Advice regarding how much should be in the bank account after downpayment for a bank to give me loan
I am planning to buy a condo in Chicago, IL - USA
Let's say that I am buying a condo worth 250,000 and is FHA approved.
Let's say that I have 70k in my account.
When I pay 20% down, and after closing costs and tax for that year ( say 5k ), let's say I will have paid 50 + 10 = 60k
Now, I will have been left with 10k in savings.
Let's say that my Credit score is between 750 - 770.
Questions:
Since I have 10k in my account after down-payment, will I get a good interest rate on the loan?
I was planning to put down 15%, but I have been told that I should buy something called PMI to satisfy the rest 5% and if I take that my interest will be more and sometimes, bank will not go for anybody who pays less than 20%. Is that true?
After downpayment + closing costs, how much money in the savings accounts, is the bank looking for to say that I am a good buyer?
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Since I have 10k in my account after down-payment, will I get a
good interest rate on the loan?
When the bank considers your loan, they will see K. Regardless, they will want to see certain amount of savings that would allow you to continue paying your loan in case of an emergency, and K might not be enough.
I was planning to put down 15%, but I have been told that I should buy
something called PMI to satisfy the rest 5% and if I take that my
interest will be more and sometimes, bank will not go for anybody who
pays less than 20%. Is that true?
Yes.
After downpayment + closing costs, how much money in the savings
accounts, is the bank looking for to say that I am a good buyer?
Depends on the bank, my wild guess would be they're looking for several months' worth of loan payments (you should have ~6 months worth of savings for emergencies, regardless of loans).
With regard to PMI. You propose to put down 5% less, i.e. 15% instead of 20%. This is ,500.
How much is the PMI? You will pay interest on the ,500 extra you are borrowing, but also stuck paying that PMI for a number of years. Say the PMI is 0/mo. That's like paying nearly 10% on top of the interest you are already paying.
If you get a firm quote on what the PMI will cost you, you can make an informed decision. Borrowing at a bit of a premium may make sense, but much about 7-8%, and I'd rather take the risk of needing to raise cash elsewhere. PMI is tough to get rid of until you are at 80% LTV.
Edit -Beautiful link from Chad below. Now for the real math - You borrow 85K (to keep math easy) which is 15% down on a 0K house. 1.1% of K is 5/yr. But, you see, you are subject to that because you couldn't raise that last 00. And 5 is 18.7% of that 00. The PMI is on the whole mortgage, not on that extra bit you owe. Permit me to say "holy crap! 18.7% is higher than my worst credit card, and more than I'd pay to borrow nearly anywhere else."
The percent is the same regardless of the mortgage, this is the math to borrow at an 85% LTV. And why I suggest things like using one's 401(k) as a bridge for such amounts. For the OP, the K delta.
(Note, the link shows an update to 1.2% which makes the real cost 20.4%)
The numbers are not as crazy when borrowing 95% LTV. "only" about 7.9% on the extra needed. Crazy as it sounds, this is how the math works.
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