Background: Wife and I (late 20's)are looking to move closer to work and into our "forever" home. Currently we live about 15 miles from the town we work in. We are able to car pool 4 days a week and each drive ourselves on Fridays. The move would also put us in the same town as our parents whom will be the primary daycare in a year or so when we start having children. We bought our current house about 5 years ago when the Wife was still in graduate school. The town we are looking to move to has significantly higher housing costs, which is why we didn't buy there 5 years ago.
We will have saved enough by the end of this year to cover 10% down and closings costs on a $275,000-350,000 home. At that point we'd still have about $26,000 in student loans. We are currently setting aside $3,500 a month into our down payment money market account and paying the minimum on the student loans. If we were to purchase a home at $325,000 with 10% down and a PMI rate at .75 with a 30 year interest rate of 4.5%, our monthly P&I payment would be $1,482.06 with $182.81 on top of that for PMI for a total payment of $1,664.87. (Total loan interest would be $241,039.63 with minimum payments)
We are afraid if we wait a year for a bigger down payment, the impending higher interest rates would actual cost us more. If we wait for 20% down and the interest rate rises 1%, we'd have a P&I payment of $1,476.25 (total loan interest would be $274,450.51 with minimum payments. Higher total interest on $32,500 less financed). The price of that same house would definitely be higher in a year or so which would add to the cost.
We hate the idea of PMI but are thinking it might be wise to buy sooner. With the 10% down payment, we could continue to pay the minimum on the student loans and attack the mortgage until PMI can be removed at which point, we could go after the student loans. Moving will also increase our quality of life and drop our transportation costs significantly. Thoughts on any of this? Haven't talk to a bank yet but was planning to look into a piggy back 80/10/10 financing as well.