buying first home, need advice

[Blanky]

thanks for the advice. here's the thing, iv'e been renting for a long long time now(maybe 8 years). it's basically money out the door that i will never get back.

Trust me: houses are WAY more expensive than renting. Of course you don't get your rent back; I don't get my interest back on my house. 80% of my mortgage payment goes toward interest, insurance, escrow (to pay taxes). That figure alone is much higher than what my last rent was. Not to mention I'm now on the hook for absolutely everything in my house. AC breaks, I pay for it, driveway needs work, I pay. Roof tiles blew off? Me again. And when I sell the house I get to deal with closing costs. Unless you're positive the housing market is going to boom and you make a lot of money (historically houses appreciate about at the same rate as inflation, btw), don't do it for the money.

Houses are very expensive and pretty much 99% of the time you should not get one because you think you're throwing money away on rent. If you genuinely want a house, fine, but don't be under the illusion it's a financially responsible thing to do whereas renting is not. And frankly as a single guy I think you'd have more fun--and it's much cheaper--leasing yourself a new luxury automobile.

 

[dbcooper1]

As if putting 20% down is any different than putting it in the bank or "reserve".

It's money going into equity......no different than savings.

Liquidity

 

[Vdubchaos]

This is ridiculous. There is one HUGE difference. You don't have immediate access to equity like you do cash.

You don't, but if you are saving (not spending), access is a none issue. The money is still there (in equity) and YOURS.

Access to that money will be available after you sell the house anyways. And if you save it up front, well, when you sell the house and you are upside down you are blowing those savings anyways. NO DIFFERENCE

Besides, you are already "financially responsible" and saving on regular basis anyways right? To replenish your savings is no big deal.

And let's be real here, any savings you might have will be blown to BS things anyways....furniture...unexpected repairs etc.

That's because you weren't ready to buy a house NOR were you financially responsible and have good financial habits to save for a proper down payment to BEGIN with.

Here we are, 7+ years after the housing economy crashed because people weren't financially responsible, didn't put down enough money and got into shitty loans.....and people are still recommending buying a house with shitty loans and no financial responsibility.

Expected. I didn't expect people to change.

Yes it's HARD to save 20%, yes it's hard to buy a house. IT'S SUPPOSE TO BE. Stop buying into an illusion that everything is easy.....you will have 1 million people selling you that illusion......but time comes where the reality kicks in, and all of those people have already disappeared with YOUR money. While you are ON YOUR OWN.

 

[Vdubchaos]

Trust me: houses are WAY more expensive than renting. Of course you don't get your rent back; I don't get my interest back on my house. 80% of my mortgage payment goes toward interest, insurance, escrow (to pay taxes). That figure alone is much higher than what my last rent was. Not to mention I'm now on the hook for absolutely everything in my house. AC breaks, I pay for it, driveway needs work, I pay. Roof tiles blew off? Me again. And when I sell the house I get to deal with closing costs. Unless you're positive the housing market is going to boom and you make a lot of money (historically houses appreciate about at the same rate as inflation, btw), don't do it for the money.

Houses are very expensive and pretty much 99% of the time you should not get one because you think you're throwing money away on rent. If you genuinely want a house, fine, but don't be under the illusion it's a financially responsible thing to do whereas renting is not. And frankly as a single guy I think you'd have more fun--and it's much cheaper--leasing yourself a new luxury automobile.

That's not always the case as most people can write off interest.

I can't, so in the end I do pay about $13k a YEAR in INTEREST ALONE.

That amount would get me a similar place to rent around where I live. And I would actually save more as I don't have to pay maintenance, taxes, repairs etc.

Everyone's situation is the same. For me, above does apply.

 

[Blanky]

Writing off interest is a tax deduction, not a credit. If you pay 10% federal tax rate you're still out almost all of that money paid in interest or taxes anyway.

 

[Vdubchaos]

Writing off interest is a tax deduction, not a credit. If you pay 10% federal tax rate you're still out almost all of that money paid in interest or taxes anyway.

It's a deduction, but that means government is NOT taxing higher amount, the money they should've gotten......so in a way, they ARE paying for it (small portion, but still a dent, especially when you multiply)

 

[MagnusTheBrewer]

Do NOT think of a house, or buy one as an "investment". You are buying a house to have a nice roof over your head. Remember, $300k house will cost you good $550-600k when you add up all the payments (interest).

And then, all your advice treats it exactly like an investment.

It is important to keep an eye on the money you spend, of course. However, a homes primary utility is NOT it's value but, it's ability to provide security and raise your standard of living along with all the unmeasurable factors like pride of ownership, community, a feeling of permanence, a place to raise a family etc. All those things are difficult to place a value on but, a value exists and frequently outweighs the value of other 'investments.'

 

[purbeast0]

my advice is to not take advice from Vdubchaos lol. he's clueless and stuck in the past.

in theory, if you make $10k/month take home and put 0% down on a house, and your mortgage is $1k/mo ... you can clearly afford it.

again, his advice in regards to "you must put 20% down or you can't afford the house" is stuck in the stoneage and too black/white.

his 20% argument is stupid too in saying that you will always have that money.

people who bought houses for $500k with $100k down and $400k in mortgage, that ended up having to sell them for $200k after the bubble burst were still upside down on their houses after.

 

[Young Grasshopper]

Thanks for everyones advice so far. So I spoke with 2 private lenders the buyers agent recommended me and here's how it went so far:

Agent #1

Credit score is 725, am able to apply for a conventional loan at 4% interest. Did not report any issues with my credit. Already provided me with a good faith estimate. I ran the report myself and it is indeed 725. I have 4 total late payments(2 with auto lender, paid off loan already) and 2 with a credit card company.

Agent #2

Also found my credit score is 725 BUT he did 'find' I disputed one of my late payments for my credit card(which I did and lost, but have since paid off off rest of balance with no other late payments). He's basically telling me somehow this account is still 'stuck' in dispute and could cause issues down the line in escrow as no accounts can be left in 'dispute' status. He also knows I'm working with the other lender.

Any truth to this? I'm a little suspicious the guy might be trying to come up with a solution to a problem that doesn't exist to win my business, but I could be wrong. Agent #1 didn't mention any of this. Agent #2 is going to try and clear this dispute. Also my credit report doesn't reflect recent changes to my balances as the report still shows about 4k in debt that I paid off 3 weeks ago. He is also going to try and get this updates with the credit bureau.


What is everyone's thoughts on going thru a bank(like WF) for loan? The buyer agent I spoke with made it sound like there would be more restrictions on the loan, but this was before she knew anything about my credit score. Assuming my credit is good which it sounds like it is, should I go to the bank and apply for a loan?


Thanks

 

[Greenman]

my advice is to not take advice from Vdubchaos lol. he's clueless and stuck in the past.

in theory, if you make $10k/month take home and put 0% down on a house, and your mortgage is $1k/mo ... you can clearly afford it.

again, his advice in regards to "you must put 20% down or you can't afford the house" is stuck in the stoneage and too black/white.

his 20% argument is stupid too in saying that you will always have that money.

people who bought houses for $500k with $100k down and $400k in mortgage, that ended up having to sell them for $200k after the bubble burst were still upside down on their houses after.

It's pretty tough to land a loan without 20% down. The days of drug dealer loans are gone, you have to prove income and they generally want you to have some skin in the game.
80/20 stated income negative amortization loans were a god send for people without the ability to repay them, but the entire edifice was built on insane appreciation and a level of myopic ignorance that we may never see again.
Some folks might still be able to get a zero down loan, but it's certainly not the norm anymore.

 

[NoCreativity]

What is everyone's thoughts on going thru a bank(like WF) for loan? The buyer agent I spoke with made it sound like there would be more restrictions on the loan, but this was before she knew anything about my credit score. Assuming my credit is good which it sounds like it is, should I go to the bank and apply for a loan?

It's worth checking out the credit score issue. I think excellent credit is somewhere around the 750 mark which is where you get the most favorable terms. You're close and a little legwork may get you over the hump.

I was able to get a conventional loan from a regional bank with <20% down (800ish credit score). I do pay PMI but it's less than $50/month and will disappear after I get to 20% equity which will happen 24 months after the loan started. So it's possible to get good terms from a bank, you just need to shop.

 

[edro]

It's pretty tough to land a loan without 20% down.

If you have a solid income and credit history, 10-15% down loans are extremely common.

Many of my friends and family have them, me included (last 3 mortgages from 2006-2013).

I don't know where people get this 20% down being necessary idea.
They must have lower credit scores or their income to credit ratio is too high.

 

[jaedaliu]

If you have a solid income and credit history, 10-15% down loans are extremely common.

Many of my friends and family have them, me included (last 3 mortgages from 2006-2013).

I don't know where people get this 20% down being necessary idea.
They must have lower credit scores or their income to credit ratio is too high.

Do you have PMI included in these low(ish) down payment loans?

 

[mizzou]

My wife and I together made around $90k. When we bought our new house, our budget max was $200,000.00 (and also included a 20% down payment). We ended up buying a lovely house in the $140's. I think the bank approved us up to $250-300k but we said that would make us too house poor. We got an awesome fixed loan rate as well.

So basically, we pay so little each month on house payment...its quite nice...had we went up to the max budget, we would be paying an extra $1,000 every month or even more. When you think about those savings, it makes it so much easier to pay for things like nice appliances, furniture, fix plumbing, etc. I'm finally in a house where we can afford to fix things.

Do the budgeting and figure out how much money you have FREE left over after all bills and savings. You need to set aside a sizeable portion of money for SHTF money. What if the sewer lateral line collapses? What if you uncover termite damage? What if the foundation shifts or drops? You need this money available so you can live a good lifestyle.

When you you say you make $100k, my first thought is that $300-400 range of houses is wayyyy too much.

My opinion on 20% down...
#1 - it gets rid of PMI which is completely wasted money
#2 - it lowers your monthly P&I payments
#3 - god forbid something happens, it gives you a cushion to walk away from the house.

Thankfully, on my last house I paid 20% down. Before we moved, I paid the loan down 33%. Because the housing market tanked so much....I ended up selling the house at around 70% of it's original value. So instead of owing over $20,000.00 to the bank, we walked away with some money. That was good planning. (aside from buying a house during the peak of the housing boom)

Would the money have made more in the stock market? At the time, no, it would have lost value. Also, there was no way I could have retreived that money and used it to pay the losses without taking a huge penalty.

 

[orderlydentist]

Hi, In buying a house, you should always consider its accessibility to your work then second the type of house and your budget too. You must check also if has legit papers before buying

 

[edro]

Do you have PMI included in these low(ish) down payment loans?

Yes, all loans with less than 20% down require PMI.
There are a few exceptions, like VA (military) loans.

 

[cabri]

It's worth checking out the credit score issue. I think excellent credit is somewhere around the 750 mark which is where you get the most favorable terms. You're close and a little legwork may get you over the hump.

I was able to get a conventional loan from a regional bank with <20% down (800ish credit score). I do pay PMI but it's less than $50/month and will disappear after I get to 20% equity which will happen 24 months after the loan started. So it's possible to get good terms from a bank, you just need to shop.

They will not drop the PMI at the 20% mark automatically

And they also may initially request a re-appraisal depending on the market

You have to request that the PMI is dropped

 

[cabri]

Yes, all loans with less than 20% down require PMI.
There are a few exceptions, like VA (military) loans.

The FHA used to support down to 5%

 

[purbeast0]

Yes, all loans with less than 20% down require PMI.

There are a few exceptions, like VA (military) loans.

This is not true which is why I asked if op is military. Navy federal has no pmi even on 100% traditional (non va) loans.

 

[RearAdmiral]

This is not true which is why I asked if op is military. Navy federal has no pmi even on 100% traditional (non va) loans.

I feel like when I looked into this and other no PMI loans it is still baked into the APR somehow.

 

[NutBucket]

It is. It's LPMI (lender paid) so you don't see it as a separate line item in your statement.

OP: OCGuy is in the loan industry so I would hit him up with any loan specific questions. I can recommend a good inspector. Where are you looking?

 

[edro]

This is not true which is why I asked if op is military. Navy federal has no pmi even on 100% traditional (non va) loans.

Right, but you still need an affiliation (VA, many Military credit unions or lenders, private credit union, FHA, etc) to back you. These are the few exceptions.
Regular Joe without an affiliation has few choices besides PMI.

Lender paid PMI is the same as PMI; it's just in the form of a higher interest rate.
The lenders pays it for you. It might be a better deal if you don't plan on keeping the loan a long time.

 

[Vdubchaos]

This is not true which is why I asked if op is military. Navy federal has no pmi even on 100% traditional (non va) loans.

Go figure, government is doing subprime loans now.

:biggrin:

doesn't surprise me

Just because you CAN, doesn't mean you SHOULD.

With 0% down, you will be in a hole/upside down if there is ever a need to sell the house. For 5-10 years!!!

And clearly you didn't have enough financial discipline and able to save to even get a house.

I know I know, banks love you!

 

[Vdubchaos]

My wife and I together made around $90k. When we bought our new house, our budget max was $200,000.00 (and also included a 20% down payment). We ended up buying a lovely house in the $140's. I think the bank approved us up to $250-300k but we said that would make us too house poor. We got an awesome fixed loan rate as well.

So basically, we pay so little each month on house payment...its quite nice...had we went up to the max budget, we would be paying an extra $1,000 every month or even more. When you think about those savings, it makes it so much easier to pay for things like nice appliances, furniture, fix plumbing, etc. I'm finally in a house where we can afford to fix things.

Do the budgeting and figure out how much money you have FREE left over after all bills and savings. You need to set aside a sizeable portion of money for SHTF money. What if the sewer lateral line collapses? What if you uncover termite damage? What if the foundation shifts or drops? You need this money available so you can live a good lifestyle.

When you you say you make $100k, my first thought is that $300-400 range of houses is wayyyy too much.

My opinion on 20% down...
#1 - it gets rid of PMI which is completely wasted money
#2 - it lowers your monthly P&I payments
#3 - god forbid something happens, it gives you a cushion to walk away from the house.

Thankfully, on my last house I paid 20% down. Before we moved, I paid the loan down 33%. Because the housing market tanked so much....I ended up selling the house at around 70% of it's original value. So instead of owing over $20,000.00 to the bank, we walked away with some money. That was good planning. (aside from buying a house during the peak of the housing boom)

Would the money have made more in the stock market? At the time, no, it would have lost value. Also, there was no way I could have retreived that money and used it to pay the losses without taking a huge penalty.

This is what you call SMART and RESPONSIBLE OP.

Also, let's not forget that stock market = gambling. To me that's not an option or responsible.

But that's just me.

 

[Vdubchaos]

Right, but you still need an affiliation (VA, many Military credit unions or lenders, private credit union, FHA, etc) to back you. These are the few exceptions.
Regular Joe without an affiliation has few choices besides PMI.

Lender paid PMI is the same as PMI; it's just in the form of a higher interest rate.
The lenders pays it for you. It might be a better deal if you don't plan on keeping the loan a long time.

......they pay it for you AND make money on you. No bank will take on "extra fees" for you. They are in business to make money not to lose it.

And any lender that will give you a loan without 20% down is probably a lender you want to stay away from......

Back in the mid 2000s I went to a good reputable bank (we are talking during subprime era) and they told me "if you don't have 20%, we will never approve you".

Guess how I knew they were a good bank/lender.

They were not just protecting their interests, they were also looking out for me.

thank GOD they did and thank god I was just testing water and not actually buying a house.

When I was ready and did go to buy a house (again, right before the crash)........as you can imagine I was having offers thrown at me that were just ridicules. $500k........no pmi and other BS.

Glad I did my research, saved up proper and got a proper loan. I would've been screwed.