San Antonio, TX · Member since 2017 · 60 posts · 13 votes
My wife and I purchased a foreclosure 14 months ago for 75k and we’ve found a really nice short sale in a much better neighborhood at 244k but the other homes in the subdivision with the same square footage are selling at 330k. We will move out of the new place in 3-5 years as our kids get older. I’d like to keep the home we bought last year and rent it out as other rentals in the area fetch about $1100 to $1200 a month. I’ve got several questions, should we sell or keep the old place, i believe we could get about 125 to 130k for it. Should we put down the minimum down payment or 20 percent to avoid the pmi payment and additional interest on the new place. Would it be better to do a 15 year or 30 year mortgage if we did put 20 down knowing we would be moving? Is it even wise to buy a short sale knowing you wIll moving 3-5 years?
Most of the questions you have here don't have a single answer, but rather depend on the situation you are in and the lifestyle you want to live. There is nothing wrong with keeping the home you bought last year and renting it out, the ROI will be fine, but do you want to be a landlord? If you sold that property and realized a $50k profit, what would you use that money for? Would it be a higher ROI than renting it out? The same analysis should be used for your PMI - if you put down the extra 17% vs a FHA loan, how much money does it save you? If you invested that capital elsewhere, what type of return can you get? Always pick the option with the higher returns.
Also, there is nothing wrong with buying a short sale, if the price is right. It doesn't really matter how long you intend to live there, as most banks only have a trivial amount of time where you can't resell the property (if any).
If you are 100% sure that you won't be keeping the property, I would take the arm since it should carry a lower interest rate. Otherwise, a 30 yeah fixed would most likely be the safest bet and give the most flexibility down the road. Choosing FHA or Conventional is a ROI calculation based on what else you can do with the money.