Advice on type of mortgage options (PMI, loan, interest rate, heloc)

[relja]

Hello, I am looking to close on my first home and banker is suggesting to consider 80-10-10 (10% cash). for 80 - that is 30 year fixed. 10% would be either second mortgage or HELOC. He suggested considering HELOC.
Rates I am quoted:
* 30 y fixed at 5.875%
* 10% HELOC at 6.125% (interest variable)
* 10% Fixed second at 9.125%

When and in general should I consider HELOC instead of fixed second? Payments are $140 lower a month. Credit is excellent. Much of fees will be covered by my relocation package. Thanks.

[allforcats]

You want to borrow at a variable rate when you believe that a year, two years, five years in the future interest rates will go down, and you can then refinance that loan at a lower interest rate. What do you believe?

[renriq02]

How about a 3rd or 4th option?

1 loan with no PMI at 6.125-6.25 putting 5 down (depends on area)
or
1 loan with no PMI at 6-6.125 putting 10 down.

No PMI = Lending is paying it through the higher rate.

I would ask him about his LPMI options

Originally Posted by relja

Hello, I am looking to close on my first home and banker is suggesting to consider 80-10-10 (10% cash). for 80 - that is 30 year fixed. 10% would be either second mortgage or HELOC. He suggested considering HELOC.
Rates I am quoted:
* 30 y fixed at 5.875%
* 10% HELOC at 6.125% (interest variable)
* 10% Fixed second at 9.125%

When and in general should I consider HELOC instead of fixed second? Payments are $140 lower a month. Credit is excellent. Much of fees will be covered by my relocation package. Thanks.

[baggiegenes]

If credit is good, then you can probably get and FHA loan with a rate as good or better. You can put as little as 3% down, but 10% is always better.

[lacierandall]

If I were you I would just go ahead with the HELOC instead of the fixed. That would only be good if you were going to keep the loan the entire term and pay it off...since the HELOC doesn't pay off much of the Princ. just the interest.
The 90% with lender paid MI isn't a bad option either but I think that if it was me I would just go for the HELOC.