What is the best type of loan for someone with a 600 credit score.Has $400,000 cash :rolleyes: and would like to buy a $500,000 house ?

Q: Does he really want to put all that money down? If not, then I would go for 100% financing 80/20.. on that deal.

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Thats like asking 'Whats the best kind of car to buy?'

What is his goal? To pay it off quickly? Lowest payment?

You're not giving us much to go one. We need to know some more details like -

- what's the borrower's income? E.g., if this $400k was inherited, and the borrower's income is really only $50k, he/she may not have a choice but to make a large down payment.

- what type of property will be purchased - primary residence, vacation home, investment?

- is it single unit or multi-unit? if multi, how many?

- what are the other two credit scores? Depending on the other two scores, this borrower may or may not qualify for a conforming loan.

For example, if 600 is the mid score, conforming lenders will be hard pressed to qualify the borrower for the standard conforming products like the 30 Year Fixed Conforming Loan.

- Has the borrower owned a home in the last 3 years? If he has not, and this purchase will be for a 1 unit primary residence and he meets the income limit for his geographic region, he may qualify for a Conforming First Time Homebuyer loan , which allows for a lower credit score.

Give us some more details....

Damon Di Placido
Wachovia Mortgage
damon.diplacido@wachovia.com

More importantly is the question of your overall financial goals......if you are simply buying a house this is one thing but if you want to build wealth (no this is not that late night Carlton Sheets deal) then there are so many other factors you should think about.

Here is an audio interview that might help you out (or at least get the thought process rolling) on what way is the best for you in structuring a loan.

http://wtygart.pmcsites.com/equityinterview.htm

Equity in a house earns you 0% (zero), so typically you don't want more than 20% equity. Of course there are many factors we do not know like Placido has mentioned.

Tell us your goals and more details and we shall reply with more answers.

Yeah the question is kind of vague.

80/20... NO what the heck are you thinking? We are not financial planners. (Keep 400k and invest it)

20% down and below is ideal because there is no PMI and the rate is the absolute lowest it can be on a 10, 15, 20, 25, 30 yr fixed. The lower the term is the lower the rate.

70% may be easier for a borrower lacking a mid score of >620.

Low LTV and Liquid Reserves make DU/LP give credit for compensating factors.

So I would suggest a 10 yr loan with enough of a downpayment to make the monthly payment comfortable. I would suggest refering this person to a financial planner to advise on what to do with this excess money if any.

On the flip side there are 2 kinds of people.
1) Risk Takers - They are either filthy rich or sitting on a park bench flat broke.
2) Safe and Passive - They just play it safe and sometimes things are a rollercoaster ride but they opted for the Hyundai instead of the Mercedes.

Safe is to place money into a guaranteed dividend paying account.

But honestly anything else is a risk and you are looking at paying 5% interest on a loan and guaranteed is 2-4% so I would put the 400k in the house. Safe and keeps liabilties low so you can save more money up for investmens/retirement on possibly a pre-tax basis.

Quick question: when the MIP is discontinued once the LTV ratio reaches 78%, what happens to the Mortgage Insurance? Does it discontinue as well, does it continue? thanks.

with that kind of money in the bank I would have him put 20% down and use the rest as a financial reserve. Fannie Mae's Desktop Underwriter (DU/DO) loves financial reserves and will give an approval with that much in the bank as long as his income is decent. I have seen a 540 fico borrower get an approve/eligible with much less in reserves. If he wanted to have less of a payment per month he could put even more down or use some of that money to pay off other debt he has. It is kind of hard to say what would be best for him without knowing the whole story but at the very least he should put 20% down so he avoids PMI.

It depends on your future plans. With that kind of money I would take a little bit for the down payment - maybe a 80/20 loan and then go for a fix since that will probably give you the best rate at this point. Save some of that money for other investments so that you have some for raining days, cash flow and whatever else you may want to do. If you want to speak to me about your options you can call me at 949-544-2168.

"It depends on your future plans. With that kind of money I would take a little bit for the down payment - maybe a 80/20 loan and then go for a fix since that will probably give you the best rate at this point. Save some of that money for other investments so that you have some for raining days, cash flow and whatever else you may want to do. If you want to speak to me about your options you can call me at 949-544-2168." by scottie

wtf??????? That would be an Alt-A loan. I agree with Adel on this one.

Slick you reading this topic still? I am interested to see what the decision was.

Wait a minute. So you guys think it would be better to put 20% cash down on a home instead of investing the cash somewhere else?

All I'm saying is,

(1) keep the cash for future investments and allow that money to make money
(2) we are financial planners, especially when advising someone about the largest financial project they're more than likely going to make in their lifetime
(3)you're not going to have PMI with an 80/20 loan program... that's why you have a 1rst at 80%.. to avoid PMI.
(4) If and once you spend the cash on the down payment, it's gone. Why bother when it could be making money in interest in another investment?
(5) How long are you going to stay in this house? An important factor to consider. Like Mr. Tygart said, there are so many other factors you should think about.
(6)How long do you anticipate on paying your mortgage? As low as rates are, why bother with trying to dump all your eggs in one basket? Do the math. If you can earn more money on the interest elsewhere, then...

Let me know if you need to speak to a professional mortgage broker and/or you need an expertm opinion from a financial advisor. I have the best financial advisor at Morgan Stanley in NY. He's sharp as a whip. With me, you'll get the best of advice. East Coast Investments coupled with West Coast money.

What on earth is going to give him the same rate of return as real estate? There is absolutely nothing out there with the exception of futures, which are very risky.

If he decides on an 80/20 as you suggest he will pay a higher rate if looking at 100% CLTV.

You say once he spends the down payment it's gone? I don't think I even need to bother with that idiodic statement...it's called equity.