Any mortgage folks in the house? I'm buying my first house!

No mortgage expert here, but having bought our first house and refinanced all within the past four years, here's what I can tell you.

If you can avoid it, don't pay PMI. You're basically throwing money away. This usually means putting 20% down, but it doesn't sound like you want to do that. There are some lenders who put together special deals for first time buyers, so they can put down less than 20% and still avoid paying PMI.

You might want to check out on-line lenders as well. We did our first mortgage through a traditional company (GMAC) but when we refinanced, we went through 80-10-10. We have friends who went through them as well, and none of us have had problems. We didn't pay any closing costs or points, and GMAC couldn't match the deal. Basically, they'll send a representative to take care of your closing in some rented office space, and soon after you close, they'll sell your mortgage to another company (ours was sold to Wells Fargo, which worked out well for us). I think all the paperwork stuff for getting approved is via fax and phone and possibly their local rep--my s.o. took care of figuring out the refinancing since he wasn't working at the time, so I don't recall exactly how it worked (except for having to sign our closing papers twice because they accidentally married us the first time--it's very easy to accidentally get married in Texas ). They also have special deals for first time buyers where you can put very little down.

Oh, and it's best to try to close at the end of the month so you don't have to pay interest for that month.

If anyone contradicts anything I said, you should probably believe them over me :mrgreen: .

 

Are you a member of a Credit Union? If so, check them out. If not, join one. They are one of your least expensive sources of financing.

ARM vs Fixed, 10, 15, 30 Years. Each has benefits and costs. Weigh your options, generate a spread sheet and compare the true costs and the breakeven points for each. Your intended lengh of stay and appreciation of the property will also influence your decision.

Also, don't forget the income tax benefit of the interest and property taxes deductions. At the end of the year you'll reduce your taxes which can make next year's payments a little easier.

Good luck, you'll be thankful you're a homeowner instead of a renter.

 

Mortgage info

[font=Arial:5e9ba84764]I wouldn't let expected interest rate increases discourage you from getting an ARM mortgage. You indicated that you expect to sell the townhouse in 3 to 5 years. So, if you get a 5-year ARM, you won't have any rate/payment increases to worry about.

I don't think there is any need for you to go to a mortgage broker. A mortgage broker can be very helpful if you have an unusual/difficult situation, such as bad credit or an unusual property. It sounds like you have a pretty normal situation (young, first-time home buyer, little cash, normal type of property). If your credit is good, a broker will just make your deal cost you more. The broker will get at least 1% of the purchase price. You don't need help from a broker. Stick with direct lenders. That is a bank or credit union or large mortgage banker. A broker has no money to lend. He/she just hooks you up with a lender for a fee. I'm a believer in credit unions, myself, if they have good mortgage services. Credit unions are owned by the members -- not by fat-cat investors. So, the credit union has your interests at heart.

As far as the down-payment issue is concerned, I think the money you have now would best be used to get you set up in your new house (furniture, window coverings, etc.) That will mean more to you in the long run than having a little more equity in the property when you go to sell because you made a down payment. You will probably make money on the house when you sell due to the increase in property values -- not because you paid down the loan. You'll pay down very little on the principal in 5 years, no matter what type of mortgage you get, unless you have extra money to add to your payments. If you can get a zero down 5-year ARM loan without PMI, and the closing costs are reasonable, that may be a good way to go in your situation.[/font:5e9ba84764]

 

hmm i just sold my house...

how much has housing gone up in your area in the past 5 years?

if its been over 30% or so, then i would go for a fixed rate mortgage. you need to look at the possible resale value of the house. so you need to determine if the house at 114k is what it would sell for if the interest rates were higher or not. you see with interest rates so low, more buyers are driving up house prices and since they are still affordable, they still sell.

but if interest rates go up then you are looking at the housing market tanking and your house not being worth as much.

but if housing has only seen moderate increases in your area in the past few years, then the prices can be attributed to normal inflation and houses will remain at the very least the same price.

there was an article that kinda details the same thing. but dont let them scare you. if you want the place and its a good deal now, then go for it. and yea its another of those New York Times article.

http://www.nytimes.com/2004/06/24/business...housing.html?th