Which loan is better?

[Qacer]

Let's say the loan amount is $200k. The monthly payments are the same at $1667 / mo including PMI and taxes.

Lender 1:
3% down @ 6.250%
cash required $12586
monthly payment without PMI and taxes: $1213

Lender 2:
5% down @ 6.50%
cash required $16859
monthly payment without PMI and taxes: $1201

I have not run any formal calculations, but just by looking at it, I would pick Lender 1 with a lower interest rate and cash required. But in the long run (life of the loan), will the 5% down for Lender 2 and the slightly lower monthly payment without PMI and taxes be better?

 

[alkemyst]

If both are the same with PMI and taxes you are paying more for PMI at Lender 2...Is this a real scenario (like you have actually GFE's from both lenders with the whole picture)?

That .25% better rate will probably pay off way better in the long run than saving $10 on payment. You loan payment is not like credit card payments...the quicker you pay off your loan the quicker you are actually putting money back in your own pocket.

Too many people make the mistake of shopping homes based on payment like they do a car. You really need to see the complete picture esp with after tax savings.

 

[Qacer]

Yes, this is an actual GFE. The only difference that I didn't mention was that Lender 1 was based on rates May 9 and Lender 2 referred to May 15. But I don't think this date difference will matter that much, no? I figured the dates are pretty close.

I was thinking that if Lender 2 could match the rate of Lender 1, then Lender 2 would be better, right? I figured with a lower rate, then the payments would be slightly lower. I'm just basing this on the fact that at a lower rate Lender 1 is still comparable in monthly payment fees.

 

[Aharami]

whats with the cash required? Are those the closing costs?
3% on 200K is 6K

 

[Vic]

Lender #1 for sure. Why should you pay a higher rate for putting more down?

Oops, saw the other post. Rates were better on the 15th than the 9th, so yes that does make a difference. However, if you're not locked in at either, then rates are back up yesterday and today. First rule of mortgage shopping: INTEREST RATES CHANGE DAILY. And sometimes, several times a day.

 

[MrMaster]

both say without PMI.

Run it through an amortization table and look at the years.

I have one if you need one but i think the ones you find online will work for what you need.

 

[rasczak]

Originally posted by: Aharami
whats with the cash required? Are those the closing costs?
3% on 200K is 6K

usually the closing costs are tacked on to the loan. the 3% requested is a downpayment i'm assuming. if that is the case and the 3% is a down payment, then go with the lower downpaymetn percentage as it is less money out of your pocket.

also in the scenario you provided, you are better off going with lender 1 since they are offering the better rate PLUS a lower downpayment.

 

[rasczak]

Originally posted by: rasczak

Originally posted by: Aharami
whats with the cash required? Are those the closing costs?
3% on 200K is 6K

usually the closing costs are tacked on to the loan. the 3% requested is a downpayment i'm assuming. if that is the case and the 3% is a down payment, then go with the lower downpaymetn percentage as it is less money out of your pocket.

also in the scenario you provided, you are better off going with lender 1 since they are offering the better rate PLUS a lower downpayment.

meh, just saw other post. rates change daily, until you sign the loan the rates are subject to change.

 

[Aharami]

also if you're not paying PMI, lender is charging you higher interest rates. I bet Lender 1 would charge you 5.875-6% interest if you were to pay PMI yourself. You have to find out how much would PMI payments be if it wasnt bundled into your loan and then see which option is better.

Im dealing with this issue also since Im looking to put down 10%. So I'd be charged PMI. BoA has a no fee mortgage plus program where they dont charge you PMI and pay for all closing costs (except inspection and interest for 1st month). But they charge about .25-.5% higher. PMI payments for me would be around 110/month but if I went with the lower interest rate and paid PMI myself, monthly payments come out to slightly more (including PMI) than the higher interest rate which has the PMI bundled.

So monthly payments would be around the same for both scenarios but you only have to pay PMI until your loan is 20% paid off. So with the higher interest rate, I'd be stuck with a higher payment for the life of the loan whereas with the lower interest rate, PMI payments would stop after i pay off another 10% and mothly payments would be less from that time forth.

Not sure which is the best scenario