Hello mustachians!
Thanks so much for taking a minute to run through some numbers with me - i trust this community way more than any real estate agent or financial planner. Sorry if this is a bit long, but this is a community of problem solvers, so your help is appreciated!
Here is my sitch. I am 30, live in the DC area and am about to get married in June. All very exciting, but since both of us currently have roommates we have to find a place to live. As many here know, real estate in DC is quite expensive, so we are weighing the age old rent or buy question. I have a very steady job in the federal government making about 100k and she has a great job at a non profit making 75k. I come to the relationship with about 130k worth of liquid investments (with an additional 90k in my 401k), while she will be bringing about 40k of cash. We are on our way to FI I hope!
In browsing for a place to live, I have found a really cool property that is zoned commercial/residential (going to view it today with the listing agent) The property is currently configured for 2 businesses, the bottom floor is currently leased to an organic hair salon for $1123 through 2018 and the top floor is empty office spaces. The property is listed for 523k and I think would take about 15-20k and some DIY elbow grease to make the upstairs suitable for residential living. The listing has been available for about 120 days.
My mortgage broker ran some numbers for me -
With FHA
Purchase Price $523,000.00
Down Payment $18,305
Total Loan Amount $513,527 ( $8,832.00 Up front Mortgage Insurance Premium included, Charged by FHA)
Monthly Payment-Principal and Interest- $2,341.95-$2,448.70 (Interest rate of a 3.625%-3.99% (This may change depending on the Market)
Home Owners Insurance Estimate $61.02
Tax Estimate $457.63
Mortgage Insurance $354.62
Total Monthly Payment $3,215.22-$3,320.98
Traditional Loan
Purchase Price $523,000.00
Down Payment $78,450 (15%)
Total Loan Amount $444,550
Monthly Payment-Principal and Interest- $2,119.79-$2,219.58 (Interest rate of a 3.99%-4.375% (This may change depending on the Market)
Home Owners Insurance Estimate $61.02
Tax Estimate $457.63
PMI $55.57
Total Monthly Payment $2,694.01-$2,793.80
Rent for a similar place would range, but probably be around 2000 - 2500 a month. I also have the option of borrowing against my 401k (thrift savings plan is what the govt calls it). I can borrow up to 50k tax free and only pay 2% interest and repay it over a 15 year period, about half the interest of the traditional loan, but with no tax benefit.
OK so what should i do! Should I buy the house, use the FHA, not use the FHA, put 20% down, 15% down. Also, my real estate agent is only certified in DC so im going to meet the listing agent today without one, which may be a mistake as well. Or maybe I can just avoid paying the fee on that side and come out a bit cheaper in the end. Any negotiation techniques are appreciated.