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Home Buying Megathread! Since we're all growing up and doing grown up things like having us some babies and buying us some houses, here is a thread to put all of the latter information in. For information on the former, try here. First things first: You are not throwing away money by renting!* * depends on many factors; terms and conditions may apply mod edit -- read this and all the other links on these CFPB pages first: https://www.consumerfinance.gov/owning-a-home/ Buying a house: Tools and resources for homebuyers https://www.consumerfinance.gov/ask-cfpb/what-information-do-i-have-to-provide-a-lender-in-order-to-receive-a-loan-estimate-en-1987/ What information do I have to provide a lender in order to receive a Loan Estimate? https://www.consumerfinance.gov/owning-a-home/loan-estimate/ Loan Estimate Explainer Here is some information. Keep in mind that I am not an expert so feel free to point out mistakes I've made in the first post and I'll try to change them as soon as possible. If you think I've left something out, let me know and I'll add it in! Can I afford to buy a house? Maybe. Here's how to look at it: Step 0 Do you really want to buy a house? I mean REALLY? Here are some major downfalls you may or may not have considered: - You can't just move to a new place if you get a better job or if your boyfriend/girlfriend wants to move. You can't move if you find out your neighbors are dicks. You can't move if they build a highway, water treatment plant, and Scientology center next to your neighborhood. You've paid out the butt to move into this house, and it won't be worth it unless you stay for at LEAST 5 years probably, just because of closing costs. - You have to pay for everything that breaks or fix it yourself. poo poo like this. - You have to mow the lawn or pay for someone to do it. - Utilities cost more - Everything costs more Step 1 Make a budget. Take a look at your credit card statement - you might be surprised that you spend $100 on coffee every month. Don't forget to include debt payments you'll need to start making in the future (like student loans). Now take a look at how much you're saving each month. Great! Hope that number is not negative. Include a list of all your assets and debts. If you don't have any savings, you're not buying a house. Minimum down payments are over, 20% down payments are in. If you have less than that, you'll have to pay PMI (Private Mortgage Insurance) which costs a lot and is money you'll be throwing away every month that you wouldn't have to if you had a nice down payment. Step 2 Check out some online calculators to see what you can afford. One rule of thumb is 2.5x your yearly income. Another rule of thumb says your mortgage payments should be less than 28% of your monthly income, another rule of thumb says your TOTAL debt payments (car, loans, mortgage) should be less than 36% of your monthly income, etc. etc. If you want some calculators to play around with, try here, here, and here. Pick the lowest estimate you end up with. SlapActionJackson posted:for the 28% rule, you should include Principal, Interest, Taxes, and Insurance (PITI) whether or not all of those things are included in the amount you send to the bank - Mortgage insurance is tax deductible. This means a lot more to people who already itemize their deductions, but it might be much less for someone who is in a low tax bracket and who always takes the standard deductions. YMMV: FidgetyRat posted:Mortage Insurance is tax deductible, but it has some pretty low income requirements. - Property tax is a HUGE chunk of what you'll be paying monthly. Check your state and city websites to see what the taxes are like, and also ask around because sometimes there are bonus property taxes in a neighborhood just because. - If you're buying a house in a housing association, you'll have to pay a fee. How big is that? - Utilities will go up, sometimes way up. I live in San Diego, so haha suck it, but if you're in Detroit a house will cost a shitton more to heat during the winter than an apartment. Take that into consideration. Here's a rent vs. buy calculator if you want to see if renting is better or worse for you if you know about how much your house will cost: http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html Step 3 What? You're still considering buying a house? Well just to be sure, start saving the difference into a savings account for a few months and see how it goes. If your apartment is $500 and your mortgage+tax would be $900, start putting that $400 into a separate account and see how good it hurts. If you really really REALLY still want to buy a house, read this guide:http://michaelbluejay.com/house/ The About page for homebuying is also very helpful: http://homebuying.about.com/. I've also heard the Complete Idiot's Guide to Buying a House is good, but I haven't read it. Here are the major steps you'll need to take once you've decided on buying a house: 1. Get preapproved at a bank for the maximum of your home price range. You can check out a few other banks too to see if their fees are comparable, but you really only need one preapproval. 2. Start looking at houses, probably with a real estate agent (buyer's agent). 3. Find a house you like (this is important)! 4. Put in an offer, negotiate, counteroffer, etc. They accept, yay! You write a check called "earnest money" and put it in escrow, so if you get cold feet now for no good reason, that money is not yours anymore. If you buy the house it goes towards closing costs, and if they back out you get your money back. 5. Pick your favorite mortgage lender and get approved for reals this time. tortilla_chip posted:Are all lenders roughly equal from a cost perspective? If interest rates are basically set by the Fed, is it worth shopping around with different lenders? Will I see large differences on closing costs or is the mortgage industry basically a commodity? H110Hawk posted:Yes. Because most people think they're all the same or don't know they're allowed to shop it around and negotiate pricing. Get 3 bids for the same loan and compare them. Pretty much the only thing you need to worry about is their ability to close within the deadline. You will likely see thousands of dollars in difference between lenders. Some are as simple as "This bid is entirely identical but this one says Mortgage Fee: $2,500" or whatever - It's the ticketmaster game but without the monopoly. Once you're approved, you can lock in an interest rate. Have Some Flowers! posted:While you can lock in an interest rate at any time after you're approved, most of the time you will want to wait until you actually have a property under contract. The importance here is having a closing date in mind when you go to lock the rate. 6. Get all inspections and appraisals done (this happens during the approval process). 7. Sign a bunch of papers, write a big check. 8. ??? 9. If you thought this step was "profit", you need to reread the first paragraphs a bit more. And that's basically it! You'll need to get homeowner's insurance and title insurance and also some duct tape. If you're in San Diego, earthquake insurance is separate. Any other questions? I want to buy a foreclosure, what are those all about? If you're looking to buy one with a regular mortgage, skip to #4 in the below quote: damnhooligan posted:I'm not sure it's done the same way all over the US, but there are a couple different routes you can go to buy a foreclosured house here in Colorado. Warning about disputed stuff on your credit file: Farking Bastage posted:During the artificial housing boom/bubble/clusterfuck/whatever, an apparently large number of prospective home buyers used some sort of credit "service" to inflate their scores. What they did to up people's scores was basically dispute everything negative on their file. This would trick the automated underwriting at fannie/freddie into ignoring all the disputed(derogatory) info and sign off on the loan. When Fannie/Freddie went bust, this practice was identified as responsible for a large number of defaulted loans. Therefore any files with disputed items will not pass automated underwriting and go to manual. Resources https://www.consumerfinance.gov/owning-a-home/ Buying a house: Tools and resources for homebuyers https://www.consumerfinance.gov/ask-cfpb/what-information-do-i-have-to-provide-a-lender-in-order-to-receive-a-loan-estimate-en-1987/ What information do I have to provide a lender in order to receive a Loan Estimate? https://www.consumerfinance.gov/owning-a-home/loan-estimate/ Loan Estimate Explainer http://michaelbluejay.com/house/ - Guide to buying a house http://homebuying.about.com/ - Lists of articles about the home buying process http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html - NY Times Rent vs. Buy calculator http://forums.somethingawful.com/showthread.php?threadid=3504190 - A goon-run free service for finding good real estate agents https://www.realtor.com - Listings and advice https://www.redfin.com - Listings and pretty GUI https://www.zillow.com - Estimate what your house is worth, but don't let this be a replacement for an actual appraisal. http://www.bankrate.com/calculators/mortgages/new-house-calculator.aspx - One of the more popular mortgage calculators http://www.hud.gov/homes/ - Listing for HUD foreclosures http://www.everyonenegotiates.com/negotiation/articlehome.htm - List of negotiation tactics if you want practice or just want to know what you're up against [broken link] Somebody fucked around with this message at 04:20 on Apr 19, 2024 |
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How do I find a good realtor?Have Some Flowers! posted:Most people find their Realtor by calling up 'For Sale' signs at random, or accepting a referral from a friend, family member or co-worker. I would recommend caution if you're going this route - this can be a risky way to decide who handles a deal worth potentially hundreds of thousands of dollars. Helado posted:I used this: Why "Renting is throwing away money" is a myth Don Wrigley posted:Before you say you're "throwing money away" on rent, think about the money you're "throwing away" when buying a house. Pros and Cons of owning a house Dead Man's Ham posted:What Ive liked about owing a house: Should I buy an old house or a new house? Tricky Ed posted:Old construction is better than new construction because older homes were usually overbuilt in structural terms. They'll also usually be in better parts of town, in more established neighborhoods, and closer to city centers and services because they were built before everyone drove everywhere. Old houses were built by tradespeople who treated construction as a career and took pride in their work. They were built to last forever. You'll have a yard and a sidewalk that leads somewhere you want to go. You'll have a cozy fireplace and a formal living room. Should I buy a condo? Economic Sinkhole posted:Consider all the angles of condo ownership. I lived in my girlfriend's condo for a year and a half before she could sell it and we bought a house. To me, a condo seemed like all the worst things about owning a house combined with all the worst things about living in an apartment, with an extra layer of bullshit spread thick on top in the form of the HOA. Every situation is different and a lot of people are very happy with their condos, but I could not wait to get the hell out of there. Is now a good time to buy? swenblack posted:In most major markets, the answer is still 'no.' Every market is different, so you're still going to your own research, but you should consider a couple different factors. First, check out the historical home prices. The Case-Shiller Index[broken link] is a good place to start. They compile housing data for most major markets and the numbers account for inflation. The February data shows that prices are only down to Sept 2003 levels, and probably will fall another 20%+ in most major markets to be in line with post-WWII historical levels. Cheesemaster200 posted:Past prices of housing does not dictate future prices of housing based on some curve. Population growth, social trends versus housing, and population movement are all major factors that are completely different than 20 years ago. Trying to estimate where house prices will be next year or 5 years from now based upon a graph of the past prices is just going to be nothing more than a complete guess, especially with this administration and this market. Don Wrigley posted:It's even simpler than that. House prices are based on affordability, period. PC LOAD LETTER posted:The truly exceptional places will do better of course, but even the exceptional places did bubble up quite a bit. Just pick a property and look at its price 8-10 years ago vs. now. If its gone up some ridiculous amount like 100% in that time frame you'll know it bubbled like everything else, and so in the end must bust like everything else. Abstract discussion about the real estate market is not really within the scope of this thread. In terms of buying a home, I don't think you should ever look at it as an investment but as a change in quality of life that may or may not be affordable to you. Beware of HOAs necrobobsledder posted:I'm the usual HOA bitcher in these threads and didn't get much from my own "let's bitch about our HOAs" thread, so I'm going to rant about HOAs here hopefully not into the cold darkness of the forums. How does the loan process work? Captain Windex posted:So you've read this whole thread, and for some dumb reason you still want to buy your own home. Do Never Buy. But if you do really want to buy, hopefully this post will provide some insight and tips on the mortgage process so that you can successfully get the loan to buy the home of your dreams (nightmares). How to check out a house, and another take on several other issues uwaeve posted:Here is the bulk of a random advice email I wrote up for a couple of friends that are first-time homebuyers. moana fucked around with this message at 20:48 on Nov 3, 2014 |
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Thanks for putting this together, I think it'll be good to have this all in one place. Now for a question: Has anyone used Redfin to actually buy a house? I'm heavily considering it, but I wonder what people's experiences with it are when it comes to meeting with an agent and closing. The biggest negative I see to using Redfin over a broker is I don't have someone finding houses for me. But I really feel like I (and probably most people who know how to use the internet) don't need that anymore. From my experiences, every house on the market is listed on Redfin, so I'm not missing any. I have daily alerts on new houses, and most weekends I look over all the listings again anyway. I guess I'd worry that they might not negotiate as well as "my own" broker, but the case studies on their site seem to prove otherwise (for what they're worth). The biggest advantages are the money, of course, and the lack of pressure. The money I would put right towards the down payment (basically, by borrowing ~4000 from my parents until I got the money from Redfin). And for the pressure, I hate dealing with sales people and feel the same way about brokers (especially after what I read in Freakonomics awhile back).
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# ? May 6, 2009 13:24 |
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Is now a good time to buy? In most major markets, the answer is still 'no.' Every market is different, so you're still going to your own research, but you should consider a couple different factors. First, check out the historical home prices. The Case-Shiller Index is a good place to start. They compile housing data for most major markets and the numbers account for inflation. The February data shows that prices are only down to Sept 2003 levels, and probably will fall another 20%+ in most major markets to be in line with post-WWII historical levels. Next, check out https://housingtracket.net. This site will show you a whole bunch of raw data from the relative short-term, but they track significantly more markets than the Case-Shiller Index. It will give you a good idea of how big the bubble was in your area and whether it's over yet in your particular market. You should look for a price/income that's at pre-2000 levels. Most people don't realize it, but the bubble actually started with the massive creation of wealth during the internet bubble around the turn of the millennium. Finally, you need to consider the long term potential in your market. Some houses will more than likely never go up in value. Two good examples are areas that are unlikely to recover economically like towns with big Chrysler plants or townhouses an hour outside of Sacramento. Also factor in macro-economic tremds that will alter home prices. If interest rates go up, prices will likely come down. Also, real income growth will likely cause a rise in home prices.
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# ? May 6, 2009 13:52 |
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Just a note for the OP. Mortage Insurance is tax deductible, but it has some pretty low income requirements. "families with adjusted gross incomes below $100,000 were able to deduct 100 percent of their mortgage insurance premiums while families with incomes up to $109,000 were eligible for a partial deduction." (And by partial, it drops pretty dramatically between 100 and 109k). I believe this is currently in effect until 2010 (which likely will be extended again, but could very well be terminated by the gov't).
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# ? May 6, 2009 14:00 |
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FidgetyRat posted:Just a note for the OP. PS, I know firsthand, this is the worst. When TurboTax tells me that I'm too rich to deduct some type of interest, I die a little inside No PMI for me, but just in general. Keep this in mind if you're "rich" like me.
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# ? May 6, 2009 14:47 |
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moana posted:Step 2 I feel kind of stupid for not knowing this, but if the rule of thumb is not more than ~1/3rd of one's income total toward debt, what is the other 2/3rd supposed to be used for? Maybe I'm missing something, but with that much extra income every month, shouldn't you pay double toward the mortgage or something?
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# ? May 6, 2009 16:27 |
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Kobayashi posted:I feel kind of stupid for not knowing this, but if the rule of thumb is not more than ~1/3rd of one's income total toward debt, what is the other 2/3rd supposed to be used for? Maybe I'm missing something, but with that much extra income every month, shouldn't you pay double toward the mortgage or something? Those calculators are usually talking about gross income, so some of it would certainly go to income taxes. I would expect the rest to be expected to go to food, utilities, insurance, home repairs, retirement savings, clothes, entertainment, travel, etc.
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# ? May 6, 2009 18:22 |
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Don Wrigley posted:PS, I know firsthand, this is the worst. When TurboTax tells me that I'm too rich to deduct some type of interest, I die a little inside I hear you.. We make just over 110/y but also live in an area where taxes are higher, house prices higher, and thus PMI is a larger chunk.. Even though our family makes 6 figures, we're not exactly going out and buying flat screen TVs.. Between student loans, the house, etc, we live comfortably, but not in excess. deducting that would have really helped out. I have a general PMI question.. Can you reappraise your house after sale and have the PMI dropped if you exceed the 20% due to increased equity? Im in the process of building right now, and in the past few months, the builder raised prices 10k and fixed a price of 15k on the properties to the left and right of me.. So at closing, my house is already 25k more then what I am buying it for.. If I were to appraise it for the price the neighbors get, could that extra 25k equity go into the PMI calculation so i'd be that much closer to getting rid of it? What about if the appraisal for some reason comes back lower, could that hurt? FidgetyRat fucked around with this message at 18:26 on May 6, 2009 |
# ? May 6, 2009 18:22 |
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moana posted:
To clarify, for the 28% rule, you should include Principal, Interest, Taxes, and Insurance (PITI) whether or not all of those things are included in the amount you send to the bank. Also, it's gross income we're talking about for the 28/36% rules.
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# ? May 6, 2009 18:27 |
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FidgetyRat posted:I hear you.. We make just over 110/y but also live in an area where taxes are higher, house prices higher, and thus PMI is a larger chunk.. Even though our family makes 6 figures, we're not exactly going out and buying flat screen TVs.. Between student loans, the house, etc, we live comfortably, but not in excess. Get ready for when you get older and can't deduct your kid's college tuition because you're too rich. That's the real heartbreaker.
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# ? May 6, 2009 18:27 |
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Don Wrigley posted:Get ready for when you get older and can't deduct your kid's college tuition because you're too rich. That's the real heartbreaker. Already expecting that.. Hell, when I started college, I was on my own and my father lost his job a year or 2 prior.. I got rejected for Financial Aid because "your father used to have a good job".. Gee thanks gov't. Should have checked off Native American on my application.... Hey, I WAS born here.
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# ? May 6, 2009 18:28 |
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FidgetyRat posted:I have a general PMI question.. Can you reappraise your house after sale and have the PMI dropped if you exceed the 20% due to increased equity? Im in the process of building right now, and in the past few months, the builder raised prices 10k and fixed a price of 15k on the properties to the left and right of me.. So at closing, my house is already 25k more then what I am buying it for.. If I were to appraise it for the price the neighbors get, could that extra 25k equity go into the PMI calculation so i'd be that much closer to getting rid of it? What about if the appraisal for some reason comes back lower, could that hurt? Depends on your lender. Mine let me drop PMI based on a re-appraisal, provided the loan was at least 2 years old and the appraisal showed a minimum of 25% equity. Call your lender and ask whether they allow this and what the requirements are.
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# ? May 6, 2009 18:29 |
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anitsirK posted:Those calculators are usually talking about gross income, so some of it would certainly go to income taxes. I would expect the rest to be expected to go to food, utilities, insurance, home repairs, retirement savings, clothes, entertainment, travel, etc. Thanks for all of the comments, I will be updating the OP regularly every night
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# ? May 6, 2009 18:39 |
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Thanks for starting this post, Moana! Very good info so far. I have some confusion about FHA verus conventional loans. I will give some info about my situation: - 60K/yr gross income, not married, zero debt, 25K in savings - ~685 FICO score, seems to be between "good" and "average" - Looking at houses in the $100k-120k range. Pre-approved for 150k FHA loan. - Live in Austin, TX, where the housing market has mostly been stable. I had originally planned on getting a conventional loan and putting down 20%. When I applied for pre-approval, my lender told me that, due to my credit score, I'd get the prime rate for an FHA loan, but would get a higher rate on a conventional loan (maybe 1% higher?) due to stricter credit rating standards. I could come up with a 20% downpayment on a 100-120k, but it would almost wipe out my savings, which I don't think I want to do. The FHA loan requires only a minimum of 3% down, but I would be looking at paying more like 10-15% down. This would leave some money for emergencies and the inevitable repairs, appliance purchases, etc, that come with a new home. The main disadvantage to an FHA loan seems to be the mortgage insurance. My understanding is that, with an FHA loan, an insurance premium of 1.5% of the loan amount is calculated up front and rolled into the loan. This is on top of the roughly 0.5% annual insurance cost. In my situation, for a 100k loan, this premium adds $1500 to the total loan amount. But I was also told that the monthly mortgage insurance payment on an FHA loan is lower than PMI on a conventional loan. I am not 100% sure about this part, is this true? Also, I have read in some places that an FHA loan requires you to pay the insurance for the life of the loan, but other sources say that you discontinue those payments after you reach 22% equity (as opposed to 20% for a conventional loan). Which of these is correct? It seems like, if I get a significantly lower interest rate with an FHA loan, the $1500 insurance premium will potentially be cancelled out by the difference in interest I will pay over the first few years of the loan. So my question is: Is there any real advantage for me to struggle to come up with 20% for a conventional loan, if I can get a lower rate with a lower downpayment on a FHA loan? If I can afford 15% down, is it worthwhile to wait until I can afford 20% down and get a conventional loan instead? There does seem to be one big advantage to the FHA loan, though: It is assumable. This means that if I sell the house in 3 years, I will be able to sell it to another FHA-qualified buyer and allow them to assume the loan with my low 2009 interest rate. In addition, they don't have to pay all the initial costs of obtaining the loan. This seems like it could be a big selling point, especially if rates go up. I am also curious to hear the thoughts of experienced people regarding the $8000 tax credit. Everyone seems to think that sellers/owners are marking up the price of every home by $8000 to account for this credit. Is this really true? Is there any solid home pricing data to back this up? Based on casual observation, I did not notice an $8k spike in home prices here at the beginning of the year. Does anyone have any hard data or personal experience to speak to this point? thanks again for doing this, OP - sorry about the wall of text.
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# ? May 6, 2009 20:59 |
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moana posted:5. Pick your favorite mortgage and get approved for reals this time. Once you're approved, you can lock in an interest rate. When you lock in an interest rate, it is done for a certain amount of days and there's a cost associated with the length of the lock. Extending the lock is costly as well. Unless you can say for sure that you are buying a house by a certain date -no matter what- (which is a bad way to buy), it's probably better to lock the rate once you're under contract. Getting the best rate is important, but not as important as getting the right house at the right price and performing due dilligence with inspections. I have my hands in real estate transactions all day every day and I'm happy to help with the discussion, especially when it comes to inspections, negotiations and contract language.
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# ? May 6, 2009 21:37 |
stash posted:I am also curious to hear the thoughts of experienced people regarding the $8000 tax credit. Everyone seems to think that sellers/owners are marking up the price of every home by $8000 to account for this credit. Is this really true? Is there any solid home pricing data to back this up? Based on casual observation, I did not notice an $8k spike in home prices here at the beginning of the year. Does anyone have any hard data or personal experience to speak to this point? With the way the housing market has been going, it isn't necessary for the prices to go up to be inflated. If they aren't dropping as fast as they would otherwise be doing, that is effectively the same as the price increasing.
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# ? May 6, 2009 22:33 |
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stash posted:So my question is: Is there any real advantage for me to struggle to come up with 20% for a conventional loan, if I can get a lower rate with a lower downpayment on a FHA loan? If I can afford 15% down, is it worthwhile to wait until I can afford 20% down and get a conventional loan instead? I'm not 100% an expert on this, but when I had a choice between the FHA and the Conventional, I stuck with the conventional for a few reasons.. 1) That up front mortgage insurance fee of 1.5% house cost is totally down-the-drain money. 2) Rates are actually higher for FHA vs. Conventional at the highest credit score. But since your score is lower, that might not apply to you. 3) You carry the .5% annual insurance cost for the entire life of the loan, it does not terminate when you reach 20% down like PMI would. I believe there are also some other restrictions regarding selling the house later, things that must be done before closing, but I'm not 100% on any of those. In the end, since my credit is over 770, we opted for the conventional because the penalties are easier to get rid of. Also, you don't need 20% for the conventional.. We were originally doing 5% and carrying PMI, but we're likely putting 10 by the time the house is closed. Its easy to get rid of the PMI once we pay 20% value on home, then its smooth sailing.
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# ? May 7, 2009 00:20 |
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FidgetyRat posted:1) That up front mortgage insurance fee of 1.5% house cost is totally down-the-drain money. Thank you for the advice. But I think the info about the FHA insurance is off. From what I am reading (including on fha.com), the monthly FHA insurance payments will be canceled after 5 years of payments and 78% LTV, which I would have after 5 years. This is not great, but not as bad as 30 years of mortgage insurance payments. I did some really basic math and on a 100k loan, those 5 years of monthly payments would add up to ~$3000 plus the $1500 up front fee, so $4500 after 5 years. If the difference in interest rates between a FHA and conventional loan (for me, based on my credit score) is 1%, after 5 years the difference in interest payments would be about $5000 - so it looks like a wash. If the difference in interest rate is less, then it looks like a conventional loan may be better - based on these numbers and I'm probably forgetting something (like the PMI payments on a conventional mortgage). If I put down 10-15% on a 100k loan, I can certainly pay down 20% equity in well under 5 years. So... If the numbers are even, do you think any of the other advantages of the FHA mortgage make it worthwhile? I guess I just need to apply for a conventional loan and run the numbers to figure out the actual net difference in interest rates vs. penalties with each mortgage. Perhaps I should just wait until I can improve my credit score (I just have slim credit history, no debt), but I have to admit that I've caught the house-buying bug and want to find something in the next 6 months or so. Anyway, thank you for the advice!
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# ? May 7, 2009 04:20 |
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stash posted:Oh definitely, in our case we were the highest credit range, so the conventional would be much less expensive in the long run, but if you have a higher rate on conventional, then odds are FHA might be the better choice. Either way you look at it, remember, your first 5-7 years or so of payments on the amortized schedule will pretty much be interest only, so unless you throw several thousand extra dollars at the principal each year, it will take longer to get rid of any Mortgage Insurances you may carry. Again, your situation seems easier, especially if you do 15% down, 5% on 100k isn't that unrealistic to throw down in extra cash. Honestly, sounds like FHA might be the way to go for you. Just look into any extra restrictions.. I don't know them off hand, but I believe there are some further gotchas, like requirements on the house itself (extra inspections, stricter limitations, etc). I could be wrong though since my FHA research was fairly minimal since the conventional was a better option for us.
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# ? May 7, 2009 14:41 |
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FidgetyRat posted:like requirements on the house itself (extra inspections, stricter limitations, etc).
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# ? May 7, 2009 15:31 |
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I just did a little googling about what happens when you pay more to a mortgage (short answer: pays off earlier, doesn't change monthly payment) and came across this article on MSN Money, which is a really good general "do this with your money" read: http://articles.moneycentral.msn.com/Banking/HomeFinancing/DontRushToPayOffThatMortgage.aspx
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# ? May 7, 2009 15:49 |
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FidgetyRat posted:Either way you look at it, remember, your first 5-7 years or so of payments on the amortized schedule will pretty much be interest only, so unless you throw several thousand extra dollars at the principal each year, it will take longer to get rid of any Mortgage Insurances you may carry. This was my plan - Pay an extra $100-200 every month towards the principal (I am already doing this in saving for the downpayment) and an occasional larger payment, maybe once a year. Hell, if I put half of the $8k tax credit toward the principal that would pretty much do it. I don't have any other higher-interest debt to worry about at this point.
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# ? May 7, 2009 16:35 |
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stash posted:This was my plan - Pay an extra $100-200 every month towards the principal (I am already doing this in saving for the downpayment) and an occasional larger payment, maybe once a year. Hell, if I put half of the $8k tax credit toward the principal that would pretty much do it. I don't have any other higher-interest debt to worry about at this point. Just make drat sure whatever mortgage you DO have, doesn't have any prepayment penalties associated with it.. Some bad mortgages actually charge you a fine if you pay down before the term of the loan is over.. Though this is very rare and will likely only occur with a shady loan company. Barry posted:I just did a little googling about what happens when you pay more to a mortgage (short answer: pays off earlier, doesn't change monthly payment) and came across this article on MSN Money, which is a really good general "do this with your money" read: I'd also agree with this analyst about not paying down too soon, but in the case of PMI, pay that loving thing down as soon as possible to at least get rid of the insurance which is totally lost money (And in my case not even tax deductible). FidgetyRat fucked around with this message at 18:34 on May 7, 2009 |
# ? May 7, 2009 18:30 |
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Does anyone know if banks are strict about using loaned money to pay for the downpayment? I know this used to be impossible, and thought it changed in the late 90's (and probably led to a lot of the problems with the housing crisis). I'm looking at a few houses where I'm just a few thousand short of 20%. If I happen to find a house I want to jump on, I'd hate to have to pay PMI for 2 years just because of that. My dad offered to use his home equity line to loan me the money at 3% or whatever low rate he's currently getting. That way I'd only be throwing away $150/yr (on the interest) instead of $200/mo on PMI. Would something like this be possible?
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# ? May 7, 2009 19:28 |
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How are you paying $200/mo on PMI? I also doubt that the mortgage company would be able to track it down to being loaned money if it's sitting in your bank account as cash. You could basically just call it a gift from your father. I have no real idea though, just seems tough to track.
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# ? May 7, 2009 19:37 |
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Barry posted:How are you paying $200/mo on PMI? I also doubt that the mortgage company would be able to track it down to being loaned money if it's sitting in your bank account as cash. You could basically just call it a gift from your father. I have no real idea though, just seems tough to track. The mortgage company will ask to see bank statements, and you'll have to explain any unusual activity. So you'll have to do this well ahead of time to avoid the "look back" period. Even then, your mortgage company will also ask you to sign an affidavit that none of your down payment money is borrowed. If they do find out about the arrangement, you'll have to disclose the terms of the loan (and have it counted as a debt for loan qualification purposes) or get your father to sign the mortgage company's "gift letter" stating that the money is a gift, not a loan. Having your parents "gift" you money, and then "gifting" it back over time is the traditional way of skirting the bank's rules here.
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# ? May 7, 2009 19:56 |
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Strict 9 posted:Does anyone know if banks are strict about using loaned money to pay for the downpayment? I know this used to be impossible, and thought it changed in the late 90's (and probably led to a lot of the problems with the housing crisis). They will look at your statements for any large deposits in the last 60 days. If you have any, you will have to explain them, and possibly have the donor sign a form that is basically an affadavit stating "This is a gift/payment and does not need to be paid back." I had to do this as part of my mortgage application, and it was pretty quick and painless - parents gave me a cash gift to use towards the down payment, I faxed the form to Mom, she signed and faxed it to the bank and all was well. It may be more difficult if the "gift" is coming from a home equity line, as they did require information about the account it came from. At least, Bank of America needed that info, YMMV.
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# ? May 7, 2009 19:56 |
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Shows what I know. I figured there was something along the lines of that "gifting" process.
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# ? May 7, 2009 20:01 |
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I'm the usual HOA bitcher in these threads and didn't get much from my own "let's bitch about our HOAs" thread, so I'm going to rant about HOAs here hopefully not into the cold darkness of the forums. Not everyone wants to own a house with a yard, white picket fence, and all that nonsense or you live in an area so expensive to purchase a single family home (SFH) and so a condominium starts looking attractive. Unfortunately, buying a condominium means that you will be subject to a private, almost completely unregulated semi-socialist organization known as a Homeowner's Association (HOA). But wait, if you do want that house with yard and fence, you may have an HOA as well! There are HOAs for certain SFH communities, but they are all but guaranteed to exist in any place where there are continuous, shared costs among homeowners. In some parts of the country, it is becoming impossible to find a home anywhere near a major city without an HOA. Here's what to look for in an HOA: 1. Budget. An HOA without a solid bankroll will be unable to basically do anything and the value of your property will be affected. If an HOA goes bankrupt, it can't exactly file chapter 7 and reform or something - the HOA represents a community's interests and collective economic means. Would you marry someone with a repetitive history of bankruptcy / financial mismanagement? 2. Litigation history. About 85% of all HOAs in the country are going through litigations whether they be against homeowners, the city, the builders, or some random unlucky person. Lawsuits are obviously very costly and usually wind up raising the HOA dues considerably. 3. Annual / monthly due history. My HOA fee used to be about $70 / month about three years ago according to records. They have since raised the dues to now $309 / month over time due to various factors completely out of my control. Refusing to pay these dues will get a lien placed upon my property and make it impossible to sell until I have paid them as well as fines & interest. Most HOAs in the country for SFH communities do not have such high rates unless they're very exclusive or costs of everything are expectedly high (gated, private security, masseuses, community 2-screen theaters, etc.). If you're interested in such a place, the rest still applies to you anyway, so keep reading. 4. Percentage of owner occupied units. If there is a high percentage of renters in a community, you will probably want to avoid buying there. There are also restrictions on the types of loans available to you (for example, FHA loans) if your property is in a community of significant percentage of investment properties. Warning: some HOAs will lie to you and some HOAs are so inept at communicating with homeowners that they will not know which units are rented and which not. My HOA grossly underestimates the number of units that are rented because of extremely poor communication with a large number of poor English-speaking (but wealthy!) homeowners. 5. Good paperwork / bookkeeping by the HOA. An HOA that is organized and knows what it's doing is an HOA that is informed and more likely to be stable, keep your costs low, and provide you with a lot of things that most people living in SFHs will be jealous of as a result of their competence. Emergencies will happen, but an HOA that's well organized will handle it faster and help keep you as an owner informed. 6. Well-written, well-defined bylaws. The covenant / bylaws should be available for any potential homeowner upon demand and should be updated regularly. Poor HOAs will go overboard on the legalese or be so loose in wording that legal professionals just may call the bylaws null and void. This does depend upon your state. 7. Fines / penalties. These are the speeding tickets of an HOA. Many HOAs exact fees upon residents and their guests to keep their budgets in good check. A healthy HOA should be fining individuals that really do cause problems rather than those who have never caused problems. A poor HOA will be too lax and wind up costing residents big time because there are always stupid people that do dumb things to their property in an HOA - no exception. I thought I had done the homework on my HOA before I bought my condo, but as a result of some really shoddy investigation by certain professionals during my process, I'm now stuck with a once pretty good property that's completely unattractive to buyers. Other people have wound up with HOAs that constantly fine them to the point where they can barely make it month to month. A quick Google search will show that HOAs can make day to day living a nightmare. The good news about HOAs is that some states are starting to regulate HOAs and beginning to enact laws that require HOAs to have a certain amount of reserve funds, for starters. Unfortunately for those of us with HOAs, this is a double whammy - you will probably have to pay up more money to raise these funds or have to pay even more money if these funds aren't raised.
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# ? May 7, 2009 21:34 |
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Barry posted:How are you paying $200/mo on PMI? I also doubt that the mortgage company would be able to track it down to being loaned money if it's sitting in your bank account as cash. You could basically just call it a gift from your father. I have no real idea though, just seems tough to track. Not sure. The bank quoted us around $180 for 15% down on a $400,000 house. Boston area. NJ Deac posted:They will look at your statements for any large deposits in the last 60 days. If you have any, you will have to explain them, and possibly have the donor sign a form that is basically an affadavit stating "This is a gift/payment and does not need to be paid back." This is really good to hear, thanks!
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# ? May 8, 2009 00:51 |
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Strict 9 posted:Not sure. The bank quoted us around $180 for 15% down on a $400,000 house. Boston area. Based upon my (incredibly rudimentary) knowledge of how PMI is calculated, that seems about double what it should be. Might be some extenuating circumstance I don't know about.
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# ? May 8, 2009 00:59 |
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Barry posted:Based upon my (incredibly rudimentary) knowledge of how PMI is calculated, that seems about double what it should be. Might be some extenuating circumstance I don't know about. <Inclusive> - <Exclusive> 0-5% down = .90% 5%-10% down = .78% 10%-15% down = .52% 15-20% down = .32% Note, you don't get any better value putting 6% or 7%.. Its a full 5 to get the next jump in the bracket. So, on a 400k mortgage at: 0% down = $300/m 5% down = $260/m 10% down = $173/m 15% down = $106/m 20% down = No PMI. Probably a good idea to get in writing how they are calculating your PMI.. They may be fluffing the charge and pocketing the difference. As we have seen, banks aren't always up front or honest. FidgetyRat fucked around with this message at 03:31 on May 8, 2009 |
# ? May 8, 2009 03:25 |
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We are closing next Friday and I'm getting a little nervous about expenses. We did a lot of planning beforehand and budgeting and everything came out fine, but now when I just add up the additional costs that the house will present above our current renting situation, it looks scary. It could be that we are just really bad with discretionary spending right now and will need to curb that quickly, but even with a mortgage/tax payment $50 higher per month than our rent, the utilities, extra gas, insurance, etc are looking to be about $500 more per month than renting. I know its too late to change anything, but maybe you guys can give me some peace of mind, or extreme anxiety. Mortgage: $197,000 Rate: 3.75% 5yr fixed Tax: $1800/yr Payment: With taxes: $475/bi-weeky $950/mo Income: $80k + 10k+ annual bonus Net monthly: $4200 (yay Canadian taxes) Debt: One lovely car ($232/mo) Student loans ($200/mo) Late twenties couple, stable jobs. House is Oil heat but fairly efficient, previous owner only used about $70/mo worth but we are anticipating double at least. Our commute has greatly increased as we are going from living in the city to being about 25 miles each way. We are anticipating about an extra $200/mo in gas costs over what we are currently spending. We don't have a ton of savings after closing costs, in fact we just have about 5k left to spend on some new furniture and to stash for anything that pops up over the next few months. I know it is far from ideal but I guess my question is, should I be worried in this situation or is this just first time jitters?
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# ? May 8, 2009 13:58 |
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I don't know, you seem like you're in a pretty ideal situation. A mortgate payment that's ~22% of your gross income doesn't seem like anything to worry about, especially considering your other debt only amounts to ~$400/month. If you're nervous, live like a pauper as much as possible for the first few months to see how you're doing, rebuild your emergency fund, and maybe pay down your other debt.
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# ? May 8, 2009 14:49 |
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jhoc posted:Rate: 3.75% 5yr fixed Why only 5 years? From what I understand, you should lock down these lows rates for as long as possible. (I'm assuming the rates in Canada have dropped like they have in the US.)
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# ? May 8, 2009 16:27 |
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geetee posted:Why only 5 years? From what I understand, you should lock down these lows rates for as long as possible. (I'm assuming the rates in Canada have dropped like they have in the US.) Canadian mortgages don't allow you to lock in for longer than 5 years. Well that's not entirely true, you can go nuts and lock in for 10 years but the guaranteed rate will skyrocket. In Canada we get new mortgages every year/few years based on a long term amortization schedule. To the guy above, with a 950 mortgage you're fine unless you both have a problem with going out to eat and partying it up often. If you can't manage that mortgage on that budget, you can't manage any mortgage.
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# ? May 8, 2009 16:41 |
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Ahz posted:Canadian mortgages don't allow you to lock in for longer than 5 years. Well that's not entirely true, you can go nuts and lock in for 10 years but the guaranteed rate will skyrocket. Ah, interesting! I hope that costs less than what refinancing costs in the US?
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# ? May 8, 2009 16:55 |
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geetee posted:Ah, interesting! I hope that costs less than what refinancing costs in the US? After the term is up, there is no cost to refinance, it's a part of the cycle. The costs are insane if you want to break your 5 year/3 year whatever term. What really sucks rear end is interest is not tax deductible.
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# ? May 8, 2009 17:51 |
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# ? May 15, 2024 04:12 |
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Ahz posted:What really sucks rear end is interest is not tax deductible. Don't feel bad. All mortgage tax interest deductibility does is artificially raise prices on homes. If you could deduct the interest, your home would just cost more.
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# ? May 8, 2009 19:48 |