Home Financing questions?

[Speedin' Ian]

So I am getting ready to buy my first home and I am a little over whelmed with all my options (neg am, fixed, interest only, options,etc...). So what are those that have bought new houses doing?
Interest only or even neg. am seems great if houses continue to appreciate at a moderate rate, but your pretty much screwed if the market takes a dump. Then again when median home prices are close to 700,000.00 in Ventura County so what options do you have? Also do you guys think it is better to finance as much as possible or put as much down as possible? I like the idea of keeping some money in the bank after I move in. Any suggestions?

[Phat Matt]

How long do you plan on living there?

[HM]

You've got pm. :cool:

[Nord]

I bought my house 3 years ago. Everyone will offer you a low interest rate, but usually when they are really low, they are adjustable. Don't buy adjustable, I don't care what anyone says. Get like a 5 to 7% 30 year, and don't refinance if you don't have to. Just pay the MO FO off! Remember, when you refinance, you are borrowing against equity, and you will just owe more. When you sell, this refinance has to be paid off too! I opened up a equity line about a year ago and haven't used it, but when I do, its tax deductable so I can use it to pay off credit cards and shit! :idea: :D

[Mandelon]

Some folks say you should use your house like a financial tool. Borrow against it, reinvest that money, or put very little down, go interest only or negative amortization, some loans have an option of which type of payment you want to make every single month!
Others know they can't be trusted with any extra money, if its not used on the house it will get spent and not saved. There are formulas and tables that will show you to use the least amount of money on your house and invest the rest. But right now there aren't many "safe" investments that will guarantee you more than 5%......junk bonds, second trust deeds, yes, but not a CD or savings bond. The stock market returns arond 10% over the long haul but hasn't done that regularly for a while.
It depends on you. Are you a risk taker? Are you a disciplined saver? Do you want to stay in this house until they carry out your body?
I'm not moving from my current house. The property taxes would kill me! I have a fixed on my residence with a 100K equity line. The rental apartments I plan to keep are fixed. Anything I plan to sell I get the cheapest rate I can.
If you will be moving in only a few years I'd say go interest only or an adjustable rate. Short term they make sense. You will be $$$ ahead. You can always pay down extra equity if you want. One extra payment a year will save you tens of thousands over time and shave off years from the balance.

[Dave C]

if you plan on moving get a 5/1 ARM.
If you plan on staying get a 30 year fixed.
Its generally OK to start with an ARM because you can borrow more (i.e. get more) cuz of the lower rate. You can buy more house than you can under a fixed. Then refinance to a fixed rate down the road when you can afford it.
The down is tricky.. put as much as is necessary to qualify and then keep the rest for repairs especially if you are buying a "used" (abused) house.
Don't wait... its a good investment.

[locogringo]

what Mandelon said to a t. Weigh your options, decide how savvy of a saver you are, and go from there. We see bout 65-70% of the loans done at an adjustable payment not a fixed. Says something about the people but an issue that is going to be a problem in the near future fo many!

[cdog]

Take this for what it's worth, i'm in the business as a realtor and I would suggest a 5 or 10 year intrest only loan. You will by all odds sell within 4-7 years and move up or out of the area. You always have to option to pay down the loan as you wish. Meanwhile enjoy a more comfortable payment and use your home as a excellent tax shelter. If you have a decent income and and need write offs it's the only way to go so don't plan on ever paying off you home untill you are close to retirement and even then if your playing some stocks it'll be nice to have tax shelters.. A wise man once said "It's not what you make, It's what you keep"...

[Restless22]

if you plan on moving get a 5/1 ARM.
If you plan on staying get a 30 year fixed.
Its generally OK to start with an ARM because you can borrow more (i.e. get more) cuz of the lower rate. You can buy more house than you can under a fixed. Then refinance to a fixed rate down the road when you can afford it.
The down is tricky.. put as much as is necessary to qualify and then keep the rest for repairs especially if you are buying a "used" (abused) house.
Don't wait... its a good investment.
Well said Mr. C

[wantacat]

if you plan on moving get a 5/1 ARM.
If you plan on staying get a 30 year fixed.
Its generally OK to start with an ARM because you can borrow more (i.e. get more) cuz of the lower rate. You can buy more house than you can under a fixed. Then refinance to a fixed rate down the road when you can afford it.
The down is tricky.. put as much as is necessary to qualify and then keep the rest for repairs especially if you are buying a "used" (abused) house.
Don't wait... its a good investment.
Exactly! Hurry rates are creeping up.

[rivercrazy]

IMO - interest only loans are a scam and will hurt the real estate market down the road. They are simply a tool used by financial institutions to help people qualify for loans that they cannot possibly handle........
When prices moderate which WILL happen at some point (its a normal cyclical thing) upon maturity the appraised values will not support some of today's purchase prices. Some peeps will be underwater and the lender at that time will put the screws to you. They will be in the drivers seat at that point on everything.
RUN FOR COVER ON INTEREST ONLY DEALS..........

[tamalewagon]

Exactly! Hurry rates are creeping up.
Actually that's wrong (not calling you out wantacat, just stating fact)...the rates have dipped again as the 10-year bond has gone below the 4.15% area again. But you are right to state they should get a move on. But then, I'm just a mortgage broker so what do I know? :D
Home equity lines of credit will soon be non tax deductable as the mortgage insurance industry is finally having their way. Beware.

[Cole]

Why in the world would you think I/Os or interest only loans are a scam?
Have you ever looked at what you pay in principal for the first 5 years with a standard 30 yr loan...
interest only is a great way to go and gives you the flexability to pay more towards principal if you like!
Also I really like the 1% programs when you have the equity.

[Rock-A-Bye-Baby]

i agree with cdogg..
a 10 year interest only loan is a great option. and he's right, you will move within the span of the loan. there is one solid piece of advice that i follow and that is that interest only loans are good, but can be exceptional if you put the tax savings back towards your loan thus paying down the principle. if you consider a couple of hundred bucks extra a month, it makes a big difference in the end. and along the way, you never know what might happen with interest rates.. you could re-fi at any time and lock in a 30 year fixed. additionally, you should consider the home equity line of credit as soon as you can. you can get one a week after escrow closes on your new home.

[rivercrazy]

The VAST MAJORITY of those choosing interest only loans do so only because they cannot afford a loan with amortization. That is selling a product to someone that is likey to hurt them down the road.
Most interest only loans have an intermediate maturity date, not 15 to 30 years. At the end of the 5 or 7 year period the piper might be there to make your life a living hell.....
Perhaps its a good product for an investor who is willing to stomach more than normal risk. However, most people need a roof over their heads and risking the single most important and fundamental investment is not generally a wise idea........
Just my humble opinion.....

[totenhosen]

I'll agree with what Mandelon said. If you want hit me up and I can help you out with the loan as well as finding a place.

[Cole]

The person by all means has to know his goals with his property...does he plan on staying there FOREVER, if so he may want to consider 30,20 or even a 10 yr fixed.
Is this an investment property where "cash flow" may be an issue, an I/O or 1% might be right for you.
There are so many factors when structuring a loan ....everyone is different.

[Dave C]

an opinion but a good one at that!!
The VAST MAJORITY of those choosing interest only loans do so only because they cannot afford a loan with amortization. That is selling a product to someone that is likey to hurt them down the road.
Most interest only loans have an intermediate maturity date, not 15 to 30 years. At the end of the 5 or 7 year period the piper might be there to make your life a living hell.....
Perhaps its a good product for an investor who is willing to stomach more than normal risk. However, most people need a roof over their heads and risking the single most important and fundamental investment is not generally a wise idea........
Just my humble opinion.....

[welk2party]

I have been following this thread and I was not going to post anything, but I am changing my mind so I can put in my two cents. People have there opinions on what is best and that is great. What I feel compelled to say, which others have touched on, is that it is crazy to generalize a particular loan product as bad or good. As has been said before, everyones situation is different. Stat say that we Americans refinance our homes on average every 4 years. There are so many factors to choosing a loan that is right for you. Can you honestly say to yourself that once you get a 30 year mortgage you will NEVER refinance because your goal is to pay it off? For most the answer is no if they are being honest. Does this mean you should not get a 30 year fixed? I don't know. Again it would depend on your situation. For most homeowners, tapping your equity is the only answer for major repairs or maintenance on their homes. How many people can write a check for a new roof or remodel a kitchen or bath? From my experience, very few. This of course is a function of poor financial practices and income not keeping pace with the rising costs of EVERYTHING! No one can predict the future, but we can certainly make educated guesses. All these "crazy" loan programs have both benefited and hurt the real estate market. More people became homeowners then ever, and current homeowners saw amazing appreciation. This in turn created more demand and inflated prices to stupid levels. The market will correct itself and unfortunately some people will be hurt. By in lage, my feeling is that most will make it through and find a way. Remember, most of the short term fixed loans have annual and lifetime caps on the rates unlike most of the loans in the 80's! The lender has a vested interest in writing loans that people can pay. They are not in the business of owning homes. Also, increased equity is nothing more than increased leverage.
Sorry for the ramble....NUFF SAID!

[Luscious]

Hi there,
As a Realtor in the business for the last 14 years... I can't begin to tell you how many people that couldn't buy houses 4-5 years ago, now CAN!! These loans are the most attractive loans and right now I work with a lender that offers what they call a "Pick-a -Payment" option on your loan. This type of loan has 4 options to it you can have either a neg. arm payment, an interest only payment, a fixed rate payment for 30 years or a fixed rate payment for 15 years. You choose based on your situation if your situation changes "every month" this loan will "accomodate you" every month. I don't like the idea of having to pay a higher payment just because it is a fixed rate. WHy not take advantage of the lower rates, everyone else does. I'll tell you without these loans, we would not have the market that we do right now. It's all about the supply and demand law. The demand is definitely there,but without the availabilty of the houses that is when the rates jump. The opportunity is there for "ANYONE"to buy a house, good credit, bad credit, every situation is different. If anyone would like some more info please PM me or call me on my cell at 951-264-5257. I would love to be given the opportunity to sit down with you and discuss your options. The market?...I don't think it is going to take a dump...not now not in the future. These loans are really the buyer's responsibility. ANy loan is as good as you discipline yourself to it. For me, these loans have worked for me.Just PM me or post your ideas or questions and I will respond to the best of my ability. Make sure when you work with a Loan agent that you ask about the prepayment penalty. All you need is someone who will disclose this to you and as long as you are aware of it (again, based on your financial situation) you should be fine.
Thanks, and if you are interested in Buying or Selling give ME a call. I make "House Calls!"

[Luscious]

Looks like welk2party was posting the same time as myself. I agree with most of what he said. Everyone has to discipline themselves with their loan. And of course even being a Realtor, I don't have the money to just "write a check " for a new roof. That's when I turn to my savings account if you will and get money from the equity in my own home. No matter what, owning Real Estate is an investment you can't go wrong in doing. Just get the right people to help you, that's where I come in. Give me a call or PM me, you won't be disappointed.

[sorry dog]

Some of you guys seems knowledgable, so I'd like to play a what if...
What if rates were to rise 100 to 150 basis points over the next 12 months?
What would that do to the housing market?
BTW - I'm in the southeast and the market has been pretty hot here too. Some places have been experiencing 20% annual appreciation.

[Mandelon]

A point or point and half rise will drop 5 to 10 percent of the buyers out of the market...more in higher priced areas. It will reduce disposable income once adjustable owners have their payments go up...
Sh*t I remember when anything under 10% was a killer rate.... adjustable assumables at 11.25 were the norm..... The rates today are a bargain.
If we could all just go back 5 years ad get a d-over, we'd all be jillionaires!!! :D

[locogringo]

this will lay out the "option loans" really well.
www.brucknermortgageteam.com/harnessPres/Sitemap.html

[sorry dog]

Interesting guide.
However, I didn't see risk mentioned anywhere. Most available investments probably will not give 3% more return than the after tax cost of the loan without risk.

[bigq]

Does anyone even offer a 30 year IO? If not what is the longest in CA? Are they all adjustable?

[totenhosen]

Does anyone even offer a 30 year IO? If not what is the longest in CA? Are they all adjustable?
It's amortized over 30 years but has a ballon.

[dossangers]

Low down long financing take the interest deduction. the markets not going to go down! the value will still be going up take a look around lots of investment big companys employing lots of people! Think positive and take the extra cash and buy a bigger BOAT! LOL!!

[Tequila-John]

Does anyone even offer a 30 year IO? If not what is the longest in CA? Are they all adjustable?
its a 30 year loan I/O for the 1st 10 years then the balance re-amortizes for 20 years

[bigq]

its a 30 year loan I/O for the 1st 10 years then the balance re-amortizes for 20 years
Ok I don't get it :cry: is it adjustable interest only for 10 years then amortized the last 20 with a balloon?

[Kwicherbichen]

I have been following this thread and I was not going to post anything, but I am changing my mind so I can put in my two cents. People have there opinions on what is best and that is great. What I feel compelled to say, which others have touched on, is that it is crazy to generalize a particular loan product as bad or good. As has been said before, everyones situation is different. Stat say that we Americans refinance our homes on average every 4 years. There are so many factors to choosing a loan that is right for you. Can you honestly say to yourself that once you get a 30 year mortgage you will NEVER refinance because your goal is to pay it off? For most the answer is no if they are being honest. Does this mean you should not get a 30 year fixed? I don't know. Again it would depend on your situation. For most homeowners, tapping your equity is the only answer for major repairs or maintenance on their homes. How many people can write a check for a new roof or remodel a kitchen or bath? From my experience, very few. This of course is a function of poor financial practices and income not keeping pace with the rising costs of EVERYTHING! No one can predict the future, but we can certainly make educated guesses. All these "crazy" loan programs have both benefited and hurt the real estate market. More people became homeowners then ever, and current homeowners saw amazing appreciation. This in turn created more demand and inflated prices to stupid levels. The market will correct itself and unfortunately some people will be hurt. By in lage, my feeling is that most will make it through and find a way. Remember, most of the short term fixed loans have annual and lifetime caps on the rates unlike most of the loans in the 80's! The lender has a vested interest in writing loans that people can pay. They are not in the business of owning homes. Also, increased equity is nothing more than increased leverage.
Sorry for the ramble....NUFF SAID!
Nice points. Deciding on a particular loan product can be confusing for most. Consider the one or two options that fit your situation and comfort level. There are tons of great options that weren't even available a few years back. Personally, I've really been diggin the pick-a-pay loan with 4 options built right into it.