Hi BP! First-time homebuyer here. Circling in on a 2-family at about $200,000. The home needs a minimum of $50,000 in renovations. I am approved for $300,000 and will owner-occupy 1 of the units. Below are 3 loan possibilities that I am circling, I just wonder if anybody has any insight or preference.
- FHA with 3% down PROS: low down payment, great interest rate, keeps cash in hand for renovations. CONS: PMI forever (yes I know refi is possible to get away from PMI), tougher closing process (to my knowledge), 203K renovation loan is ruled out, none of 4 lenders seem to work well with the program, only local lender that seemed excited about it approved me for way less than required.
- Conventional with 15% down PROS: No PMI forever, more equity in home, potential to bundle in with traditional renovation loan CONS: Higher interest, more upfront cost
- FANNIE MAE HomeStyle with 5% down PROS: PMI not infinite, keep cash in hand while having access to funds for renovations. CONS: unsure really as most lenders are seeming to sway me to either FHA or Conventional.
My thoughts originally were to go FHA as it is my first-time home, but I'm beginning to feel more deterred by it. I am intrigued by Fannie Mae loans but not getting as much info as I'd like on them despite shopping through multiple lenders, both local and larger. I like the seeming simplicity of a conventional loan. Assuming that I have the funds to cover the cost of renovations, I am just wondering what would be the best way to finance this home and complete the necessary renovations.
Any thoughts, advice, experience, or questions are greatly appreciated.
@Chris Platis 203k is good product for renovation specially for 2-4 units. The interest rate is lower, MI is lower if you have lower FICO, renovations funds are available through standard and limited 203k. Yes the staff should be knowledgeable in this products.