First time home buyers - Lessons learnt
- Thread starter venkat
- Start date
sgip
Well-known member
FHA insured 30 fixed loans have Monthly Mortgage Insurance for 5 years no matter the loan to value. If you put 10% down, you have MMI, same with 20% or more! HUD removes the MMI once you hit 78% loan to value AND have paid it for 60 payments. FHA insured loans then, when structured as a 30 fixed, do not work out well when you have more than 20% down.
The only exception would be for low FICO scores. The Agencies have some pretty heinous add ons for low FICOS. For example, a 20% down 679 FICO score Condo purchase has 3.375 in fees added. If the market 30 fixed rate is 4.625% for 1.0 point, now is 4.625% for 4.375 points! Most borrowers of course will raise the rate to absorb those fees - around 5.250% would then be a 1.0 point loan. With an FHA fixed, you'd have 4.5% with MMI.
If we use a $350,000 mortgage amount, 5.25% is 2,814 conventional, a 4.5% FHA with MMI is $2,924. Yes, that's higher than the conventional loan. Quite a few lenders won't fund conventional loans with sub 680 FICO's. They will fund them FHA however. Once the MMI goes away your P+I is $2,677 less than the 5.25% rate.
This is a very rare circumstance where FHA 30 fixed loans can be used with 20% down.
My .02c
Soylent Green Is People
The only exception would be for low FICO scores. The Agencies have some pretty heinous add ons for low FICOS. For example, a 20% down 679 FICO score Condo purchase has 3.375 in fees added. If the market 30 fixed rate is 4.625% for 1.0 point, now is 4.625% for 4.375 points! Most borrowers of course will raise the rate to absorb those fees - around 5.250% would then be a 1.0 point loan. With an FHA fixed, you'd have 4.5% with MMI.
If we use a $350,000 mortgage amount, 5.25% is 2,814 conventional, a 4.5% FHA with MMI is $2,924. Yes, that's higher than the conventional loan. Quite a few lenders won't fund conventional loans with sub 680 FICO's. They will fund them FHA however. Once the MMI goes away your P+I is $2,677 less than the 5.25% rate.
This is a very rare circumstance where FHA 30 fixed loans can be used with 20% down.
My .02c
Soylent Green Is People
Understood SGIP. Sounds like with high DP and high FICO, best to go conventional.
IHO - why does APR being higher matter - at end of day, the monthly is the only number that I am looking at. The numbers I gave were the monthly payments.
I am still looking for ideas and suggestions on how much to put down and ideal loan length. Or is there no right answer and just personal preference?
On another related note, what do you think about buying down the rate. My friend made a good point: you lose all the buy down money if you want to refinance. While rates are low and they might not go lower, why spend more now with the chance of losing it. It made sense to me and I am only looking at the loans with $0-$10K in fees.
IHO - why does APR being higher matter - at end of day, the monthly is the only number that I am looking at. The numbers I gave were the monthly payments.
I am still looking for ideas and suggestions on how much to put down and ideal loan length. Or is there no right answer and just personal preference?
On another related note, what do you think about buying down the rate. My friend made a good point: you lose all the buy down money if you want to refinance. While rates are low and they might not go lower, why spend more now with the chance of losing it. It made sense to me and I am only looking at the loans with $0-$10K in fees.
irvinehomeowner
Well-known member
The APR is just another way to show your costs are actually higher than what the "rate" shows when you compare.
My opinion in this economy and unstable RE climate... stay as liquid as possible if you can afford it. For some that may mean renting, for others that may mean the lowest down payment and the longest loan they can afford.
I forgot who said this but you rent things that go down in value and buy things that go up in value. But yes... there is no right answer and just personal preference... as long as you are being financially responsible.
My opinion in this economy and unstable RE climate... stay as liquid as possible if you can afford it. For some that may mean renting, for others that may mean the lowest down payment and the longest loan they can afford.
I forgot who said this but you rent things that go down in value and buy things that go up in value. But yes... there is no right answer and just personal preference... as long as you are being financially responsible.
rkp said:
According to some personal finance experts like Liz Pulliam Weston from MSN Money, we should not be in a hurry to pay down our mortgage.
"There are situations where paying down a mortgage makes sense, such as when you're approaching retirement or when reducing your principal will get you a much better deal on a mortgage refinance. But most people still have better things to do with their money, even in this environment, than to pay down a low-rate debt that's often tax-deductible to boot."
She offers a bunch of suggestions on how to prioritize.
http://articles.moneycentral.msn.com/Banking/HomeFinancing/DontRushToPayOffThatMortgage.aspx?page=1
sgip
Well-known member
Buying down rates is a matter first of perspective, second of economics.
1) If you believe rates will be lower in the coming months, close on a 5 or 7 year ARM at the lowest rate you can with low fees. When the opportunity comes to refinance to a fixed loan, your making a lateral move from a low rate ARM to low rate fixed with minimal buy in and buy out costs. Would I do this? Perhaps, but we're at a very low fixed rate market now relatively speaking. I'm guessing rates will be between 5.5 on the high to 4.75 on the low average for the next 12 months. I'm guessing that we might see a bit of a retracement back into the 4.5% range, but cannot tell if it will be for long. That's quite a bit of guessing to base a decision on. Some may agree and consider the ARM route as a way to keep payments and costs down.
2) If you believe rates will stay flat to higher over the coming years, count the cost of the buy down. Let's say your rate is 4.5% for 1.0 point, or 4.375% for 1.5 points on a $400k mortgage. 1/2 point is $2,000. .125 in rate is $500 of interest per year (+/-). You'll recover that $2k buy down in around 4 years or less when you factor in tax consequences. Will you keep the loan for more than 4 years? If so, pay the point. If not, keep the cash. The quicker the payback the more compelling the reason to do so.
Perspective is a personal matter, as is economics, therefore I cannot say there is a right or wrong pursuit of either pathway forward. Just move forward with your decision with a full range of information, and stay confident that you made the right decision no matter how it worked out in the end.
SGIP
1) If you believe rates will be lower in the coming months, close on a 5 or 7 year ARM at the lowest rate you can with low fees. When the opportunity comes to refinance to a fixed loan, your making a lateral move from a low rate ARM to low rate fixed with minimal buy in and buy out costs. Would I do this? Perhaps, but we're at a very low fixed rate market now relatively speaking. I'm guessing rates will be between 5.5 on the high to 4.75 on the low average for the next 12 months. I'm guessing that we might see a bit of a retracement back into the 4.5% range, but cannot tell if it will be for long. That's quite a bit of guessing to base a decision on. Some may agree and consider the ARM route as a way to keep payments and costs down.
2) If you believe rates will stay flat to higher over the coming years, count the cost of the buy down. Let's say your rate is 4.5% for 1.0 point, or 4.375% for 1.5 points on a $400k mortgage. 1/2 point is $2,000. .125 in rate is $500 of interest per year (+/-). You'll recover that $2k buy down in around 4 years or less when you factor in tax consequences. Will you keep the loan for more than 4 years? If so, pay the point. If not, keep the cash. The quicker the payback the more compelling the reason to do so.
Perspective is a personal matter, as is economics, therefore I cannot say there is a right or wrong pursuit of either pathway forward. Just move forward with your decision with a full range of information, and stay confident that you made the right decision no matter how it worked out in the end.
SGIP
irvinehomeowner
Well-known member
Not sure if this was mentioned but:
Utilities
Some are pain to transfer or set up new... the most notorious being phone service from the local telco provider. In the many times I moved, moving phone and DSL was a pain because they required a 2-week window and many times there were issues so not only did we have no phone service but no internet when we moved in (and we all know internet is probably more important than water and electricity... heh).
Gas, water, electricity and trash are fairly easy... and having experienced issues with AT&T (the sole Irvine phone service), I switched to Cox. Not only were they able to provide service next day, but they had no issues installing both new phone, cable AND internet all at the same time (and you can get deals that will be cheaper than AT&T).
And I'm not sure this is a utility but start forwarding your address sooner than later. Usually it takes a while to kick in and you'll won't get mail until a few weeks after you move in.
Utilities
Some are pain to transfer or set up new... the most notorious being phone service from the local telco provider. In the many times I moved, moving phone and DSL was a pain because they required a 2-week window and many times there were issues so not only did we have no phone service but no internet when we moved in (and we all know internet is probably more important than water and electricity... heh).
Gas, water, electricity and trash are fairly easy... and having experienced issues with AT&T (the sole Irvine phone service), I switched to Cox. Not only were they able to provide service next day, but they had no issues installing both new phone, cable AND internet all at the same time (and you can get deals that will be cheaper than AT&T).
And I'm not sure this is a utility but start forwarding your address sooner than later. Usually it takes a while to kick in and you'll won't get mail until a few weeks after you move in.
waitin4ever
New member
Brookefield homes (Montecito & Monterey) has a person who takes care of these in addition to some other stuff. Making sure the old service turned off and the new one starting at the correct time. I thought it was a great service they provided. Don't know
if all builders in the new collection homes did that.
if all builders in the new collection homes did that.
irvinehomeowner said:
Irvine2Irvine
New member
waitin4ever said:
The Sonoma builder (Tripointe Homes) just asked the buyer to switch it over from Builder to the buyer's name in "timely" manner. They also pointed out that nothing will be shut off on the day of the close of escrow or even after a week. It was more of an honor system. I called the utility companies myself and switched over. All of the utility companies asked me to name the date I wanted the utility to switch over. I picked a day a couple of days after the close of escrow, but probably could have easily milked it for a week or two.
irvinehomeowner
Well-known member
Moving into new homes is easier because as mentioned, the builder has the utilities in... but into resale homes is harder because the person moving out will shut off their utilities when they move out and won't help you switch yours in.
But gas/water/elec utilities are fairly easy, it's really phone and internet that gave me fits.
But gas/water/elec utilities are fairly easy, it's really phone and internet that gave me fits.
Irvine2Irvine
New member
irvinehomeowner said:
I transferred both internet and phone from my old house to the new house without a hitch. They did it on the day we wanted and COX technician was at the new house for a couple of hours making sure everything was up before he left. They even gave me a huge new customer discount for 6 months for transferring the service over to the new house. When I told them I may move over to "U-Verse", they gave me the big discount.
You gotta play Cox and AT&T against each other!!!
irvinehomeowner
Well-known member
Yeah... like I said... Cox rocks.
AT&T... well... rhymes with [bleep]. I even had issues when I activated the fe9000phone.
And when you rdiscount with Cox runs out (they usually are limited), call them back and say you'll switch and they'll continue it and even throw in a free month of HBO or something.
AT&T... well... rhymes with [bleep]. I even had issues when I activated the fe9000phone.
And when you rdiscount with Cox runs out (they usually are limited), call them back and say you'll switch and they'll continue it and even throw in a free month of HBO or something.
Cox was great when we moved from irvine rental to irvine home, they set up cable, internet and home service in the two hour window without a hitch. I was thinking about getting directTV and separate phone and internet service but in the end the "all in one" convenience of Cox doing the whole thing quickly and professionally and making sure everything was working, made for a smooth transition.
Irvine2Irvine
New member
TustinRanchResident said:
Here's an important thing I learned as first time seller. Do not just go with the what the realtor recommends for the listing price. Many will try to lowball you so they can have a quick sale. My house had a lot of upgrades that I knew would bring the house price up. I listed my house for about 20K more than what the realtor wanted to list at according to comps. The house ended up selling for $4K over the listing price. Do your own research on the redfin.com on sold houses and look at the conditions of the house when the realtor shows you the comps.
villiagepeople
New member
ok.. i hope i don't sound like i'm whining but here are some of the ways i got ripped off buying and selling...
when buying i didn't compare new homes with old.. i was new to oc at the time, and i know it's my duty to find this out but this was the days before redfin, zillow, etc... so the realtor had the mls locked down and only showed me stuff that got her the most commission (i found this out later from her husband while drinking)... there were new condos for less or about the same as what i paid for my "used" condo.
the broker sent out one of his buddies to notarize my docs... now the law says no more than $20 or something small like that if you go to a notory... but when they travel to your house they get to charge more... i got charged $400.
when selling, if you have to deal with an hoa... make sure your escrow orders all the hoa docs... my realtor told me to get it in advance to help the escrow... but the docs you get yourself is not sufficient for escrow... i don't know if they don't put their seal on it or something... or they leave some documents out but all it know is i ended having to pay the same price again but the escrow company had to order it (and of course the hoa didn't tell me anything when i talked to them and told them i'm getting docs for the escrow to sell my condo).
there were all sorts of stuff that i can't remember right now... in the end... i spent nearly $30k to sell my $400k condo... that's 7.5%... that may not seem that high... but i only paid 5% in commission.
when buying i didn't compare new homes with old.. i was new to oc at the time, and i know it's my duty to find this out but this was the days before redfin, zillow, etc... so the realtor had the mls locked down and only showed me stuff that got her the most commission (i found this out later from her husband while drinking)... there were new condos for less or about the same as what i paid for my "used" condo.
the broker sent out one of his buddies to notarize my docs... now the law says no more than $20 or something small like that if you go to a notory... but when they travel to your house they get to charge more... i got charged $400.
when selling, if you have to deal with an hoa... make sure your escrow orders all the hoa docs... my realtor told me to get it in advance to help the escrow... but the docs you get yourself is not sufficient for escrow... i don't know if they don't put their seal on it or something... or they leave some documents out but all it know is i ended having to pay the same price again but the escrow company had to order it (and of course the hoa didn't tell me anything when i talked to them and told them i'm getting docs for the escrow to sell my condo).
there were all sorts of stuff that i can't remember right now... in the end... i spent nearly $30k to sell my $400k condo... that's 7.5%... that may not seem that high... but i only paid 5% in commission.