Ask Anything About Mortgages - Page 15

SossMan · #**141** 02-02-2007, 07:25 PM

again...so what...one has nothing to do with the other.

tell me this...where would his money be better spent?

Bicycles_Biatch · #**142** 02-02-2007, 07:56 PM

[ QUOTE ]
again...so what...one has nothing to do with the other.

tell me this...where would his money be better spent?

[/ QUOTE ]

conservative mutual fund earning 7%....

paying down credit card debt costing 21%....

Paying down a car payment that is costing 6-7%....

socking away money for home improvements / conditions needed to close on the sale of this house (ING direct is at 5% on liquid money I think)...

Pretty much doing anything but paying down a 7% mortgage that is probably is ONE tax write off in life.

Again, read the scenario, if he said "this is the house I want to live, retire, and die in...." then go ahead, do everything you can to pay it off...

If it's gone in 2-5 years, the money is best spent / saved elsewhere.

sdsuchris23 · #**143** 02-02-2007, 08:38 PM

Hello I'm looking to buy my first home within the next year. I live in San Diego and was wondering what type of advice you have for someone that is looking to make their first purchase. A little about me I've been out of college for about 3 years (currently 24 live with my gf) and currently make 55K. I currently have about 40k saved up and will be receiving some assistance from my grandfather for about 30k. I've been looking at houses between 400k - 500k and have no clue as to how much I need to put down or what to expect for closing costs. Any info you can provide me on first time buyer programs or any useful info for a new buyer would be greatly appreciated.

Thanks,
Chris

d10 · #**144** 02-03-2007, 05:30 AM

Thanks for the thread BB, it's been very informative.

I'm in the process of buying my first house. I know nothing about mortgages so I went to one of my best friends who is a loan officer for Wells Fargo and I'm basically trusting him to not screw me. He's a very honest person but I've heard stories of people trusting friends for mortgages who got screwed out of many thousands of dollars. What kind of things should I be looking for to make sure this doesn't happen?

FWIW, he recommended a 30 year fixed loan at 6.5%, VA secured, $0 down. The mortgage is for ~$120k. My credit score is somewhere around 700, I have a very secure job at about $50k/yr and about $20k in cash assets. He mentioned something about a loan origination fee and wanted to know when I planned on selling, I don't know what that is or whatever came of that conversation, but it sounded like he was going to do whatever would be best for me assuming I would live in the house for 3+ years.

Messiahkid · #**145** 02-03-2007, 10:19 AM

[ QUOTE ]
again...so what...one has nothing to do with the other.

tell me this...where would his money be better spent?

[/ QUOTE ]

Soss-

I have 0 Credit card debt, no car loan/payment, and no other debt of any kind besides this mortgage.

I have a 795 score from 2 of the 3 credit bureau's.

If I plan on leaving in 2 years, everyone else I have talked to has also said there is no reason to pay down any extra principal.

I think the money would be better spent pretty much anywhere else in a 'savings vehicle' (ie high yield savings, roth ira, vanguard funds, etc)

You seem pretty adament, can you give me your reasoning?

scotchnrocks · #**146** 02-03-2007, 11:46 AM

[ QUOTE ]
I've heard stories of people trusting friends for mortgages who got screwed out of many thousands of dollars. What kind of things should I be looking for to make sure this doesn't happen?

He mentioned something about a loan origination fee

[/ QUOTE ]

I just bought a new place a few months ago and used my old roommate who is a loan officer for advice.

My recommendation would be to get a good faith estimate from your friend. Given the property value, if your total closing costs with prepaid interest and property taxes, escrow, loan origination, etc. is greater than $3500-4000 you may be getting screwed and should at least get other estimates.

SossMan · #**147** 02-04-2007, 03:51 PM

I'm not saying that you have to pay down principal, but there are a few compelling reasons to do so (assuming you have adequate cash flow and are simply looking for the best bottom line...if cash flow is an issue, then having the interest only option is viable)

There is also a much larger thread about paying down principal from a few weeks ago in this forum...a quick search should be able to find good info.

The gist of it is this:

It's a gauranteed return on investment equal to your interest rate with zero risk. The tax consequenses of paying down principal vs. any other taxable investment (mutual fund, etc..) negate each other.

Since it's absolutely risk free and gauranteed, the proper investment comparison would be something like an FDIC insured CD or high yield savings account. If you have a mortgage at 6.25%, you would have to find a CD paying 6.25% or better for it to be a better investment than paying down principal. Again, this is all cash flow independent.

Investing in a mutual fund that has a historical 10% RoR is comparing apples and oranges since a MF obviously carries with it risk.

All I'm saying is that there are fewer safe investments paying this high of a yield.

If you have a combo loan (typical if you have less than 20% down) at a higher rate, then it's really not close. Of course, if you have a higher risk tolerance over the next few years, then go ahead and invest in a mutual fund/ index, whatever.

An additional benefit is that you can typically get a better rate on your mortgage by anywhere from .125% to .25% by leaving off the hit for I/O.

SossMan · #**148** 02-04-2007, 03:58 PM

[ QUOTE ]
[ QUOTE ]
again...so what...one has nothing to do with the other.

tell me this...where would his money be better spent?

[/ QUOTE ]

conservative mutual fund earning 7%... APPLES AND ORANGES...A MUTUAL FUND ISN'T A NO-RISK PROPOSITION

paying down credit card debt costing 21%.... OBVIOUSLY, BUT HE DIDN'T SAY THAT HE HAD ANY OF THIS HIGH INTEREST DEBT...OF COURSE YOU WOULD PAY DOWN THE HIGHER RATE DEBT BEFORE THE LOWER 

Paying down a car payment that is costing 6-7%.... SEE ABOVE 

socking away money for home improvements / conditions needed to close on the sale of this house (ING direct is at 5% on liquid money I think)... SEE MY POST BELOW, BUT THIS IS ASSUMING CASH FLOW/RESERVES ARE NOT AN ISSUE...TRUST ME, I'M NOT AGAINST I/O LOANS, I JUST DON'T LIKE PEOPLE WHO SELL NOTHING ELSE REGARDLESS OF THE SITUATION 

Pretty much doing anything but paying down a 7% mortgage that is probably is ONE tax write off in life. WELL, OBVIOUSLY NOT ANYTHING. YOU KNOW YOU PAY TAXES ON MUTUAL FUNDS, RIGHT?? 

Again, read the scenario, if he said "this is the house I want to live, retire, and die in...." then go ahead, do everything you can to pay it off... IT HAS NOTHING TO DO WITH THE AMOUNT OF TIME HE'S GOING TO BE IN THE HOUSE IF YOU ARE LOOKING AT IT FROM AN INVESTMENT PERSPECTIVE. 

If it's gone in 2-5 years, the money is best spent / saved elsewhere. HOW DO YOU KNOW? YOU KNOW NOTHING ABOUT HIS SITUATION EXCEPT THAT HE'S ONLY GOING TO HAVE THE HOUSE FOR 2-5 YEARS...APPRECIATION HAS ZERO TO DO WITH THE DECISION TO PAY DOWN PRINCIPAL OR NOT. 

[/ QUOTE ]

Bicycles_Biatch · #**149** 02-05-2007, 12:50 PM

[ QUOTE ]
Thanks for the thread BB, it's been very informative.

I'm in the process of buying my first house. I know nothing about mortgages so I went to one of my best friends who is a loan officer for Wells Fargo and I'm basically trusting him to not screw me. He's a very honest person but I've heard stories of people trusting friends for mortgages who got screwed out of many thousands of dollars. What kind of things should I be looking for to make sure this doesn't happen?

FWIW, he recommended a 30 year fixed loan at 6.5%, VA secured, $0 down. The mortgage is for ~$120k. My credit score is somewhere around 700, I have a very secure job at about $50k/yr and about $20k in cash assets. He mentioned something about a loan origination fee and wanted to know when I planned on selling, I don't know what that is or whatever came of that conversation, but it sounded like he was going to do whatever would be best for me assuming I would live in the house for 3+ years.

[/ QUOTE ]

At the current rates, you should be getting 6.50%, 30 year fixed for NO origination fee (i.e. points).

If you are getting 6.50%, and your "estimated Hud-1" shows you paying "Points"... then your buddy is padding his pockets a bit.

An estimated HUD-1 is the document you can request from escrow prior to signing documents that outlines all your cost.

PM me if you want to fax a copy of the Hud-1 to me and I can review it.

Bicycles_Biatch · #**150** 02-05-2007, 12:53 PM

[ QUOTE ]
Hello I'm looking to buy my first home within the next year. I live in San Diego and was wondering what type of advice you have for someone that is looking to make their first purchase. A little about me I've been out of college for about 3 years (currently 24 live with my gf) and currently make 55K. I currently have about 40k saved up and will be receiving some assistance from my grandfather for about 30k. I've been looking at houses between 400k - 500k and have no clue as to how much I need to put down or what to expect for closing costs. Any info you can provide me on first time buyer programs or any useful info for a new buyer would be greatly appreciated.

Thanks,
Chris

[/ QUOTE ]

I would recomment you use what you can to put 10% down... $50-55K in this case. The rest of the money you have in savings or from your GF you should keep in a seperate "house fund".

Owning a home is expensive. The stress of deferred maintenence, taxes, supplemental taxes, and a mortgage payment can be pretty over-whelming.

Have a $20K nest egg just dedicated to housing expenses (and I'm not talking about a new flat screen TV), will keep you sane over the first couple years of home ownership.

PM me if you want to talk about specific rates and programs. However, keep in mind that rates change daily, so setting up a plan today, for a purchase 6-12 months down the road, doesn't really mean much.