1st time homebuyer here (hopefully), not sure which route to take

[sgomez1325]

Looking at FHA loan.  My DTI is a bit high, I was told by lender that he can do a conventional loan (with current DTI), but I'd have to come up with down payment  of about $6500   OR   I could use that $6500 to pay down my debt to get my DTI lowered, then I would be eligible for FHA down payment assistance.   He said that the conventional loan route would be less interest on the loan--so that is what he is sayng is my best bet,  but my first thought is to pay down my debt so I'll have 2 less monthly bills to worry about each month. Thoughts? Which route would you take?

[ShanetheMortgageMan]

If your scores are 680+ then usually conventional is the better route to go, lower PMI, PMI will be removed automatically (vs. staying on for the life of the loan, assuming you are putting less than 10% down), and the overall payment is comparable between conventional & FHA at those scores.  If your primary concern is coming up with funds for the down payment though, and the down payment assistance program isn't available for conventional, then that gives FHA an edge.  You should make a comparison chart of all of the differences (payment, interest rate, amount of PMI, down payment, total amount of funds brought in at closing, how much in debt you'd need to pay off for either option, etc.) and use that to determine which option would be better for you.