To 20% or Not on an FHA

[Christian Valencia]

Greetings fellow investors!

My wife and I are in the process of purchasing a 3 family home with an FHA loan. Our lender got us a 30 year fixed rate at 2.75% (crazy, I know!!). We originally wanted to take advantage of the low money down with an FHA (3.5% down) but after learning that the PMI (.85% or about $4,000/yr.) stays with the life of the loan, we're now tempted to put 25% down. Property is $470K. $117K would be 25% down.

We only have $85K at closing, we’d need to borrow about $50K (shout out to any hard money lenders willing to lend) to have enough for $117K (plus reserves). Our goal is to purchase another property in the near future. The trade off with dumping most of our savings (and then sum) would obviously be the opportunity cost, but it makes us happy to see that we’re not paying an extra $4k/yr. in supplemental interest fees.

What are your thoughts fellow investors?

Looking forward to hearing from you!