How many of you like to have money left over after making a major purchase? I would think many of us would say yes to this. There are some mortgage experts that tell you to put 20 percent down or that you should pay off your mortgage as soon as possible. I will tend to disagree with this. In my opinion, “Cash is king” … I think we can agree on this statement, right? In my comparison between FHA loans and conventional loans, I showed that even with 10 percent down and a 699 credit score, that FHA loans were slightly cheaper. (you can read about this in the link at the bottom – Part 1)
In my next example, I want to show you the difference with the FHA mandatory requirement of 3.5 percent down and compare it to 10 percent down. As many of you know, I am a firm believer in keeping the money in your pocket, even if you have the down payment. Again, some will tell you to put more down. Unless you have lots of money saved as a backup, why strap yourself. You can’t predict emergencies, it’s just a fact.
In the chart above, you can see that your mortgage payment only increases $107 per month if you put less down, yet you put $16,250 back into your bank account. The logical sense here is to have more money left over for emergencies, such as :
Home repairs to include repairing the roof, air conditioner, plumbing, or electrical
Loss of job or reduced work hours
I want to show you if you pay 1 extra point to lower the interest rate.
As you can see in the chart above, you could pay a point to lower your monthly payment and still keep plenty of cash in your pocket. You can also write off a portion of your points, depending on your income tax bracket. If you were in the 30% tax bracket, you would get to write off an additional $730. Please speak to a professional tax accountant or CPA.
Summary : I just think people need to have a plan, have goals, and a real budget. There are to many out there getting you to buy into the fact that you must pay your home off as soon as possible. Some of these so-called well-known people have you pay for courses, showing you how to use your money and or pay down your mortgages, acting like it’s the best for you. Keeping in mind that you need to have goals to make these decisions. But in my opinion, available cash is king. You can’t walk up to your house and demand to get your money back at that split moment.
Reminder : The conventional pricing hits will change for the worst effective April 1st, 2011. Pricing hits for conventional loans in April 2011
And many lenders/investors are making this change now and not on April 1st.
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For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors
Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc