Conventional with seller paid CC and a 3-2-1 buy down or FHA with a 3.5% down

[Rick Soto]

Hello guys, me and my wife are trying to buy a property in TN. We are currently in this situation and wanted to hear your opinions.

We are buying the house to live in it for no more than 5 years, then sell it or rent it out. I initially intended to put down $50,000 to get a sellers concession where they would cover closing costs and a 2-1 buy down (we have to put down 10% or more down for the seller to be allowed to give us that that amount concession, around 5.8% off the purchase price of $484,500, seller concessions are capped at 6% with a 10% or more DP). The interest rate would be locked in at 6.875% with first year at 4.875% and so forth. This seemed like a good deal to me, since the seller is paying for this and it would also give me time to hopefully refinance into a good rate before hitting the 6.875% mark again. This is essentially where we are at now, and just lack my signature to make it happen.

Shopping around, I also spoke with a second lender. This guy is offering me to put down $48,450 which is right at 10%dp + $3,550.00 out of pocket and give me the same rate at 6.875, but with a 3-2-1, starting off at 3.875% on the first year. This is option 1.

Option 2 with second lender is, get an FHA loan at 3.5% and use the concession to buy discount points and bring a 6.2% interest rate down to a 5.4% permanent buy down, putting me at around $3,450.00 monthly PITI and also adding 8k to the top of the loan for mortgage insurance.

Knowing you guys were to move out in 5 years, would you go with a 10% dp and a 2-1 buy down and cheaper monthly payments, or 3.5% dp with higher monthly payment, but with more money in the pocket to invest elsewhere? I feel like its either save now on the down payment, or save as you go on the cheaper monthly payments.

Thank you!