buying a house need advice

[curtains]

So Im buying a house. I have some money in Vanguard. I could easily pay 5-10% of the downpayment however to pay 20%+ I'd need to take money out of Vanguard. It seems like it'd save me about 1% in interest.

Is it smarter to put as little down as possible and leave it in Vanguard or not? Forgive me if this is a really dumb question [img]/images/graemlins/smile.gif[/img]

[curtains]

Ok I know I gave very little detail, don't want to discuss lots of financial details on the forum......I will figure it out though [img]/images/graemlins/smile.gif[/img]

[meditate89]

I ran an example through real quick... 30 yr fixed mortgage. House price is $250,000. Example will work for however much your house costs as long as proportions are equal.

SCENARIO 1
Put down 50k
Mortgage for 200k @ 6%
=$1200 / month
=14400 / annum
-you may get cheaper rates on certain types of insurance by having a larger down payment.

SCENARIO 2
Put down %12,500
Mortgage for $237500 at 7$
=1580 / month
=18960 / annum

Investment income on 37500 capital (AFTER TAXES!!!)
= 3750 @ 10%
=4687.5 @ 12.5%
=5626 @ 15%

Net
15210 (@10)
14272.5 (@12.5)
13335 (@15)
- larger mortgage payment of course means a larger tax write off

In conclusion: If you think you can return 12.5% after taxes in the stock market, it would make sense to pay the higher rate. This probably isn't a realistic goal for most people using Vanguard's funds. (Not that there's anything wrong w/ them. I just expected better after reading 100s of your STT posts. I know you could beat the market if you wanted put to some time/effort into it ). Usually I recommend putting less money down as long as you're not going to waste it on coke and hookers... after all 6 or 7% is a bargain rate... but if putting more down lowers the rate on the entire loan, it is clearly worth doing so in this case.

On that note, it seems like a large change in rate between 5% vs 20% down. You have same the credit score, same net worth, etc. Is that extra 10-15% down really going to get you $ at 1% lower? Because if the difference is only .5%, it's probably worth putting down as little as possible. But if it's really 1% there's no way you can't put 20% down.

I've helped a few people to purchase rental properties before, and it's pretty standard to get
80% of the property at say 6% and then another 10% of it at 7%... the second loan is slightly more risky because if the bank only nets 80% of the purchase price when they repossess the house, the second loan may be only partially repaid, or not at all in some cases... hence the higher interest rate.

Without knowing more about your situation, I would strongly recommend speaking with at least 3-5 different loan officer, look for one who is upfront about their fees, looking out for your best interests / understands your situation so they can get you the post possible loan time.

If you end up putting the additional money down, I would shop around for a HELOC and tap whatever equity you can assuming a good rate + suitable investment are available. Make sure you read the mortgage terms carefully to see if there are any provisions against this.

[curtains]

Well its not just 1% but its also the fact that I wouldn't have to pay mortgage insurance. Im looking into INGDirect's loans, they seem very good on first glance. Realize that I'm a professional poker player though and somewhat worried that lack of a regular job will make it difficult. One person suggested a no doc loan, but it seems the rates are pretty bad for those?

[meditate89]

In general, poker players will have to pay more for no doc loans b/c it's the only viable option for them. If you have a few years of tax returns, then you might not need no-doc. Again, a good broker could provide more info on this.

I just logged into ING (for the first time in months) and I'm only seeing ARMs... no 30 year fixed. I would strongly suggest locking in a fixed rate, since the payments on your house could increase substantially with an ARM. If interest rates were to go from 6 to 8% for example, you could be left with a substantially larger monthly payment. (IE going from 1350 --> 1650 a month or so on 225k, if 6-->8%)

At the very least, make sure you weigh the costs and benefits of an ARM vs 30 year fixed. The fees at ING are certainly straightforward/ cheap, so they might be a viable choice for a 30 year fixed if they're willing to offer you one.

Banks would much rather sell you an ARM, because when they lend you money @ 6% fixed for 30 years, they're taking a risk/ gamble that they wouldn't be able to lend it out for 7% next year. The ARM is a hedge for the bank against interest rate fluctuation. But because rates are already so low, you should just lock the rate in. After all, if interest rates were to drop substantially, you could always refinance your mortgage.

I'd just like to reiterate that you should be very careful w/ what you get yourself into... make sure you understand the terms 100% before you make a commitment, and have a good friend / trusted adviser / lawyer or someone look everything over. It will be well worthwhile to talk to some people who have experience in real estate- just make sure they have your best interests in mind.

[prohornblower]

Since you can't really show a "legitimate paycheck", work with a lender who will offer manual underwriting.

I don't know much about it but I hear they will take a look at your situation from a unique standpoint while determining your rate. And not just plugging numbers in.

This may be where "no doc" loans come from though.

[curtains]

Looked into IngDirect, I think its going to be alright...They seem to have very good rates and are fine with just seeing my Tax Returns.

Anyone have any details about IngDirect mortgage plans?

[Strickly Bidness]

how could a low maintainence guy like curtains be buying a house ??? r u sure u wanna grind it out for the man like that bro?

[curtains]

[ QUOTE ]
how could a low maintainence guy like curtains be buying a house ??? r u sure u wanna grind it out for the man like that bro?

[/ QUOTE ]

whats that mean? I will be paying like 40% less per month in rent or mortgage or whatever its called.

[Strickly Bidness]

u just dont seem like the kind of guy that likes to be tied down to something like a mortgage. i see u as a free spirited type. perhaps a bad read?