Just had the easiest home buying experience

[repoman0]

in one of the hottest markets in the country. My girlfriend and I have been looking at bigger apartments and could not mesh our two lists of wants (me: dirt cheap, it's just an apartment. her: "nice," "updated," etc.). We went over to a friend's place on Saturday, who had just bought a condo/half of an old house. We loved his place, and by Sunday we were going to open houses all over the town we've been looking at. At the last open house, we met a very nice realtor team, who referred us to a mortgage guy, who preapproved us for some absurd amount at a very low interest rate with only 5% down ... by today we put in an offer and it was accepted a couple hours ago.

I can't believe it! The stories I have heard about this market completely put me off it for a long time and kept me in crappy apartments with rats in the ceiling. Year long searches, houses and condos with 10+ offers that are easily beat by all cash, no inspection or appraisal contingency rich buyers, etc. Our closing is in just over a month!

 

[rcpratt]

Congrats! Definitely a seller's market right now. It's not quite over yet, though. Good luck with the inspection and appraisal.

What rate did you get with only 5% down? Plus PMI, I assume?

 

[Red Squirrel]

Congrats! Always a nice feeling to own. It's like owning a computer vs leasing one. Now you can mod it and do what you want.

Try to make higher payments than minimum, you get used to it and then it will get paid off faster. At the rate I'm paying mine will be paid off in 10 years.

 

[s0me0nesmind1]

Enjoy your FHA loan paying MIP (Mortgage Insurance)

 

[nk215]

Congrats. I had very easy time with our first 2 houses 15 and 9 years ago. This time around, I don't have much luck. Our last offer "all cash, at asking price, no string attached" got turned down.

Enjoy your new place.

 

[repoman0]

Thanks all! Except for you:

Enjoy your FHA loan paying MIP (Mortgage Insurance)

It's not an FHA loan, it's a 3.875% private loan. If I remember correctly, you're a finance guy, so you should be able to do simple math, supposedly ... though not quite true of finance guys in general in my experience. (Evaluating a loan is solving a differential equation, they usually only know how to use the solution with no idea how to get there). I'll keep it simple though.

Let's say home price is $100000 with a loan amount of $95000 at 3.875%. PMI on this portion of the particular loan is $27.71 per month. Total interest paid on year one is roughly $3840, and total interest+PMI is roughly $4125. So paying PMI brings our effective interest rate from 3.875% to about 4.15%, which I could not give less of a shit about. That effective rate increases slightly to about 4.25% as our LTV decreases to 80%, at which point it's instantly back to 3.875%. So basically my girlfriend and I get a nice place to live and later rent out in one of the most expensive and rapidly increasing in value markets in the country for a temporary 0.3 to 0.4 percent effective rate increase in a (likely) rising rate environment, and we get to do it at 27 and 24 without saving up well over $100k for a down payment, AND we pay the same monthly as our previous combined rents (though we have been splitting my rent for a little while). So, despite the fact that yours was the only post less than genuine, we will greatly enjoy our loan and new place, PMI or not! Thanks!

Congrats. I had very easy time with our first 2 houses 15 and 9 years ago. This time around, I don't have much luck. Our last offer "all cash, at asking price, no string attached" got turned down.

Enjoy your new place.

If it was anything like around here, the problem was it was at asking price. The usual is the house goes on the market Thursday, open houses Friday, offers due Monday evening or Tuesday at noon. Typically 3-8 offers, at least one significantly over, possibly all cash. We got lucky and only had to pay a little over.

 

[skull]

Thanks all! Except for you:



It's not an FHA loan, it's a 3.875% private loan. If I remember correctly, you're a finance guy, so you should be able to do simple math, supposedly ... though not quite true of finance guys in general in my experience. (Evaluating a loan is solving a differential equation, they usually only know how to use the solution with no idea how to get there). I'll keep it simple though.

Let's say home price is $100000 with a loan amount of $95000 at 3.875%. PMI on this portion of the particular loan is $27.71 per month. Total interest paid on year one is roughly $3840, and total interest+PMI is roughly $4125. So paying PMI brings our effective interest rate from 3.875% to about 4.15%, which I could not give less of a shit about. That effective rate increases slightly to about 4.25% as our LTV decreases to 80%, at which point it's instantly back to 3.875%. So basically my girlfriend and I get a nice place to live and later rent out in one of the most expensive and rapidly increasing in value markets in the country for a temporary 0.3 to 0.4 percent effective rate increase in a (likely) rising rate environment, and we get to do it at 27 and 24 without saving up well over $100k for a down payment, AND we pay the same monthly as our previous combined rents (though we have been splitting my rent for a little while). So, despite the fact that yours was the only post less than genuine, we will greatly enjoy our loan and new place, PMI or not! Thanks!



If it was anything like around here, the problem was it was at asking price. The usual is the house goes on the market Thursday, open houses Friday, offers due Monday evening or Tuesday at noon. Typically 3-8 offers, at least one significantly over, possibly all cash. We got lucky and only had to pay a little over.

Did you make sure there is no up front mortgage insurance payment? Hes ragging on FHA rightfully so. With FHA You pay something ridiculous like 1.5% upfront added to the loan and 1% every year for the life of the loan unless you refi starting the amortization schedule over again and adding closing costs. FHA loans are real wealth killers.

 

[repoman0]

Did you make sure there is no up front mortgage insurance payment? Hes ragging on FHA rightfully so. With FHA You pay something ridiculous like 1.5% upfront added to the loan and 1% every year for the life of the loan unless you refi starting the amortization schedule over again and adding closing costs. FHA loans are real wealth killers.

It's not an FHA loan. It's a private loan, and they gave us the same 3.875% rate for anything from 5% to 20% down. We both have excellent credit.

 

[skull]

I know I wasn't sure if the conventional loans required pmi upfront too like FHA. When they do the upfront mip added to the loan it changes all the numbers because your paying interest on it too.

 

[Humpy]

Of course buying is easy. It always is.

It's the owning and selling and having a girlfriend that will gut you.

 

[repoman0]

I know I wasn't sure if the conventional loans required pmi upfront too like FHA. When they do the upfront mip added to the loan it changes all the numbers because your paying interest on it too.

Ah gotcha, I wasn't aware of that. But no, no PMI up front, just monthly. I am not sure why more people don't think about it like an effective rate increase, which is exactly what it is ... you're paying a little bit per month for the additional risk the bank takes on. Totally worth it, I'd do the 5% in this case even if I had 20%. The opportunity cost of giving away the down payment is a lot higher than a small temporary rate increase.

Of course buying is easy. It always is.

It's the owning and selling and having a girlfriend that will gut you.

 

[Tweak155]

You still have a ways to go, if nothing comes up during the mortgage process then yeah, sounds like a home run. Is that a 30yr loan? If so that's a pretty solid interest rate.

 

[ponyo]

If it was anything like around here, the problem was it was at asking price. The usual is the house goes on the market Thursday, open houses Friday, offers due Monday evening or Tuesday at noon. Typically 3-8 offers, at least one significantly over, possibly all cash. We got lucky and only had to pay a little over.

Market is too hot for me to touch. Paying more than the asking price? That's like paying over sticker on a new car. I will never do it no matter how much I like it.

 

[repoman0]

You still have a ways to go, if nothing comes up during the mortgage process then yeah, sounds like a home run. Is that a 30yr loan? If so that's a pretty solid interest rate.

Yep, 30 years. It's a very quick closing (just over 30 days from now) so we will know quickly if things go south. Inspection is Friday AM.

Market is too hot for me to touch. Paying more than the asking price? That's like paying over sticker on a new car. I will never do it no matter how much I like it.

I didn't like it either. But, I said the same thing 4 years ago, then 2 years ago, and if I had gone in then I'd have a really solid profit right now. They aren't building any new housing around here (no space) and a lot of new high paying jobs are popping up. Looking at median home prices over time, this town lost almost nothing in 2008-2009 too, so I am pretty confident in it. Hopefully that confidence is well placed.

We plan on leaving in 3-4 years at least temporarily to move out west (Colorado) and will keep the place to rent it out and possibly come back to.

 

[slag]

Enjoy your FHA loan paying MIP (Mortgage Insurance)

PMI

And its not that expensive.

 

[ponyo]

Yep, 30 years. It's a very quick closing (just over 30 days from now) so we will know quickly if things go south. Inspection is Friday AM.



I didn't like it either. But, I said the same thing 4 years ago, then 2 years ago, and if I had gone in then I'd have a really solid profit right now. They aren't building any new housing around here (no space) and a lot of new high paying jobs are popping up. Looking at median home prices over time, this town lost almost nothing in 2008-2009 too, so I am pretty confident in it. Hopefully that confidence is well placed.

We plan on leaving in 3-4 years at least temporarily to move out west (Colorado) and will keep the place to rent it out and possibly come back to.

Good luck to you. I'm fortunate in that I already have a house and it's already paid off. I can afford to wait and not be pressured. All I know is the market in my area is the hottest I've seen in my lifetime and things usually don't end well when it's this hot.

 

[BurnItDwn]

Hope it closes well, good luck to you!

 

[NoCreativity]

Glad you had such a good experience, hope it continues through closing.

PMI

And its not that expensive.

s0me0nesmind1 was correct, an FHA loan is MIP. And FHA MIP is expensive. However, his assumption was wrong that OP had an FHA loan. And you're correct, PMI isn't that expensive.

 

[kt]

I hate to sound like a Donnie Downer but your home buying experience has just begun. Yes, it takes time to find a home and have your offer accepted but that is cake walk compared to closing escrow. In the next 30 days, if one thing goes wrong then POOF you're back to square one. Good luck on your closing and I hope everything goes smoothly for you.

 

[repoman0]

I hate to sound like a Donnie Downer but your home buying experience has just begun. Yes, it takes time to find a home and have your offer accepted but that is cake walk compared to closing escrow. In the next 30 days, if one thing goes wrong then POOF you're back to square one. Good luck on your closing and I hope everything goes smoothly for you.

Thanks ... so far so good. The inspection was really thorough and came back with a few issues that are so far being smoothly resolved. There is some ancient knob and tube electrical wiring in the basement that the seller will be replacing, which is apparently an issue for insurance as well as fire safety. The electrician who came by to give the quote even shocked himself just touching it right in front of the seller the seller seems very reasonable and is mostly upset that his own inspection didn't uncover it. It's a pretty typical item in a historic district like this one and the rest of the greater Boston area ... slowly being uncovered and ripped out of all the old houses.

Other stuff that came back is minor and can either be fixed cheaply or with a weekend or two worth of work on my own. We will see if we can knock the price back a bit and call it a day. Purchase and sale signing is this week, pending agreements on the fixes and potential price drops.

 

[repoman0]

The best part about this place is RCN and Verizon FIOS are both available and competing to sell me the cheapest gigabit internet either of them can. Both of them will sell me gigabit for less than I currently pay for 25mbps Comcast. I can't wait to cancel with those pieces of shit.

 

[MrSquished]

Market is too hot for me to touch. Paying more than the asking price? That's like paying over sticker on a new car. I will never do it no matter how much I like it.

Pricing a house vs pricing a new car are very very very different things. I wouldn't use them in the same sentence. At the end of the day that home is worth what the final price paid for it is. The market has decided. Around here you'd miss out on some great homes at a fair price if you didn't go over asking.

 

[MrDudeMan]

There's a lot of incorrect assumptions or misinformation in this thread it seems. PMI is still paid on Fannie/Freddie loans, which are conventional, not private. Private loans are another thing entirely and I doubt the OP has one. If the OP actually has a private loan, then the rest of this is just FYI.

FHA requires PMI payments up front and for at least five years (it used to be five years, but this is just details anyway). If you got a loan through Fannie or Freddie, you are going to pay PMI whether you like it or not regardless of what your lender is telling you unless he or she is doing something wrong.

https://www.fanniemae.com/content/guide/selling/b7/1/02.html
http://www.freddiemac.com/blog/homeownership/20150420_1_fyi_on_pmi.html

Getting an 80/10/10, 80/15/5, or some other workaround loan structure to avoid PMI is less likely to work these days, but it can still be done. If you have one loan with less than 20% down through Fannie or Freddie OR you have an FHA loan, you're paying PMI or you had to do something special to enhance your credit.

 

[repoman0]

There's a lot of incorrect assumptions or misinformation in this thread it seems. PMI is still paid on Fannie/Freddie loans, which are conventional, not private. Private loans are another thing entirely and I doubt the OP has one. If the OP actually has a private loan, then the rest of this is just FYI.

FHA requires PMI payments up front and for at least five years (it used to be five years, but this is just details anyway). If you got a loan through Fannie or Freddie, you are going to pay PMI whether you like it or not regardless of what your lender is telling you unless he or she is doing something wrong.

https://www.fanniemae.com/content/guide/selling/b7/1/02.html
http://www.freddiemac.com/blog/homeownership/20150420_1_fyi_on_pmi.html

Getting an 80/10/10, 80/15/5, or some other workaround loan structure to avoid PMI is less likely to work these days, but it can still be done. If you have one loan with less than 20% down through Fannie or Freddie OR you have an FHA loan, you're paying PMI or you had to do something special to enhance your credit.

To be totally clear, the loan has PMI, which I've stated in this thread. Paying it is exactly equivalent to about a 0.3% interest rate increase until we hit 20% equity. I'm really not worried about it. Buying still works out to be a much better deal than renting for us, and we really don't want to plop down 20% for a down payment at these prices. As I've stated, I'd choose the 5% + PMI even if I had 20% to put down right now.

 

[MrDudeMan]

To be totally clear, the loan has PMI, which I've stated in this thread. Paying it is exactly equivalent to about a 0.3% interest rate increase until we hit 20% equity. I'm really not worried about it. Buying still works out to be a much better deal than renting for us, and we really don't want to plop down 20% for a down payment at these prices. As I've stated, I'd choose the 5% + PMI even if I had 20% to put down right now.

I wasn't rendering an opinion about whether or not to pay PMI. I was just trying to clear up some of the statements where PMI and FHA were being used seemingly interchangeably.