Hello,
New to real estate (my first BP post!) and I'm looking to purchase a duplex to owner occupy in Milwaukee as a first home purchase. I'm in the process of pre-approval and I'm still on the hunt for the right property, but the lender gave me a few different options to consider. The different loan options all seem to have pros and cons but I was hoping to get thoughts from more seasoned real estate folks to get some input on which route might make the most sense for my situation. I'm looking in the $340k and under range so the hypothetical numbers were run based on that. Most likely looking to buy/hold maybe renovate and refinance as I live there but trying to start with baby steps.
1: FHA: told that sellers are not so enthused about this option and that my offer may go to the bottom of the pile if competing with multiple offers that are conventional. I have the funds to put more than 5% down but I'm hoping to use the rest of my funds to start purchasing additional properties. I'll have to refinance eventually in roughly 10 years to drop the MIP so does it really matter that it's a 30 year fixed?
(15% down, 2.875% 30 yr fixed, MIP $232/mo, $17k funds to close, $2300/mo payments)
2: ARM: I'm nervous to have a rate that may be significantly higher in 5 years that will cut into my bottom line and I'd like to take advantage of the low rates now. This option seems to be more popular with my lender/RE agent as it seems they favor this over the FHA.
(5% down, 4.125% 5 ARM, no PMI, $22k funds to close, $2260/mo payments)
3: Conventional
(15% down, 3.7% 30 yr fixed, PMI $30/mo, $56k funds to close, $2050/mo payments)
To me, the FHA option looks the most appealing because it requires so much less down, but I'm not sure if I'm missing something. Should I try with the FHA first and if I find I'm having a hard time getting offers accepted, consider the ARM/Conventional instead?
