I've started looking into buying my first home and I'm looking for some mortgage advice/recommendations...
In the research I've done so far, the monthly payments would be easy enough to manage on my salary, but the big chunk required for the down payment, closing costs, etc. has me a bit scared. I've got some savings, but I would rather keep it in the bank to put towards remodeling rather than the down payment.
I'd like to put either zero down or as little as 5%. I have no problem with having two mortgages - just trying to avoid the initial hit that would wipe out most/all of my savings.
Anyone out there that has recently bought a house w/ zero downpayment that could provide some advice or resources?
i did a zero down, 5 year ARM loan, which was an 80/20 breakdown. it was a good option for me because i knew i wouldn't own the home for more than 5 years. so you have to consider that - how long do you plan to stay? if this is a long term thing, then a more traditional loan might be a better option.
See if your bank or state offers credit counseling for these sorts of loans. I know there's a program in Colorado that requires credit counseling on them, because so many people get sucked into something like this and then can't repay it.
I closed on my house 2 months ago. I put 5% down, but there are 0 down options. The way to avoid paying closing costs is to ask the seller to cover them. We offered the asking price on our house under the terms that the seller would cover all costs associated with closing. Also, don't forget to factor your insurance and taxes into your monthly payment. Between the two, I pay around $300 a month. There is also PMI if you put less than 20% down, which will be about $100 a month, depending on your mortgage, unless you split your debt into 2 mortgages, known as a 80/20 loan. Also, don't be a fool and get a home inspection ($200-$300) to unearth any hidden problems, and we had a mold test done as well (about the same cost as the inspection). A little money now could save you a lot in the future.
Thanks PlastiX - We're looking at an 80/20 30yr fixed. We don't like the ARMs because it feels like a lease to us - not enough of the payments were going towards ownership. We don't want the hassle of having to potentially re-fi in a few years either. The monthly payments with an ARM were a bit less than a 30 year fixed, but not enough of a savings.
We like the 80/20 because it eliminates the need/cost of PMI...
dml, I think you're getting an ARM confused with an interest only load. As far as I know, an arm is just an adjustable rate mortgage which, initially, is a lower rate than a fixed, but has the potential to increase over time. The same amount of your payment will be applied to principle and interest as would with a fixed loan. They offer loans now where you can actually pay less than your interest amount, getting upside-down on a house in no time.
yeah, paying PMI is about as annoying as paying brokers fees to get an apartment. it's not helping you any. i would hesitate to recommend an ARM for your situation then. it's really not a great idea unles you're pretty much 'flipping' a house. it was laughable how little of my condo i actually owned at the time i sold. also, keep in mind, with the 80/20 split, the 20 is often a 15 (etc) year balloon situation.
and absolutely, as CD mentioned, ask the seller to cover closing costs. negotiate, negotiate.
Yeah, looking at an Ammortization table for an ARM is laughable - after 5 years, you basically "own" nothing and your're hoping that the property value has increased (or at least kept pace) in case you have to sell.
We're not flipping, which is why we're only looking at 30yr fixed...
Since we're talking about buying homes, does anybody know about buying into co-ops in NYC? I won't be doing it anytime soon, but it's something I may consider in a few years. I understand a bigger down payment is usually required, and that you have to go through an approval process with the co-op board, but that's about all I know.
You might also want to do some research on special programs for first time homebuyers. I know the state of Georgia has a program that provides 100% financing w/ low interest rates to people that meet certain criteria related to income and credit-worthiness. Your state might have a similar program.
Another option would be to check with some of the major lenders to see if they have program for first time home buyers. My wife and I bought a house last summer and financed through Bank of America. We received an 80/20 loan with the same low interest rate on both parts. It's a 30 yr fixed rate loan w/ no PMI, which is almost unheard of. The only extra work we had to do was go to a couple of homeowner education classes where they educate you about the homebuying and mortgage process. It was well worth the time to get a great rate and loan.
dml...the 30year fixed rate, with 80/20 loans you are looking for is the best way to go nowadays...i'd definitely stay away from any variable/adjustable rates, or any interest only loans... if you have a good credit score, you might still be able to get away with a 0%down loan and still get a good rate...Chilli is right about getting a "seller's concession" on closing costs (which will allow you to save quite a bit of upfront costs); make sure that your loans don't carry an early termination fee (in case you want to refinance later on), and whatever you do, get a home inspection, and send a camera down the sewage line if it's an older home;
oh, and try to get pre-approved before you start seriously looking, and get a real breakdown of costs involved in your monthly payments, especially taxes for each city you are looking at, which can be a nasty surprise later on (property taxes for my house is over 4000/year); be very careful with internet calculators...
also, find a good realtor...sellers pay for realtors, not buyers, so if you are a first time buyer, you won't have to pay the 3%fee...a good realtor will go through all the financial picture with you before you look at houses...
We did zero down and a single loan with the lender paying the mortgage insurance. It was a new loan that became available this past August. We come out ahead since we aren't paying interest on two different loans and we have no mortgage insurance.
mortgage advice...
I've started looking into buying my first home and I'm looking for some mortgage advice/recommendations...
In the research I've done so far, the monthly payments would be easy enough to manage on my salary, but the big chunk required for the down payment, closing costs, etc. has me a bit scared. I've got some savings, but I would rather keep it in the bank to put towards remodeling rather than the down payment.
I'd like to put either zero down or as little as 5%. I have no problem with having two mortgages - just trying to avoid the initial hit that would wipe out most/all of my savings.
Anyone out there that has recently bought a house w/ zero downpayment that could provide some advice or resources?
Thanks!
i did a zero down, 5 year ARM loan, which was an 80/20 breakdown. it was a good option for me because i knew i wouldn't own the home for more than 5 years. so you have to consider that - how long do you plan to stay? if this is a long term thing, then a more traditional loan might be a better option.
See if your bank or state offers credit counseling for these sorts of loans. I know there's a program in Colorado that requires credit counseling on them, because so many people get sucked into something like this and then can't repay it.
I closed on my house 2 months ago. I put 5% down, but there are 0 down options. The way to avoid paying closing costs is to ask the seller to cover them. We offered the asking price on our house under the terms that the seller would cover all costs associated with closing. Also, don't forget to factor your insurance and taxes into your monthly payment. Between the two, I pay around $300 a month. There is also PMI if you put less than 20% down, which will be about $100 a month, depending on your mortgage, unless you split your debt into 2 mortgages, known as a 80/20 loan. Also, don't be a fool and get a home inspection ($200-$300) to unearth any hidden problems, and we had a mold test done as well (about the same cost as the inspection). A little money now could save you a lot in the future.
Thanks PlastiX - We're looking at an 80/20 30yr fixed. We don't like the ARMs because it feels like a lease to us - not enough of the payments were going towards ownership. We don't want the hassle of having to potentially re-fi in a few years either. The monthly payments with an ARM were a bit less than a 30 year fixed, but not enough of a savings.
We like the 80/20 because it eliminates the need/cost of PMI...
dml, I think you're getting an ARM confused with an interest only load. As far as I know, an arm is just an adjustable rate mortgage which, initially, is a lower rate than a fixed, but has the potential to increase over time. The same amount of your payment will be applied to principle and interest as would with a fixed loan. They offer loans now where you can actually pay less than your interest amount, getting upside-down on a house in no time.
yeah, paying PMI is about as annoying as paying brokers fees to get an apartment. it's not helping you any. i would hesitate to recommend an ARM for your situation then. it's really not a great idea unles you're pretty much 'flipping' a house. it was laughable how little of my condo i actually owned at the time i sold. also, keep in mind, with the 80/20 split, the 20 is often a 15 (etc) year balloon situation.
and absolutely, as CD mentioned, ask the seller to cover closing costs. negotiate, negotiate.
Yeah, looking at an Ammortization table for an ARM is laughable - after 5 years, you basically "own" nothing and your're hoping that the property value has increased (or at least kept pace) in case you have to sell.
We're not flipping, which is why we're only looking at 30yr fixed...
Since we're talking about buying homes, does anybody know about buying into co-ops in NYC? I won't be doing it anytime soon, but it's something I may consider in a few years. I understand a bigger down payment is usually required, and that you have to go through an approval process with the co-op board, but that's about all I know.
dml955i,
You might also want to do some research on special programs for first time homebuyers. I know the state of Georgia has a program that provides 100% financing w/ low interest rates to people that meet certain criteria related to income and credit-worthiness. Your state might have a similar program.
Another option would be to check with some of the major lenders to see if they have program for first time home buyers. My wife and I bought a house last summer and financed through Bank of America. We received an 80/20 loan with the same low interest rate on both parts. It's a 30 yr fixed rate loan w/ no PMI, which is almost unheard of. The only extra work we had to do was go to a couple of homeowner education classes where they educate you about the homebuying and mortgage process. It was well worth the time to get a great rate and loan.
Exactly what I wanted to hear Karl! I knew that option had to exist. My wife & I have been doing all our banking at BofA for the last 8 years too...
I think we make too much money to qualify for an FHA type loan, but we do have stellar credit...
dml...the 30year fixed rate, with 80/20 loans you are looking for is the best way to go nowadays...i'd definitely stay away from any variable/adjustable rates, or any interest only loans... if you have a good credit score, you might still be able to get away with a 0%down loan and still get a good rate...Chilli is right about getting a "seller's concession" on closing costs (which will allow you to save quite a bit of upfront costs); make sure that your loans don't carry an early termination fee (in case you want to refinance later on), and whatever you do, get a home inspection, and send a camera down the sewage line if it's an older home;
oh, and try to get pre-approved before you start seriously looking, and get a real breakdown of costs involved in your monthly payments, especially taxes for each city you are looking at, which can be a nasty surprise later on (property taxes for my house is over 4000/year); be very careful with internet calculators...
also, find a good realtor...sellers pay for realtors, not buyers, so if you are a first time buyer, you won't have to pay the 3%fee...a good realtor will go through all the financial picture with you before you look at houses...
have fun!
oh, and first time home buyers can use their 401k for down payments without paying the penalty...although, it's best to keep your 401k intact...
We did zero down and a single loan with the lender paying the mortgage insurance. It was a new loan that became available this past August. We come out ahead since we aren't paying interest on two different loans and we have no mortgage insurance.
dml955i,
I believe the name of the loan program we did at BoA was the "Community Commitment" program. You should ask about it at your local branch.
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