I don't want to do it. Also, apparently some smaller condos can't get PMI because of lender preference.

My dad has offered to co-sign/co-borrow. He's well-off with a six-figure income, no debt, owns 100% of his home, perfect credit, etc. But I've been told that the mortgage then might be seen as an "investment" instead of a primary residence because of his participation, therefore possibly causing as much as a 1.0% bump in the rate. Then again, I believe there's less concern where the money's coming from in this case, and him putting in the down payment and me paying him back in a separate agreement - formal or informal - might be less of a hurdle in terms of bank approval.

So I don't know what my play is. I'm taking a government job with an agency that does not layoff. Will be in the same location for at least five years. Moreover, the monthly payment + HOA + taxes will be around $950, which is just north what I would be paying for a good one-bedroom apartment. I love the neighborhood the condo is in but won't be able to afford a single family home in it in the immediate to medium future. I'll be out of town a 3-8 days each month, which makes a condo a little more appealing for a single person. The condo is in great shape, and the appliances/floors/blinds/etc. are what I would have picked out had I furnished and decorated the place.

Then again, the FHA program, with its better down payment terms, PMI, and lower closing costs, seems to be by far the better option for me. Condos are harder to sell. A two-bedroom home could suffice for a longer timeline if I get married and have children, which isn't yet on the horizon. But I'm going to be out of town a lot. Not real handy with home improvement work, and the vast majority of houses I've looked at, even at $20-35k more than the condo, need work.

Maybe I should continue renting...

[tammie2]

Where do you live?

I ask because in certain areas, condos sell just fine. Although I would be concerned with a 1 br, I would definitely try for at least a 2 br. Our first place was a 2 br town home with a 3rd bedroom that could be a dining area. It sold in 3 days in a Philadelphia suburb. Where we are now and in Houston, condos just didn't go over very well, property is cheap enough without needing to go to a condo(whereas in Philly houses were out of reach even for many families).

Best of luck in your situation.