To get 100% mortgage or pay 5% down?

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I found the place of my dreams a little earlier than expected (6 months earlier). So needless to say I wasn’t as far along in my savings as expected. By the time I close I will have enough for down payment and closing costs. But then I’ll be wiped out.

Should I make the down payment and have no savings or get a 100% loan. With the current savings and a 100% loan, I can pay off my credit card debt, start an IRA, buy furniture, and start the remodeling process/or have a savings.

BTW-I’ve been approved for both loans. And I have no retirement started and I’m 27. And I hate credit card debt!

What would you do?
Total monthly payments would be pretty equal. Maybe a $ 20-50 difference.

8 Comments
  1. Reply
    Natsif Alphamith
    April 29, 2011 at 11:40 pm

    Sounds like you would be in a better position with the 100% loan. But compare what your total monthy payments will be for all your bills including credit cards under both loan scenarios.

  2. Reply
    glo_river
    April 30, 2011 at 12:32 am

    Just go with the 100% financing, you are going to need that extra money for home repairs or property tax or anything that might pop up. I don’t think the 5% will make much of a difference on your mortgage payment if you apply it to the principle.

  3. Reply
    Nishi
    April 30, 2011 at 1:01 am

    The more you are able to put down the better off you will be and you can lower your monthly payments.

  4. Reply
    jess_offramp
    April 30, 2011 at 1:26 am

    Whenever you purchase a home, there are always costs associated with it outside of the mortgage. Property & school taxes, insurance, repairs, remodeling, furnishings, etc. Also keep in mind that other costs may come about that have nothing to do with your home (car repairs, family affairs, medical, etc.) that you will need to be prepared for.
    If you have the option to do the 100% loan, take the offer. Especially if the monthly payment is a minor difference. Just be sure your budget can account for that difference. You can always look into refinancing in a few years once you have some equity into the house.
    Also consider asking the seller if they would take care of any of the closing and/or inspection costs that may accrue. It doesn’t hurt to ask and depending on how desparate the seller is, it may work to your advantage.
    Use some of the savings and start a retirement fund, 401k, IRA, whatever. It’s never too early to start saving. Then put some of it aside for unforeseeable costs for the house (repairs, remodeling, etc.) or anything you need right now for the house. Don’t go and buy all the furniture & try to redo every room at once. Use the budgeted amount you are saving now & put that towards those things & aim to make improvements over time. The house is yours, so what’s the hurry?
    Good luck!

  5. Reply
    REInvestor
    April 30, 2011 at 2:24 am

    It seems as though you have already weighed out your options considerably. To deplete your savings in order to save between 20-50 dollars a month would not be a wise choice.

    If you assume the 100% mortgage, you should be saving more money every month by using the additional funds to pay off your credit card debt.

    With that savings, it would be wise to pay an additional 50-100 dollars every month on top of your monthly mortgage payment to go towards your principal. It is a small amount to pay in the short run and will reward you with more equity in your home in the long run.

  6. Reply
    Rico
    April 30, 2011 at 3:13 am

    I’d go for 100%. More than likely they aren’t giving you a better rate (after taxes) or lower fees for the 5% down so stay safe and keep some money in reserves and payoff the cards. Even if you put it in IRA, you can always access it in an emergency.

  7. Reply
    colleend01
    April 30, 2011 at 3:17 am

    Based on the fact that when I bought my home, you NEED money to buy things with, and make it a personal home to you. You yourself said with 100% loan, you can pay everything off and buy stuff for your home. Based on that assumption, you won’t have payments to credit card companies and such. Figure out how much you’d be paying the credit card and other bills that’ll be paid off (how much your monthly payment to them would be) and take that amount and add it to your mortgage payment (even though it isn’t required, ) You’ll find that you’ll pay off your house quicker. (ask your mortgage broker how much quicker you’ll pay off your mortgage if you do that.)

    You’ll find in my opinion you’ll be happier at this time with the 100% loan.

  8. Reply
    mortgage help
    April 30, 2011 at 4:02 am

    If it’s the place of your dreams, you probably plan on being there a while… Therefore, go with 100% financing. Use that money for those debts, and to help furnish your place. Don’t put yourself in a position to be strapped for cash once you close. Stay happy.

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