+2 votes
first time home buyer, ready to purchase 200K single family home, credit score 740, income 40K, can put up to 90K down payment. trying to figure out what type of loan (Fannie Mae home ready-HFA-Wheda...ARM or 30 yr) and what strategy as far as down payment
asked Nov 14, 2017 in Buying a Home by confused

3 Answers

+1 vote
Since you have such good credit and a large down payment available, you would probably do best with a standard conventional loan via Fannie Mae or Freddie Mac. Just about any lender can do these. Think about only putting 20% down and keeping the rest of your down payment for other purposes. The reason is that, once you put that money into your house, it can be tough to get it back out again in an emergency. Once you put 20% down, you avoid mortgage insurance. Putting more down doensn't really help you, unless you need to significantly lower your mortgabe balance to qualify for the payment. At current rates, I would opt for a 30 year fixed unless you are for sure going to sell within 5 years. As far as FHA, HomeReady, etc, those are all low down payment mortgages, and they are great for those with little or no down payment available, but they come with mortgage insurance. But it sounds like you have more than enough to put down, so there's no reason to use these.
answered Nov 15, 2017 by TimLucas (10,040 points)
0 votes
Many of the programs for first-time homebuyers were created to help with down payments. For instance, the main benefit of the HomeReady program is flexible underwriting guidelines, reduced mortgage insurance, and a minimum down payment of just 3 percent. You seem well-qualified and not in need of that help.

If you were my client, I'd ask about your monthly debts like auto loans, credit card balances, and student debt, and I'd want to know about your retirement savings. Because a well-qualified buyer with a good credit score like yours probably only needs to put 20 percent down to get approved for a prime loan at a good rate.

A bigger down payment is appropriate if you have no higher-interest debt, if you need a lower monthly payment for other reasons (supporting another relative, charitable contributions, or expensive hobbies, for instance), and if you can make that without sacrificing your emergency funds (which should cover at least three month's expenses for a wage-earner, and six for a self-employed pr commissioned individual.

Your choice of program depends on several things -- mostly your timeframe. If you intend to keep the home and its mortgage for only a few years, a 5/1 hybrid could have a rate .5 to 1 percent lower than that of a 30-year loan. If your goal is to keep the home for many years, a 30-year mortgage might be best. And if your goal is to become mortgage-free as soon as possible, you have two choices. One is to put the max down and get a 15-year loan, which comes with rates similar to those of 5/1 hybrids. The other choice is to take a 30-year loan, put 20 percent down, and start adding to your savings until you have enough to pay off the remaining mortgage balance. That can be safer, because if you need money, it's hard to get it back once you have paid it to a mortgage lender.

Finally, I'd say that with your good credit and large down payment, you're in a position to shop aggressively for the best interest rate. Make sure you get a few offers, and work with a competitive lender who can help you choose the right program.
answered Nov 15, 2017 by GinaPogol (47,650 points)
0 votes
From your situation, conventional loans is your best choice. No mortgage insurance required with at least 20% down payment on purchase with 80% loan to value. Max debt to income ratios is 50% DTI.
answered Feb 13, 2018 by GustanCho (106,540 points)

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