Hello,
This is my first time buying a house.
SO+my income=$140k
Debt=$30k in student loans
Credit=Excellent
Cost of living=VERY high (Bay Area)
$ for DP=$60k (leaves us with $ for closing costs and ~$10k stash for emergencies/repairs)
Handy man skills=not great
Using the rent vs buy calculator (New York Times), the verdict is buy despite HCOL.
Cheapest home prices for what we need=$500k-600k
I talked to a lender for the first time yesterday. He was encouraging us to put 3.5-5% down contending that would only cost us $50-60 more per month on our payment than if we put 10% down (all we can afford). After 2 years or so as the value of the home increases (presumption) and as we paid off the mortgage, we could likely refinance in order to remove PMI when our LTV would be <80%. I presume that would be at a greater interest rate, right?). He argues that having the extra $30-40k in cash is better than having a lower monthly payment.
1. His advice doesn't sound very mustachian. Am i correct?
2. But neither is my notion (admittedly) to buy a house with <10% dp. Should I give up on buying a house for now? We are paying low rent right now, but will need to upsize with a baby likely on the way sometime this year. (Renting a bigger place would cost us ~40% more than our current rent.) It's not possible to stay in the same place. We'd be okay with renting out a room in a new house. Our idea is to rent out the room, hustle to pay off the mortgage until we don't have PMI.
3. There is a special loan for houses in certain census tracts that is at 3.61% rate even if we only put 10% dp (trying to find out if there's a minimum dp to get this rate). It includes houses in neighborhoods where we're already looking. Should we look into the minimal dp strategy with this rate?
Thank you in advance for feeding me your knowledge. I need it.