What home mortgage option would you recommend?
That’s what who said? asked:
I am buying a home. I will put down an offer for $65,000. I make $30,000 a year and have $19,000 saved up towards the home. I have a credit score of 725. I was planning on getting a 15 yr mortgage, and putting 20% down, basically because I want as little debt as possible. Today, I was talking with someone who recommended putting down as little as possible (FHA 3% even) and taking out a 30 year mortgage. He said I could use the money I would have otherwise spent on the 15yr, 20% down mortgage to invest, thus making more money than i will pay extra in interest. While his thinking made sense, I just can’t be comfortable with that much debt. I am familiar with other forms of investing. He also reminded me most 30yr mortgages let you pay more than your principle, and I would have more “cushion” this way. It just seems like a better idea to get the best interest rate possible (about 4.7% for a 15yr, as opposed to 5.1% for a 30 yr). With the 20% down I would also avoid mortgage insurance. I know i CAN afford the 15yr, 20% down payment, but should I go this route? Thank you!
Eric
I am buying a home. I will put down an offer for $65,000. I make $30,000 a year and have $19,000 saved up towards the home. I have a credit score of 725. I was planning on getting a 15 yr mortgage, and putting 20% down, basically because I want as little debt as possible. Today, I was talking with someone who recommended putting down as little as possible (FHA 3% even) and taking out a 30 year mortgage. He said I could use the money I would have otherwise spent on the 15yr, 20% down mortgage to invest, thus making more money than i will pay extra in interest. While his thinking made sense, I just can’t be comfortable with that much debt. I am familiar with other forms of investing. He also reminded me most 30yr mortgages let you pay more than your principle, and I would have more “cushion” this way. It just seems like a better idea to get the best interest rate possible (about 4.7% for a 15yr, as opposed to 5.1% for a 30 yr). With the 20% down I would also avoid mortgage insurance. I know i CAN afford the 15yr, 20% down payment, but should I go this route? Thank you!
Eric
Tags: 30 Year Mortgage, Fha, Mortgages
May 31st, 2009 at 10:51 pm
Cindy
Ask for an amortization table for each of the types. You’ll be appalled to discover how much more you’ll pay in total interest with the 30-year option. It’ll be like buying the house and paying for it 3 or 4 times.
June 3rd, 2009 at 1:17 pm
Aaron
Put 20% down please and if you can more than that….cause buying home is the best option right now….Why would you want to pay more in interest rates…put 20% down get over with it in 15yrs with low interest rate….As you know coming years of Democrats…will boost up the economy and will appreciate the actual paid cost of ur house….
your thinking basically is good:)
June 5th, 2009 at 10:39 am
Ricky
The “best” investment to make these days is to pay down debt or to not assume debt. Putting down a larger down payment means you have less of a chance of becoming upside down. Taking a 15 year mortgage gives you a lower interest rate. If you can swing it, I suggest you do it. As far as investing. Talk to anybody in the market over the past year or two. Go with the 20% down 15 year mortgage. Good luck.
June 7th, 2009 at 2:46 am
Amanda
Right now there is way to much uncertainty and risk with the market I would shy away. You can always do two loans, 80% and 20% to avoid the PMI. Remember not to spend all your savings in case of a short fall. Rates are quite low now and you’ll save a lot in interest going with the 15 yr. All depends on your cash flow. 30yr will give you a lower payment but you pay more in interest. As you have 19k in savings I presume you have no other debt?
June 9th, 2009 at 7:34 pm
Gary
I would go with the way you were going to go. That is the smarter choice. Do not take his advise.