buying first home, need advice

[NutBucket]

It's LA...yes it's a gamble but the fact is there is always a housing shortage here and values continue to go up (not exponentially, but you're far more likely to break even/turn a profit than lose money. Plus, the rental market has been hot for years)

 

[Vdubchaos]

my advice is to not take advice from Vdubchaos lol. he's clueless and stuck in the past.

in theory, if you make $10k/month take home and put 0% down on a house, and your mortgage is $1k/mo ... you can clearly afford it.

again, his advice in regards to "you must put 20% down or you can't afford the house" is stuck in the stoneage and too black/white.

his 20% argument is stupid too in saying that you will always have that money.

people who bought houses for $500k with $100k down and $400k in mortgage, that ended up having to sell them for $200k after the bubble burst were still upside down on their houses after.

And one can also save 20% in NO Time if they make that much money and are financially responsble with it.

There is a GOOD reason 20% down was a RULE before our government deregulated.........which lead to collapse.......

Remember, at the front line of all of that was DEREGULATION and enabling banks to do whatever. Without deregulation, none of the housing crisis would've ever happened.

Now that I think about it. We all know military is struggling to get people into service so they are targeting minorities....and we already know military is now filled with minorities as well.

So it would make sense they would give them subprime loans.....

And some people like you are actually convinced that it's ok too.

 

[purbeast0]

Right, but you still need an affiliation (VA, many Military credit unions or lenders, private credit union, FHA, etc) to back you. These are the few exceptions.
Regular Joe without an affiliation has few choices besides PMI.

Lender paid PMI is the same as PMI; it's just in the form of a higher interest rate.
The lenders pays it for you. It might be a better deal if you don't plan on keeping the loan a long time.

nope. they are just an amazing credit union. the interest rates were the same as any other banks at the time we bought our house.

true about having some kind of affiliation though. but it's still not a "special" loan. it's the traditional loan just with no pmi. it's not caked in anywhere.

 

[Vdubchaos]

nope. they are just an amazing credit union. the interest rates were the same as any other banks at the time we bought our house.

true about having some kind of affiliation though. but it's still not a "special" loan. it's the traditional loan just with no pmi. it's not caked in anywhere.

The funnies part is that you don't even know.

:biggrin:

It's special alright, as special as you.

 

[purbeast0]

And one can also save 20% in NO Time if they make that much money and are financially responsble with it.

There is a GOOD reason 20% down was a RULE before our government deregulated.........which lead to collapse.......

Remember, at the front line of all of that was DEREGULATION and enabling banks to do whatever. Without deregulation, none of the housing crisis would've ever happened.

Now that I think about it. We all know military is struggling to get people into service so they are targeting minorities....and we already know military is now filled with minorities as well.

So it would make sense they would give them subprime loans.....

And some people like you are actually convinced that it's ok too.

we all know you make up excuses as to why you live like the croods. if it makes you feel better about yourself, then more power to you.

you clearly don't have a clue what "being able to afford something" means.

 

[purbeast0]

The funnies part is that you don't even know.

:biggrin:

It's special alright, as special as you.

the "funnies" part is you are on my nuts hard on these forum.

the truth of the matter is you have absolutely no clue about any of it and don't know the terms of the loan that i have (or any other that navy fed gives out) yet you continue to talk as you do.

the only thing that is clear from your post history is that you don't make much money nor ever have, so you don't even have experience with a lot of disposable income, so you really don't know what it is like to be able to do things "outside the box" (such as buying a home with less than 20% down). you choose to live frugal as hell and penny pinch and talk yourself into feeling good about it, which is fine. but not everyone wants to live like a homeless person like you do.

 

[Vdubchaos]

the "funnies" part is you are on my nuts hard on these forum.

the truth of the matter is you have absolutely no clue about any of it and don't know the terms of the loan that i have (or any other that navy fed gives out) yet you continue to talk as you do.

the only thing that is clear from your post history is that you don't make much money nor ever have, so you don't even have experience with a lot of disposable income, so you really don't know what it is like to be able to do things "outside the box" (such as buying a home with less than 20% down). you choose to live frugal as hell and penny pinch and talk yourself into feeling good about it, which is fine. but not everyone wants to live like a homeless person like you do.

So you determined that I don't make much money and have 0 experience or disposable income from my posts.

You are genius

Exactly how you determined that getting into 80/20 like loans with "no PMI" and no 20% down payment was a great idea.....cause you know? It's from Navy/our government, so it' must be good. The people that deregulated and were the CORE of the sub prime melt down!

Or can it be that YOU weren't financially responsible to save for the 20%, weren't ready to buy a home and had no choice but to get into sub prime loan as the ONLY way to buy a home.

And that's probably the reason why you recommend such shitty advice as well.

we all know you make up excuses as to why you live like the croods. if it makes you feel better about yourself, then more power to you.

you clearly don't have a clue what "being able to afford something" means.

Tell me one excuse or what you feel is wrong in my post.

Not spew some BS and dismiss it with your general garbage.

 

[MagnusTheBrewer]

Well young grasshopper, now that all the financial sorts have got their fap on, I would remind you of the "Real" in real estate. The vast majority of problems, opportunities and, options come from what you can see, touch and, change in home ownership. You cant live in a financial instrument. If you have any questions regarding those, feel free to ask.

 

[Ban Bot]

purebeast isn't completely off regarding the Navy Federal. We also used a PMI free loan. We had looked at a PMI buy off at closing (such thing does exist) but as we ended up buying a foreclosed FNMA home we had the option for their old Homepath loans, some of which had no PMI for qualified buyers with 5% down. Unlike an FHA which has a crazy APR due to fees and CRAZY HIGH MIP the FHA was reasonable. The APR was slightly higher than a standard conventional but as it worked out our payment is over $100 less than the other conventional loans we qualified for (which were OK as my credit score is >800 and we had 5%). That said a conventional in ~ 10 years when PMI would have dropped when the equity in the home exceeded 20% we are paying about $50 more. Based on simple math we come out slightly ahead; time value of money we come out even better. $100/mo. for 10 years and ($50) for 20 years may cancel out but having that $100/mo. in my account now instead of the banks has value. To my knowledge FNMA no longer has this no PMI program as I don't think it was extended.

 

[Vdubchaos]

Well young grasshopper, now that all the financial sorts have got their fap on, I would remind you of the "Real" in real estate. The vast majority of problems, opportunities and, options come from what you can see, touch and, change in home ownership. You cant live in a financial instrument. If you have any questions regarding those, feel free to ask.

Well played sir, well played

 

[Pens1566]

You don't, but if you are saving (not spending), access is a none issue. The money is still there (in equity) and YOURS.

Access to that money will be available after you sell the house anyways. And if you save it up front, well, when you sell the house and you are upside down you are blowing those savings anyways. NO DIFFERENCE

Besides, you are already "financially responsible" and saving on regular basis anyways right? To replenish your savings is no big deal.

And let's be real here, any savings you might have will be blown to BS things anyways....furniture...unexpected repairs etc.

That's because you weren't ready to buy a house NOR were you financially responsible and have good financial habits to save for a proper down payment to BEGIN with.

Here we are, 7+ years after the housing economy crashed because people weren't financially responsible, didn't put down enough money and got into shitty loans.....and people are still recommending buying a house with shitty loans and no financial responsibility.

Expected. I didn't expect people to change.

Yes it's HARD to save 20%, yes it's hard to buy a house. IT'S SUPPOSE TO BE. Stop buying into an illusion that everything is easy.....you will have 1 million people selling you that illusion......but time comes where the reality kicks in, and all of those people have already disappeared with YOUR money. While you are ON YOUR OWN.

Lots of characters that really do nothing to prove that equity is the same as liquidity. You know, the original point you tried to make and no one agrees with you on.

And I really have no dog in the fight as I save plenty and have never purchased any of my real estate in a less than 20% down manner. Your statement was just flat out wrong.

 

[Aikouka]

I'm not out of my apartment lease until September, but I've been doing some light looking. One of the biggest things for me is that I wish more places had floor plans available. Floor plans are a great way for me to be able to look at a room and know whether my stuff will work (e.g. entertainment center + home theater in a living room). I do sometimes get room sizes, but those are largely worthless, because they don't provide any information on things that break up a room (e.g. doors, windows, nooks, or fireplaces). For example, my living room is something like 11x20, which sounds great until you know that both of the long walls are nearly unusable due to a fireplace and sliding glass door on one and a "dining room" opening and a hallway on the other.

In regards to PMI, Alabama actually had an interesting program going on where they were paying for the PMI in a lump sum. Unfortunately, I didn't know about this until after it ended last month. I probably would've bought a house last year had I known about it as I was focusing more on paying off some debt rather than saving for the usual 20% down payment.

 

[Blanky]

I got my last house back when 80/20 loans still existed as a way to cheat PMI. My 20% is a HELOC and it is actually set at under the prime rate. It is in fact hilarious how little I pay to keep it current, which is why I have yet to bother putting a penny into its principal. At the 15 year mark they will start requiring I pay it down

However since I still don't have 20% equity in the house from primary loan and house appreciation I am stuck in the house if I wanted to move and not pay PMI. PMI is bullshiat.

As purbeast points out buying a house without 20% down does not automatically point to irresponsibility. There are many scenarios in which a person has just achieved a reliably source of income but not yet saved substantial money; e.g. New doctor or similar.

 

[clok1966]

My advice, keep renting (go cheap) and save till you can just buy. I'm done (own house) bought my house at 48, yea it was a long haul and yes, money wasted, but the houses i looked at in my 20's are not what I want now. And again yes, I could have sold and changed houses later. BUT, my reasoning, all my friends who bought in the 20's all still owe, some have changed etc.. all are living for a house not living.. Not a single one owns the house yet, some have refinanced and got even deeper. I must admit my housing market it going to be much less then yours (and my wages too). If i was making what you do i would have done it in 10 years, not 30.. sad thing is. I won my house and pay way more now then I did when I rented.. yes i own it.. but its quite a change.

 

[Vdubchaos]

My advice, keep renting (go cheap) and save till you can just buy. I'm done (own house) bought my house at 48, yea it was a long haul and yes, money wasted, but the houses i looked at in my 20's are not what I want now. And again yes, I could have sold and changed houses later. BUT, my reasoning, all my friends who bought in the 20's all still owe, some have changed etc.. all are living for a house not living.. Not a single one owns the house yet, some have refinanced and got even deeper. I must admit my housing market it going to be much less then yours (and my wages too). If i was making what you do i would have done it in 10 years, not 30.. sad thing is. I won my house and pay way more now then I did when I rented.. yes i own it.. but its quite a change.

This is good advice IMO.

While in the 20s, you have no idea about what you really want in life (you think you do, but you don't).

Expect your priorities and things you want to change completely.

Not a good age to be buying a house. Also there is the whole "not married yet" and if you do the special someone.......what's the legal deal if they move in.

If you are not looking for LTR then it's a mute point, but regardless, in the 30s......you WILL know yourself much better.

 

[slag]

It's pretty tough to land a loan without 20% down. The days of drug dealer loans are gone, you have to prove income and they generally want you to have some skin in the game.
80/20 stated income negative amortization loans were a god send for people without the ability to repay them, but the entire edifice was built on insane appreciation and a level of myopic ignorance that we may never see again.
Some folks might still be able to get a zero down loan, but it's certainly not the norm anymore.

We had no problems with a few lenders offering what we wanted with 5-10% down.

 

[NutBucket]

Agreed. The bad loans were issued to people who simply couldn't afford them (interest only, etc). Putting down less than 20% has nothing to do with being able to afford a loan.

 

[Vdubchaos]

Agreed. The bad loans were issued to people who simply couldn't afford them (interest only, etc). Putting down less than 20% has nothing to do with being able to afford a loan.

It does.

Being able to save 20% = financial discipline and good financial habits.

It has more to do with RESPONSIBILITY than it does with "begin able to afford it". Most financial experts with no conflict of interest (read: not banks/lenders or Real Estate people) will tell you that.

20% puts you in a low risk position. If you go to sell the house, you lose about 10%, which leaves you with plenty of room.

What is PMI? Read exactly what it stands for. It's insurance to protect the lender from you defaulting on the loan! It's set to 20%, that's the # that our financial institutions know and go by. Do you know why? Because 20% and under = high risk, risk which is ON THE PERSON not the bank. Banks are willing to let go of this insurance after you have 20% equity. What does that tell you? Think about it.

If it wasn't risky, there wouldn't be no PMI!

Unfortunately we live in the society of instant gratification and everyone "deserves" a house NOW. And clearly no one wanted to do the work it takes to save up proper for down payment, have proper emergency fund etc.

Truth is, not everyone will have a house and it takes a LOT of hard work to obtain one.

Skip above and the risk is ON YOU (not the bank or other institutions).

If you are not smart enough to understand that and take that risk, be my guest. Even today, after a complete housing crash (DUE TO PEOPLE NOT BEING ABLE TO AFFORD HOUSES AND PUT DOWN PROPER DOWN PAYMENT) there is plenty of lenders that will still put the risk on you. Remember, regulations have not been altered to help the consumer. Banks are already working hard and will come up with new ways.

20% or don't do it is what I recommend.

Just because you CAN, doesn't mean you SHOULD

We had no problems with a few lenders offering what we wanted with 5-10% down.

Of course not. They are not taking a risk.......YOU ARE

Nothing has changed in the financial industry. Housing crash will repeat itself as CLEARLY people have not learned anything and are doing more of the same.

If you are financially responsible and have good financial habits, you will have no problem saving up another 10% for proper down payment.

But we all know you want the house NOW. Waiting a year or 2 is just too unbearable right?

 

[Vdubchaos]

Agreed. The bad loans were issued to people who simply couldn't afford them (interest only, etc). Putting down less than 20% has nothing to do with being able to afford a loan.

Before 80s/90s deregulation, if you were to walk into a bank and not have 20%, they would tell you......wait for it......"you are not ready, cannot afford a house right now"

 

[NutBucket]

Maybe so, but the point is as long as the income is there its the borrower's choice as to whether they want to go the PMI route.

Perhaps that's just my opinion since we put down 10% on our home

 

[Aikouka]

20% puts the bank in a low risk position.

I think that's far more accurate. You even go on to state that PMI is for the bank, yet you think that a 20% down payment is great for the owner. You then stated that if something happened, they'd be out 10% if they made a 20% down payment. So... if what you're saying is true, why wouldn't I just make a 10% down payment instead, which covers all potential losses?

That's right... because the 20% figure is for the lender. To them, with a 20% equity stake, you're less likely to default and run as you'd be out that amount.

 

[slightlyhuman]

Closing on a house this week.

Went the FHA route even though we qualified for conventional. Got the house for 184,500 with the seller paying $5k in closing cost. Appraised for 188k. We're paying $6500 down. 30 years @ 3.85(barely missed 3.75).

I thought about going conventional(with a higher interest rate) for the possibility of 18-20% LTV and having PMI dropped but FHA looks at student loans a little different than conventional, and I felt that was the better option for us right now.

We didn't pay 20% down and I feel pretty happy with everything thus far.

 

[Uppsala9496]

Congratulations.
Surprised to hear you went FHA with the PMI. Did you run the numbers to see what the cost impact will be after about 5 years?
Nice with the low down payment. I put 40% down and paid my own closing costs. Did get the loan at 3.75% and plan on paying the whole thing off in 15 years instead of the agreed 30.

My closing wasn't nearly as painful as I thought it was going to be. Was an extremely smooth process and my lawyer explained everything in a clear concise manner. Only cost me $400 for him.

 

[cbrsurfr]

I put 5% down and did pre-paid PMI. ~$3600 upfront versus paying $100/month for 5 years. Asked for higher closing costs from the seller/bank which more than covered the PMI. Net to me was $0. Got the same rate as a coworker who put 20% down the week before me. Actually I had the better rate and told him about it and he re-locked at my rate just before closing.

You could argue that I could have gotten the house for less and asked for lower closing costs, but being a short sale the bank had a price already approved. It was easier and faster to get more closing costs than to try and get the bank to come down. I closed in just under 5 weeks.

 

[slightlyhuman]

Congratulations.
Surprised to hear you went FHA with the PMI. Did you run the numbers to see what the cost impact will be after about 5 years?
Nice with the low down payment. I put 40% down and paid my own closing costs. Did get the loan at 3.75% and plan on paying the whole thing off in 15 years instead of the agreed 30.

My closing wasn't nearly as painful as I thought it was going to be. Was an extremely smooth process and my lawyer explained everything in a clear concise manner. Only cost me $400 for him.

I didn't run the numbers and I probably should have. We have 10k saved up right now and wanted to keep a few thousand in the bank(getting married June 6th) for emergency like things.

Our DTI ratio is right at 27%, despite her owing 100k+ in loans. The conventional loan would have put us at a higher DTI ratio and a bigger down payment.

I sure would have liked to get 3.25% like a buddy of mine did a year or two ago but I'll settle for 3.85%, we LOVE the house. We're going to beat the 30 day mark by quite a bit, so that makes it even better.