Volkswagen Passat Forum banner

1 - 15 of 15 Posts

·
Registered
Joined
·
215 Posts
Discussion Starter #1
I am working on becoming a first time homebuyer. I have found a nice starter home that needs some cosmetic work, but over all is very structurally sound and was recently reduced in price by $25K to sell it quickly. It’s nice cape in a nice area and includes two decks – one finished and the other one by the pool is not finished. The woman that owned it died some time ago, so her children have been living there sporadically and have done quite a bit of cosmetic damage. I can do most of the work myself.

I have the standard 20% down using just about all of my savings ($16000, 10% of down payment) and the other 10% coming from program my employer offers where they’ll lend you whatever you have for down payment at half the going rate of the local bank ($16000 loan @ 2.75 for 25 years)

One of my many questions is my local bank’s rate is 6.25% for a 30yr fixed, I have looked online, specifically etrade, which they offer 5.75% for a 30yr fixed. Should I go with an on-line loan? Any thing I should look out for?

Another of my big questions is, if I purchase this house, then I will have very, very little savings left to buy things for the house (mower, washer & dryer, etc…), taxes, neuspeed swaybar, and home improvements like finishing the deck and fixing the damage. It would be easier if I had an extra $5000 - $10000. Do I have any options? Like could I get a home equity loan or an improvement loan right away?

Thanks
 

·
Registered
Joined
·
3,649 Posts
why you want to put money down????
do you know that every $10k lowers your monthly payment for only $60...
It is better to get a house with zero down (try FHA loan for first time buyers) and pay $60 more each month for you principle.....

ahh and one more thing.... get the varible APR loan. you dont want to get the fixed rate one. this way you may lower you APR down to 4%


If you have any question Pm or email me and I will get you some more info :)
 

·
Registered
Joined
·
1,535 Posts
I just bought my house little over 4 months ago. I put 5% down, got a 1st mortgage for 80% and home equity loan for the other 15%. No PMI necessary.
 

·
Registered
Joined
·
2,505 Posts
I think he's trying to avoid PMI (which CAN get expensive) and lowe rhis monthly payment.

You can do a 80/20 loan to avoid the PMI. 80% first mortgage and 20% second but that can get messy.

Now depending on which loan broker you go through, the point fee (that is the % that you pay them for getting the loan for you) is negotiable. I know that BofA WILL NOT NEGOTIATE on this. But small loan brokers will.

Try and negotiate down to 0.5% fee (which is what we did). Or you can simply do a zero point fee but your rates will be a tad higher.

About whether you should go online or not, yes and no. No because some will screw you. Yes because you can get some really good deals. Just have to shop around. I'd try your local market first though.

If you like, PM me and I'll send you a spreadsheet that I created a whiles ago that'll do multiple calculations and scenarios for you at once so that you can make a better decision faster.

Now whether you have options, you ALWAYS have options. Borrowing money to buy a home is one thing that you can manipulate.
 

·
Lisa Simpson
Joined
·
15,043 Posts
PMI is not the end of the world. Allow yourself a good 5% of the cost of the house to cover the cosmetic stuff. We always put a huge amount down, but leave close to 10% for working on it. Very important to have that sitting around.
 

·
Registered
Joined
·
2,505 Posts
Here's something that might help you. Baesd on the information that you provided, the house you're buying is:

$32,000 (downpayment) / 20% (The percentage you want to put down) = $160,000


$160,000 (sale price) - $32,000 (your 20% downpayment) = $128,000 (your proposed loan amount).

Your payment will be $757.17/month (not including optional impound payment). However, keep in mind that you'll need roughly between $8,000 to $10,000 for closing costs. If you don't have that, you'll need to borrow that. So then you're looking to borrow about $138,000 with a monthly payment of $816.32.

All these figures are based on today's mortgage rates.

Bottom line is, the amount that you're borrowing isn't really high (compared to what we have to borrow in California) so you're likely better off borrowing more (since your borrowing costs won't be as high) and saving some cash so that you can do some home improvements.

With PMI, since you won't be borrowing that much, your PMI will like be below $50/month. You can choose to pay PMI now... and wait a year or two when your house is value increases (80% to loan value of home, and this assumes the housing market in your area is increasing at an average annual rate of 5.9%), reappraise, and then get rid of your PMI. That's also an option.

 

·
Registered
Joined
·
1,585 Posts
I would borrow the money and fix the house up. What area is it in? I grew up just south of there and was at Williams all the time to work out with their wrestling team. If it is near the college it will most like appreciate very quickly as you fix it up and could become a great investment. If you get it fixed up, after a year you can have it reappraised and may be able to get rid of the PMI.
 

·
Registered
Joined
·
889 Posts
First, I'll tell you up front that I'm a Realtor(r) ... so you can evaluate my comments knowing that.

Here's what I would do:

1) retain a Realtor(r) ... ask your friends, family etc for references. Interview a couple and select one who's worked for someone who bought a home in your general price range as a first-time buyer.

A Realtor(r) won't cost you a cent ... the seller's broker will share the commission with your Realtor's broker and that's how your Realtor(r) will get paid.

A good Realtor(r) will show you the sales prices for comparable homes (eg same approximate size, features, location, etc) (S)he will also give you advice on resale value (for when you will want to sell it), how well it will appreciate compared to other homes in the same or similar areas, what thngs to consider (eg floorplan, condition, build quality), etc

2) ask your Realtor(r) for the names of two loan officers with whom your agent has worked. Get good-faith estimates of closing costs and ask both to outline alternate financing programs for buying a home in your price range.

I've had mixed results with eLoan ... two mortgages went without a hitch, one client had his approval yanked two days before closing (I got him in front of my loan officer and we closed within four days of making application); one client couldnt get the morgage to close at all because eLoan wasn't familiar with Minnesota's requirement for table closing.

I've had less positive results with other Internet lenders. They tend to be longer on promises than delivery and their fees weren't consistent from application to closing.

3) there's no hard and fast rule for how much money to hold back for possible repairs, etc. It all depends on the home that you select to buy.

4) If you want to minimize your risk of having to buy new appliances, furnace, etc ask the seller to place a warranty on the home ... or buy one yourself. Here in Minnesota a good warranty will cost around $400 ... your agent should be able to recommend some options in this regard.

5) Retain a home inspection company and have the home inspected after you reach an agreement with the sellers ... your agent will write your offer contingent upon the outcome of the inspection.

6) I don't recommend an adjustable rate morgage unless you're pretty confident that you will sell the home before the rate adjusts. (A lot of my first-time home buyers go the adjustable route because many of them stay in the home for less than 5-7 years. But some aren't confident that will happen and thus tend to take fixed rate mortgages)

7) If avoiding the PMI by takng a second mortgage or home equity loan makes financial sense, do it. Make sure you factor in the tax savings with a second mortgage or home equity loan since interest is deductible. PMI payments are not deductible.

Hope this helps. Feel free to contact me via e-mail if you want any more suggestions.
_______________
MN Snowman driving
"Not so Ol' Blue" -- 2002 GLS - Blue Anthracite w/ 1.8T & 5 Speed Manual
See photos & more info here


"Calloway" - '86 Cabriolet - 5 spd - 1.8L
See Pictures here
 

·
Lisa Simpson
Joined
·
15,043 Posts
Listen to the man! ^^

Particularly on the ARM thing. You can always refinance down, but if rates go up (and they will, we are at a very low swing) you can not leverage your ARM. It will go up with market rates.

We have gone with 30yr fixed, and refinanced when appropriate. Once, we refi'd to a 15 yr loan that we were sceduled to pay off in 7 by just paying the old total (overpaying the new loan).

I think you are better off to take advantage of the low rates and just suffer the PMI for a few years. Our previous lenders have simply requested a letter from us indicating that we wanted it removed upon reaching 20% equity. One lender dropped it automaticly.
 

·
Registered
Joined
·
3,649 Posts
I bought condo this summer with adjustable... It is frozen at 4% until Jan 2005 (if I would go with fixed I would get 5.75%). It cannot go more than .5% a year but only when the market goes up .5% or more. And they cannot do it more than 5 times during the live of the loan, one time a year, so in the worst case in 2010 I will have 6.5% fixed....
Good for me be cause my monthly payment are lower then if I would go with fixed so I might pay the same amount as I would pay with fixed (I put $150 more a month on my principle... calculate how much faster I will pay my condo off)
I will sell it in 3 years anyway so at the selling point The worst case I will be at 5%.... no bad

It is worth to think about. When you get fixed you may always refinance, but so you can do with adjustable. Try to get this one and pay more towards your principle. You will pay off your house 10 years faster.
 

·
Registered
Joined
·
9,154 Posts
www.bankrate.com to shop for the lowest rate in your area :thumbup: . This is where we got our house refinanced. Make sure to ask for the complete list of closing cost, this is where many mortgage houses ding you with hidden charge(s).

Good luck
 

·
Registered
Joined
·
215 Posts
Discussion Starter #12
Wow, thanks for the information everyone. I think I will be able to get a home equity loan, and I'll put 20% down to avoide PMI. According to my math, that works out the best.

As for which lender I'm going to use, I am still very up in the air. I think I have narrowed it down to either my bank @ 6.25 or ETrade @ 5.75. If I go with ETrade I could save $40 a month. I beleive ETrade to be a very repitualble company. Anyone have any experiance with ETrade?
 

·
Registered
Joined
·
3,184 Posts
I had great luck with these guys. Ask for Ron Perry. First lender I worked with that gave me the rate on their website and didn't bend me over with extra fees.

http://www.hnbank.com/

They are a broker, and my mortage ended up with Wells Fargo which has been great.
 

·
Registered
Joined
·
295 Posts
Go local - even for $60 extra. I made the choice to go through an eLoan type of place and it sucked. I refinanced a year later and went with a local bank. I had lots of problems with tracking people down since there was no brick and mortar I could track down in my area. No one took accountability for problems and miscalculations, etc. It soured my opinion on going with an out-of-town eLoan type of place.

I also agree with skipping out of the ARM. I was going to do a 5yr ARM when my wife and I bought our house because we thought we would move soon...and now it seems like we will be there longer and we got a great 30yr rate during our refi.

Good luck.
Jason
 

·
Registered
Joined
·
2,505 Posts
This is what I'd do first.

Ask around your work place about where your co-workers go to for mortgages. Get a name and phone number.

Then make phone calls... and ask for a GFE (Good Faith Estimate) to be faxed to you ASAP (Usually they'll do it by COB). The GFE is no cost to you and is VERY important.

Once you have several GFE's from different brokers, start negotiating. Offer to pay only 0.5%. Save yourself about $650 to $700 right there.

NEGOTIATE... NEGOTIATE... NEGOTIATE... You'll win in the end.

Go by referrals. That way you're not going in blind wondering if the broker will be good or not.

Also... don't forget to do some projections. Ask yourself, are you planning on staying there for long term (ie... over 5 years or longer). If so, go with a lower interest rate. Otherwise if it's short term loan, consider an ARM.
 
1 - 15 of 15 Posts
Top