Is 100% financing a good idea?

[FelixDeCat]

Originally posted by: SampSon

Its ok, we all have bad credit sometimes.

My credit was pristine at the time of that transaction. That was also for my first house. FHA rates are a good 1.5% lower than conventional, at least from the clients I deal with and the credit union my company is part of (I work in the real estate market).

Even with the decent cash I make 20% down was near impossible to do in a timely fashion. Also the interest I would pay on the secondary loan of the 20% purchase price would still be over the quarter of a point interest I paid for the first 5 years of my FHA loan.

The vast majority of first home buyers cannot afford to do a std conv 80/20 loan. 100% financing and FHA financing is very common and typically a very good deal for first time home buyers.

And thats it, first time home buyers tend to have unestablished credit, insuff income, etc (although not necesarrily the rule). Ive worked in the servicing side for 16 years on those 'evil' arm and balloon loans (muhahahahahahahaha). :evil:

You want to know what real evil is? A $1,000,000.00 12MAT "payment option" monthly arm starting off at 1%, negatively amortizing after 30 days at 6.5% with a 20% prepayment penaltly. Including deferred interest, you could effectively be paying over 10% just making your required mo payments! :shocked:

Of all the things I do, I dislike explaining those the most. They usally wind up being emotionally draining 30 min phone calls that take expertise to hand hold a novice borrower in rate shock. Once they realize they must pay more more than the $1000 a month (try $6,500 mo) just to avoid neg am, things get pretty ugly. Right now they are servicing released to privates but b/c of various reasons weve been stuck with a couple. They want to start keeping them in house once FHMLC goes through with its plan to securitize them. Where else are you going to earn mega $ on A paper? Im working to get them to not do this as it puts a bad taste in customers mouths once they go through this. Better to treat them right to begin with and keep their business for life than make a quick buck IMO. Not to mention they will make my life pretty stressful (again!) :laugh:

 

[SampSon]

Originally posted by: FelixDeKat

Originally posted by: SampSon

Its ok, we all have bad credit sometimes.

My credit was pristine at the time of that transaction. That was also for my first house. FHA rates are a good 1.5% lower than conventional, at least from the clients I deal with and the credit union my company is part of (I work in the real estate market).

Even with the decent cash I make 20% down was near impossible to do in a timely fashion. Also the interest I would pay on the secondary loan of the 20% purchase price would still be over the quarter of a point interest I paid for the first 5 years of my FHA loan.

The vast majority of first home buyers cannot afford to do a std conv 80/20 loan. 100% financing and FHA financing is very common and typically a very good deal for first time home buyers.

And thats it, first time home buyers tend to have unestablished credit, insuff income, etc (although not necesarrily the rule). Ive worked in the servicing side for 16 years on those 'evil' arm and balloon loans (muhahahahahahahaha). :evil:

You want to know what real evil is? A $1,000,000.00 12MAT "payment option" monthly arm starting off at 1%, negatively amortizing after 30 days at 6.5% with a 20% prepayment penaltly. Including deferred interest, you could effectively be paying over 10% just making your required mo payments! :shocked:

Of all the things I do, I dislike explaining those the most. They usally wind up being emotionally draining 30 min phone calls that take expertise to hand hold a novice borrower in rate shock. Once they realize they must pay more more than the $1000 a month (try $6,500 mo) just to avoid neg am, things get pretty ugly. Right now they are servicing released to privates but b/c of various reasons weve been stuck with a couple. They want to start keeping them in house once FHMLC goes through with its plan to securitize them. Where else are you going to earn mega $ on A paper? Im working to get them to not do this as it puts a bad taste in customers mouths once they go through this. Better to treat them right to begin with and keep their business for life than make a quick buck IMO. Not to mention they will make my life pretty stressful (again!) :laugh:

I'm guessing you work in an area where real estate values are generally substatially higher than where I am. So FHA isn't an option in thoes areas, or the loan amounts are so close to the FHA ceiling of 417K that other options are more appealing due to heavily appreciating markets and a shortage in housing. Here in my area FHA financing is very popular and helps plenty of people get into a home.

I had plenty of established credit, a high income for my age bracket and friends in the mortgage industry. I really wasn't willing to dump all my cash holdings into a downpayment at that point. It worked out fine for that house and then the rental properties after that fell like dominoes.

I know a lot of the LOs I speak to don't like FHA as much because they don't make as much commission, but hey, that's the game. Gotta cater to the consumer.

 

[ultimatebob]

You have the option of paying for the PMI upfront on most mortgages, which is usually 1% of the total amount being financed. That might sound like a lot, but it's often cheaper than the extra interest payments required for a second mortgage or HELOC for the remaining 20% in the long run.

It's something else to look into, anyway.

 

[FelixDeCat]

Originally posted by: SampSon

Originally posted by: FelixDeKat

Originally posted by: SampSon

Its ok, we all have bad credit sometimes.

My credit was pristine at the time of that transaction. That was also for my first house. FHA rates are a good 1.5% lower than conventional, at least from the clients I deal with and the credit union my company is part of (I work in the real estate market).

Even with the decent cash I make 20% down was near impossible to do in a timely fashion. Also the interest I would pay on the secondary loan of the 20% purchase price would still be over the quarter of a point interest I paid for the first 5 years of my FHA loan.

The vast majority of first home buyers cannot afford to do a std conv 80/20 loan. 100% financing and FHA financing is very common and typically a very good deal for first time home buyers.

And thats it, first time home buyers tend to have unestablished credit, insuff income, etc (although not necesarrily the rule). Ive worked in the servicing side for 16 years on those 'evil' arm and balloon loans (muhahahahahahahaha). :evil:

You want to know what real evil is? A $1,000,000.00 12MAT "payment option" monthly arm starting off at 1%, negatively amortizing after 30 days at 6.5% with a 20% prepayment penaltly. Including deferred interest, you could effectively be paying over 10% just making your required mo payments! :shocked:

Of all the things I do, I dislike explaining those the most. They usally wind up being emotionally draining 30 min phone calls that take expertise to hand hold a novice borrower in rate shock. Once they realize they must pay more more than the $1000 a month (try $6,500 mo) just to avoid neg am, things get pretty ugly. Right now they are servicing released to privates but b/c of various reasons weve been stuck with a couple. They want to start keeping them in house once FHMLC goes through with its plan to securitize them. Where else are you going to earn mega $ on A paper? Im working to get them to not do this as it puts a bad taste in customers mouths once they go through this. Better to treat them right to begin with and keep their business for life than make a quick buck IMO. Not to mention they will make my life pretty stressful (again!) :laugh:

I'm guessing you work in an area where real estate values are generally substatially higher than where I am. So FHA isn't an option in thoes areas, or the loan amounts are so close to the FHA ceiling of 417K that other options are more appealing due to heavily appreciating markets and a shortage in housing. Here in my area FHA financing is very popular and helps plenty of people get into a home.

I had plenty of established credit, a high income for my age bracket and friends in the mortgage industry. I really wasn't willing to dump all my cash holdings into a downpayment at that point. It worked out fine for that house and then the rental properties after that fell like dominoes.

I know a lot of the LOs I speak to don't like FHA as much because they don't make as much commission, but hey, that's the game. Gotta cater to the consumer.

You need a new job. You dont know what your talking about and it shows.