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We need help choosing a mortgage option. We were working with a particular bank and just last week they told us they can no longer do 90% financing. Considering that we already put down a 50K down-payment and signed a contract we don’t have the option to back out so we have started courting other banks. We have about 2 months to get everything together and get a mortgage, but we were hoping to close by the end of this month. It’s been really hard for us to choose and see what option is best for us. We don’t know We are hoping that someone in the brownstoner family can provide some good advice. PS- we are going through this process without a realtor but we do have an attorney

New construction condo, purchase price- $500K

Option 1- The major bank that denied us 90% financing has offered to finance at 85% for 6.375%. This option requires us to put down an additional $23K plus pay $25K in closing costs.

Option 2- A second major bank is offering 90% financing at 6.75%. The closing costs would be 5% of purchase price.

Option 3- A credit union is offering 90% financing at 6.875%. The closing costs would be 3-4% of purchase price.

Option 4- The major bank in option 1 has also offered us the possibility of a FHA loan at 6.5%. This is because the home is in Crown Heights and is considered a low/moderate income area. This also gives us a potential $1500 closing cost credit. This seems like the best option but I am unsure. I’m a little peeved that they didn’t offer this at first, why are they only offering this now??

Is it better to pay the additional $23K now in order to get the lower rate? Ideally we don’t want to put any more money down and also have low monthly payments. Because it is new construction we are looking at very high closing cost.

How do we know what Option is the best for us financially? Is it better to pay the money up front even though it would take a huge chunk of our savings? Opinions please!