House Hack Mortgage - 3% or 5% down?

Question

Hello, I am buying a househack in Northern VA! I have roughly $30k cash - here are the numbers my lender is running by me.

Which one should I choose?

Sales Price $529,420

OPTION #1:

——————

97% LA = 513,537

3% = down payment = $15,883

Home ready has to take an education class

3.250

Mortgage Insurance = $201.14 monthly

$13,711.44 one payment – upfront

Payment

P&I = 2,235

MI = 202

Tx = 500

Ins = 75

_________

Total = $3,012

OR

OPTION #2

——————-

95% LA = 502,949

5% = down payment = $26,471

Home ready has to take an education class

3.125

Mortgage Insurance = $159.27 monthly

$10,360.75 one payment – upfront

Payment

P&I = 2,154

MI = 160

Tx = 500

Ins = 75

_________

Total = $2,889

John Warren · Answer

@William Richard Arens the answer is to always keep money in your pocket today to invest or have for a rainy day. The time value of money is more important than most people realize, and when you buy a rental your tenants are the ones paying for the payment.

Dan Maciejewski · Answer

Lol -- the $123 difference is more than I thought but your purchase price is higher than I thought it would be from the title.

With the payments sooo similar (4% difference), and the interest rate not too different, I'd save the 10k down payment (less the MI 3k pre-paid difference) and pay the extra monthly. You'll probably re-fi out when you get to 80% LTV, so you won't pay the full interest difference.

William Richard Arens · Answer

@Dan Maciejewski

Yeah the Washington DC area market is insane!

I agree with your thoughts, Im going with 3%. I can use the extra cash for improvements or just maintain reserves.

Thank you!