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Profile picture for iveyskate

How much down??

OK So my boyfriend and I are educating ourselves as we prepare to purchase our first home. We have agreed to finance no more that $120,000. We will have up to $20,000 to put down. My credit score is 731 and his is 567. We are paying off his debt, which isn't much, and taking steps to boost his score before we apply for a loan.

Our goal is to finance a home for 30 years and pay it off early.

Our plan is to make an additional monthly payment of $1100, thus shortening the life of the loan to approximately 6.5 years.

IKR???

So my question is, would we save more money going with a higher interest rate and less money down or a bigger down payment and a lower interest rate GIVEN the fact that we will be paying the loan off earlier than we financed it for.

To soothe any concerns about our ability to commit to such a plan, I will say that we will be receiving a monthly payment of $1100 for the next 8 years on top of our combined yearly income, which is approximately the total value of the loan.

Thanks,
Dana
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January 26 2012 - Mobile
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Answers (6)

Profile picture for Candace S
Take a look at these:

Qualifying for a mortgage

How to save for a down payment

Can you afford a mortgage

These have some good tips.

Good luck,
Candace
Zillow Customer Support
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January 27 2012
You have several options and would suggest you get a referral to a local loan officer and explore them. If that is not possible post a requrest on Zillow. If your income is sufficient to qualify, you would eliminate the large issue with your boyfriends 567 credit score and do loan in your name. The size of the down payment does not impact the rate nearly as much as credit scores. An FHA 15 yr loan would be a good option or IF you are disciplined and really can accelerate the payments a 7/1 ARM could be considered.
There are other issues that you have not addressed i.e. is down payment equally shared? Can you afford house on your own if circumstances change? Are you using joint funds to pay off his debt?  Who gets to stay in the house if............
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January 27 2012
3 pieces of advice.

1) Don't buy a house with a boyfriend, it never turns out well. 
2) Don't buy a house with someone who already has a proven track record of being irresponsible with credit. The 567 is a clear indication of that.
3) Get a better boyfriend, one with better credit.

OK... so maybe 3# is just personal opinion, but #1 and #2 are definitely good advice!
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January 27 2012
Profile picture for shapiroamg
Before you do anything, you might want to see why your boyfriend's score is at 567. You will find it difficult to get financing with that score.
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January 27 2012
Profile picture for Caveat Emptor
here's the deal when comparing zillow's mort rate ad over on the sidebar which i have no idea if the rates are current(but I doubt it), but it will do for demonstration purposes

Loan Summary (based on 30 yr, 100,000 no taxes, no pmi, etc)
$463.12 + 1100 = 1563.12
Monthly Principal & Interest   

30yr @ 3.75  paid off 72 months (6.0 years)
Principal 100,000
Interest 11,741.28
Payment 1563.12

15 year @ 3.05% paid off 70 months (5.85 years)
Principal 100,000
Interest 9,103.34
Payment 1563.12

you'll notice the effect of shortening the term by 2 months. it was almost a 15% reduction in total interest paid. now imagine lengthening it by six months and adding an extra 1.5% per year in PMI. you'll see that the best option is clear.
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January 26 2012
Profile picture for Caveat Emptor
step 1) finance the home for 15 years and not 30, thus reducing your interest payment and thus shortening the term even more

step 2) put down 20k which equals 20% so that you dont have to deal with FHA/ PMI which is ALWAYS a waste of money if you don't absolutely need it

I can tell you right now that when you are talking about reducing your term to ~5 years, you wont even notice the 1% per year interest payment.
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January 26 2012
 
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