FHA loan w/ 3.5% down now, or save up 10% down and wait a few years.

Asked by Homeagainquick, 08873 Tue Jun 23, 2009

Is it better to get an FHA loan with only 3.5% down now while it's a buyer's market, or to wait a few yearsand save up around 10% down? We're looking in the $190's price range and really want to get into a house but won't know we won't have more than the 3.5% down in time.

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Dexter Jasper, , Somerset, NJ
Tue Dec 22, 2009
This is a fairly common question but what you should also consider is the timing. Right now with the tax credit still alive and interest rates at its lowest point in years it' s hard to ignore. If you do the math its simple to make a case for buying now, in addition there are Somerset county grants available for first tiem buyers too therefore I recommend a consultation to examine the hard numbers and examine the variables.

If you are still considering and need an agent to help work through the questions I am happy to offer a consultation session to review the choices. A typical session will take about 30 minutes but can save you a lot of headaches.

Please visit me at http://www.njhomenet.com
Web Reference:  http://www.njhomenet.com
0 votes
x, , Richmond, VA
Sat Nov 21, 2009
If you can qualify now, buy now. The difference between 3.5% down for FHA and 10% down is minor. If you get a 30 year mortgage, you will still pay the FHA mortgage insurance.

Just using pure base numbers, if you finance $183,000 at 5.00% for 30 years, you will pay about $984 per month for principal and interest. That would be 3.5% down on a purchase price of $190,000.

Let's say you finance $171,000 at 5.00% for 30 years, you will pay about $917 per month for principal and interest. That would be 10.0% down on a purchase price of $190,000.

Just a $67.00 difference in the monthly payment. I would rather keep my $12,000 in the bank and cut back somewhere for the extra $67.00.

But most important is don't count on rates being where they are now in 2 years. I would bet my bike rates will be much, much higher. All the experts predict we will enter a period of high inflation once the economy starts to truly recover. Rates will skyrocket.

By the way, if you put 10% down and finance $171,000 at the higher rate of 6.00%, your payment will be about $1,025.00 per month. How about that? Paying more per month than you would have paid with 3.5% down.

Without question, if that's the only thing holding you back, buy now.

Good luck.

Carol Lloyd, CLU, ChFC, FLMI
Mortgage Advisor
"In the Business of Educating My Clients About Mortgages"
First Hallmark Mortgage
(856) 728-7100
0 votes
Dianne Scott…, , East Brunswick, NJ
Sat Nov 21, 2009
I concur with all of the above, however, looking at this from a buyer's perspective, why not buy now, with the money you have available. Most mortgages do not have pre-payment penalties, which would allow you to keep your payments manageable, and allow for additional payments toward the principal, as you see fit.

In doing so, you take advantage of the low rates, tax credit, etc., and still have the ability to pay down your mortgage.


If you would like additional information, please feel free to contact me.

Dianne Scott Bey
Weichert Realtors
East Brunswick, NJ

(973) 207-3121-cell
0 votes
Al Akerman, Mortgage Broker Or Lender, Lakewood, NJ
Tue Nov 17, 2009
Consider this:

Say you wait five years until you have 10% to put down- rates migh be higher, prices might be higher, the $8,000 tax credit won't be there and your 30 year mortgage will be paid off in the year 2045.

If you buy now, and in five months use your $8,000 tax credit to pay down your mortgage it would shave off almost 3 years off your 30 year mortgage. So, besides for getting low rates and a great price on your home, you would be finished paying in 2037.

I strongly suggest doing it now.

Feel free to call me @ 908 415 3958 if you have any questions.
0 votes
does your lending facility accept low score but paid off negatives, but report isn't updated as yet,
Flag Mon May 19, 2014
Alexander Fi…, , 08057
Tue Nov 17, 2009
The minimum down payment is something that HUD is looking into currently along with raising insurance premiums, but has NOT been put into effect yet. All the more reason the time is NOW to purchase before these changes are made. I would expect to see the insurance premiums raise before the down payment change, but anything is possible with the reserves as low as they are. Get those contracts signed NOW! Link at the bottom has more detail.

Alex Finley
Loan Officer
Pleasant Valley Home Mortgage Corporation
305 Harper Drive
Suite 3
Moorestown, NJ 08057
856-252-1200 X 1216
856-252-1240 (fax)
877-296-5454 (toll free)
0 votes
Vishal Maher…, , New Jersey
Tue Nov 17, 2009
Dear Home Buyer,

Per my knowledge,Commencing Today, November 17, 2009, the FHA downpayment criteria has increased from 3.5% to 5%.
You can confirm the same with your Mortgage sales representative.
I can certainly assist you If you are looking to buy a home in Franklin or other areas near Franklin.
I am always available on my cell# 732-277-9321 from 6:00am-9:00pm- seven days a week.


Vishal Maher
Richa Realty
Cell# 732-277-9321
0 votes
Dirtha Campb…, , Overland Park, KS
Tue Jun 23, 2009
With the upward trend on interest rates you would be better to purchase now. Rates will eventually noralize in the realm of 7.5 to 8% in the next 24 months.

With a conventional loan you can put down 5% and have a 95% loan with MI of about .25% vs. a FHA loan that has a 3.5% required down payment, monthly MI of .5% and "up front" MI of 1.5% to 1.75% is normally financed in the loan.

If you have decent credit 700 or above I would recommend the conventional 5% fixed and do a budget letter show how you will save the remaider. If your score is under 680 you will not be able to get MI for conventional financing and should opt for FHA with the more flexible approval guidelines.

If you would like to see how either proposal looks the 5% Conventional and the 3.5% Fha feel free to contact me.


Dirtha Campbell
Certified Mortgage Consultant
Flagstar Bank
0 votes
Olivia Aluba…, , Turnersville, NJ
Tue Jun 23, 2009
Hi There,

There are many outside factors that play into this scenario, but based on the information you've provided, I would advise you to purchase a home now. Unless you put down 20%, you will still be required to pay PMI. You're more likely to find a home you like in your price range now than in the next few years.

Please do keep in mind that fixer-uppers will not be FHA approved, so avoid these types of homes during your search.

Also, don't forgot that if this is your first home or you haven't bought a home in the last three years, you qualify for a $8,000 tax credit as long as you close by December 1st. Please let me know if you have any other questions. Thank you.

Olivia Alubankudi
Century 21 Hearst Realty, Inc.
0 votes
Lukasz Wojtu…, , Fairview, NJ
Tue Jun 23, 2009
I would be careful with the 10% loans. I have yet to close any despite what mortgage lenders said, promissed and assured. I had 3 clients this year that came to me with 10% loans and everything was fine until the loan went to underwriting and all of a sudden the debt to income ratio is no longer up to par and the lender requires 20%. Every single time. So all 3 of said clients went with FHA which ended up prolonging the process by another month or so and alot of stress on everyone, especially the sellers who wanted to pull out of the deal because they thought it wouldn't happen. If you can go FHA now and maybe pay off a couple interest points with some of the extra money, that might be a better idea since the rates are still low, even though they have come up a bit in the past month. Who knows where they will be in the next few years or home prices for that matter.

Whatever your decision, good luck to you!
0 votes
Daniel Casta…, Mortgage Broker Or Lender, Forest, VA
Tue Jun 23, 2009
I would do it now. Here is the reasoning. Rates are really good, in the low to mid 5's. Home pricing have come down some. so you can probably get a little bigger house for the your money. Sellers are wiling to take less to sell. And the main reason i would buy now...the government will give you up to $8000 tax credit.

plus, you will be stimulating the economy.

Danny Castagna
Sr Loan Officer
E Mortgage Management
800-796-9633 x 185
0 votes
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