Mortgages

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Wag482

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School me on mortgages.
First time home buyer and trying to figure out what my options truly are. I know I know. Now's not the time to buy. But realistically I'm tired of spending 1900 a month to rent, a new sub development is breaking ground just down the street and I think jumping on it is the best option for me right now. Homes will probably be in the 4-500 range. I guess my questions are

-conventional loan? Do I go with that and muster the 20-ish %?
- look into a FHA with 0 down and pay PMI? Making bigger principal payments? Is that even a thing?
-yesterday I went down the rabbit hole of ARM loans. Is that really a good gamble in this market? Basically betting the interest rate is going to go down in the next 5,7,10 years?
 
I'm not up on mortgages but our first, and only, house I bought 42 years ago had an ARM option. I stayed away from that and was glad I did.

If you can find some program/offer for first time homebuyers that might be the best bet.

Getting away from $1900 per month rent is a good plan.
 
You can do Conventional w < 20%, sometime 5%; Be VERY CAREFUL of Builder Credits/Financing - They say hey, I'll pay $10,000 towards closing, but ends up costing you $ 57K over life of mortgage. A Wholesale Broker will save you around $ 9,400 vs going through retail bank. No one has crystal ball, but rates should go down in next year or so, but ARM's are risky.

Also, 1 Extra payment a year can take years off a 30 yr Mortgage, Good Luck!!
 
coueskiller43 said:
If you can swing it the 20% down is always your best bet. Sometimes the homebuilders will finance the loan and offer a better interest rate than you can get from the bank. A co-worker of mine recently purchased a home and financed through the builder/ developer and was able to get a 5% loan.
Click to expand...
Interesting, they don't do that around these parts but we do have builders who work a lot with certain lenders on projects that offer to assist with financing but it's the lenders not the actual builders who do the lending. At least that's how it works in these parts:)
 
Things to consider are:

*30 year average mortgage rate is in the 7.8% range. The days of 3's and such spoiled buyers to no end and they won't be coming back. However I wouldn't be surprised to see them hit the low 6's in the next 9 months or so. IMO, 6% give or take a bit will become the new normal.

*Personally I wouldn't touch an ARM

*Pretty darn sure you can get into a conventional with less than 20% down if you shop around a bit

*I would work with a local lender, by that I mean one that you can walk in and sit down and talk with. As well I do like my lenders to have their underwriters in state as well. And, I would speak to 2 or 3 different lenders and get their ideas/quotes from them.

*PMI to me isn't the end of the world as you can petition to have that removed after a couple years as long as you have enough equity in the property. (seems to me that magic number is 20%)

*One other thing to consider, there is roughly 5 million potential buyers out there waiting for the rates to drop to 6% that will engage when they do. What do you figure the prices of properties will do when the rates go that low (and they will) and all those buyers get into the market...? Prices will rocket up and inventory levels will get lower than they already are. Course there will be more people who have been waiting to sell that will put their homes on the market but there will still be a housing shortage and prices will head north!

Just a though or three:)
 
i am no expert, but you are smart for jumping in, $1,900/month rent is like flushing $ down the drain every month.
If you are a veteran, try a VA loan, if not, go for an FHA.....you can re-finance in a few years & get rid of the PMI.
I would NEVER do an Adjustable Rate Mortgage......you can re-fi when the rates fall , IF they fall......
do what it takes to get out of the rental as soon as you can, otherwise you are loosing equity every month instead of building it.
 
Conventional. Shop it around. there are some with better rates.

If rates fall enough you can refinance.

Put as much down as you can. A home is an investment. I was fortunate and was gifted money from my grandfather that allowed me to buy my first home. I paid myself 8.5% interest and made the payments every month into an investment account. Years later when we moved, I had saved enough and with the equity of my home, I did an home equity line and paid cash for the next house. Sold old house, and continued to pay myself the mortgage. Cycle continued. A home is an investment in yourself and your future. Husband it and take care of it.

Things to look for in a new home.

LOCATION: And this is not just one item.
-Is area going to improve and house appreciate faster than inflation?
-Are schools good? No kids now but maybe one day or future buyers will find this important.
-Look at 100 year flood maps. The first house we almost bought was in a low area. Floyd hit months after we decided on another house and that house was submerged to the roof.

Drive around house you are looking at after hours and on weekends. Get an understanding of noise and neighbors.

Good luck.
 
Go find a real estate agent and/or broker in your area. They can get all the answers in your state. Certainly figure on a 30 year loan that you can make "principal only" additional payments on the "pay your loan off early" in 10-15 years. Your % down is critical to lowering your payments and possibly eliminate any "mortgage insurance payments" which eats up principal value you are trying to build. Good luck.
My daughter is a real estate broker in Arizona. She might be able to name drop some people in Utah that could help bring you up to speed.
 
As mentioned above, stay away from adjustable.
We refinanced when rates were low and knocked about 5 years off the 30 years. Along with putting extra monthly towards the principal which knocked probably another 5 years off the loan.
I think renting a house is throwing $$ away just like leasing a car. You pay for years but in the end you have nothing to show for it.
Good luck
 
We used a balloon mortgage for our first home. We chose a 7 year term because my position was only 3 years and then odds are I'd be moving, which I did. It saved us money on our interest rate.

Look at Credit Unions. Better terms and rates that conventional banks. It's OK to get a 30 year loan but then pay extra $/month or convert to a 15 later. Most CUs will let you. In addition, almost any bank or CU will let you buy a house with only 5% down. You just pay a higher rate and have to pay PMI into escrow. I find that a PITA as they can never calculate correctly and the monthly payments vary too much year-to-year. I was glad to get away from that once the value of the house and my payments were >20% of the value. Refinancing to a 15 year at the same time you hit 20% value gets 2 benefits in 1.
 
I agree with the above, we probably won't be seeing low interest rates again. If they do drop significantly a year or two after you buy, refinancing is always an option.

For our first home, I went with an ARM since I knew the absolute longest I'd be in the area was 5 years (for medical residency and fellowship). It worked out really well and saved us a decent amount compared to the conventional loan at the time.

We bought our recent house about 10 months ago with a 6.7% rate. 30 year mortgage. Like others mentioned, make extra payments on the principal and you can pay the loan off faster if you can afford the extra payment.
 
Last edited:
257WHBY13 said:
You can do Conventional w < 20%, sometime 5%; Be VERY CAREFUL of Builder Credits/Financing - They say hey, I'll pay $10,000 towards closing, but ends up costing you $ 57K over life of mortgage. A Wholesale Broker will save you around $ 9,400 vs going through retail bank. No one has crystal ball, but rates should go down in next year or so, but ARM's are risky.

Also, 1 Extra payment a year can take years off a 30 yr Mortgage, Good Luck!!
Click to expand...
Make bi monthly payments if you can it add up over the life of the loan

Thanks

Buck
 

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