Does anyone know what this means.
1.75% Funding fee can be waived for an increase of .375% to the interest rate
which is better?
The seller wont pay a dime.
I thought the interest would be better since you can deduct that?
I guess it's going to depend on how long you stay in the house. If you plan on staying in the house several years, then it would make more sense to pay the funding fee since you'd recoup it over time with the lower payments over the life of the loan.
Since there's a tradeoff between paying the fee upfront now, or spreading out the cost over time with a higher interest rate, this is a calculation definitely worth considering for anyone looking for a HBC loan, or interested in purchasing points as well. I do a simple "break even" calculation that tells me how long I need to own a property before I realize the benefit of paying 1.75% upfront. For any of these programs where you trade upfront costs for lower interest rates, you will always always win in the long run by paying upfront. The question is when? In your case, the exact number of months you need to own the property for it to make sense to pay 1.75% now is dependent on the rate you are quoted, but it should be about 58 months, +/- a few months. If you plan on owning your home longer than that, by all means pay the fee now and take the lower interest rate. Good luck!
Actually I plan on moving south in 3+ years .. sooner if I can so I guess I will take the rate hike. TYVM!
I'm thinking about that option as well. The zero down with no required PMI is pretty darn hard to not take advantage of it. I just need to look at the long term and see which is better. Also you can have the funding fee rolled into the loan as well.