Mortgage Questions for college grads

[lamagra]

Hello all,
Overview:
Ages: 22
Combined Income: ~90k
Current plan: Budget living, maxing out 2 ROTH IRAS, matching company 401k
Credit Score: Mine is ~740 Hers is around ~650 (never had a credit card or payments but we are working on this)

My fiance and I (soon to be married in april 2008 ) Are looking into buying a house. Right now we are in a cramped two one bedroom apartments (parental decision ) and are paying a combined 1000 a month. I was looking at the interest rates and the housing prices around us in illinois and it seems like a much better idea to buy a smaller house 110k-135k and build some equity while paying the same amount in mortage as we are for the apartments.

Here is my question. Right now we will not be able to put down the 20% and have a security blanket. Here are some of my thoughts for options

A. We are debating borrowing money from the parentals and family members to make our 20% without having to dig into our security blanket.

B. 80/20 loan and use most of the money form the wedding and some of our security blanket to pay off the 20% within two-three months.

C.100% financed with pmi

I have been reading some articles with people in the same position but I havent found anything that is conclusive to help me make my decision.

Does anyone have any good advice or links to articles?

Thanks alot for your time,
Lammy

[Tree0164]

I would spend some time being aggressive in making a good size downpayment instead of asking parents for money. You can use some of your wedding money for that as well.

I wouldn't go 100% financed either.

[myself]

I agree with paying the 20% down to avoid the PMI.
If you could do an 80/20 loan and paying it off in 2-3 months, you'd probably be better off borrowing from parentals/family, and even paying them 4%-5% interest on the money you borrowed from them. I would imagine that you'd be saving a bit of money because the 20% portion of the loan would be at a higher rate than the regular rate in any state.

We put 20% and also don't escrow, by our own choice. Since we have very high taxes (the state of NJ is the highest in property taxes evidently), we felt we could leave that money sitting in a high interest savings account.
OK, not escrowing only equates to $7-$8/month, but that's something. Now if we could build up savings to $152,000, we'd be paying our property taxes from the interest we earned without touching the principle.

[loanstar]

option A is the best simply because it will not alter your other plans that much. also, you wont pay any interest on a loan from a family member.

[LivingAlmostLarge]

Will your parents loan the money without strings or will they always mention it? We were a bit younger than you when we bought and we told no one. We only put down 10% because money was tight.

The main reason why we didn't tell anyone is our parents would have nagged us to death and been whining about how we were too immature.

In fact when we got married we paid 100% for everything because my MIL said "If you aren't able to pay for your own wedding, you aren't old enough to get married."

Well so we did. We have paid for everything ourselves including our new house. Our parents offered but we refused because it would be allowing them too much say.

Now when they visit we tell them it's our choice.

I think it's fine to borrrow money depending on the type of parents you have and the relationship. Ours are not the type to not hold it over us and they are also the type to boss us around.

[lamagra]

Livingalmostlarge,

You have a really good point. I highly doubt that we will borrow from her parents (her parents and I dont really see eye to eye) but my parents are extremely laid back and we would only have to borrow a couple of thousand from them. We would then borrow a couple of thousand from my brother.

We will probably have enough to put down 14% while keeping about 6k for security money.

We are really debating this issue. We need to explore the interest percentage difference between 80/10/10 and an 80/20/0

Lammy