Mortgage Question - Mind sharing some of your experiences?

[SCSIfreek]

Hello everyone,

First time home buyer here..... the noob on the block as some might call me. I'm in the processes of purchasing my first home and I would like to get some input from ATOT. I know I can count on you guys when it comes to mortgage right? RIGHTTTTTT!

I was pre-approved for a loan but would like to seek alternatives/options. At first, we thought the best solution would be doing a 80-15-5 loan but after much thoughts and processing. We might as well go with a 80-20 loan and use our downpayment/saving to pay off our car loans. Here is my question: do people tend to stay with the same lender for both loans or get the second loan from someone else?

Much appreciate anyone's help.


--Scsi

 

[DurocShark]

Just a heads up... Don't let Washington Mutual be your lender or your servicer. They have lots of lawsuits pending from people whose taxes weren't paid properly, insurance wasn't paid, etc from their escrow accounts.

I've worked in the IT side of the mortgage industry for years now, including for WAMU, and I'll say there are lots of problems with them (and countrywide).

As for what kind of loan, if you can pay off higher interest stuff, it's always worth it. Mortgage rates are so rediculously low right now, pay off as much as you can. And most lenders have no problem holding both the 1st and 2nd papers. To them each mortgage is a separate deal.

 

[Hoober]

I second the recommendation. Don't use Washington Mutual. Our loan was transferred to them by our original servicer and I've never received worse customer service. We're in the process of refinancing in order to go with a different lender.

WAMU is terrible!

 

[SCSIfreek]

thanks for the headsup on WAMU. I wasn't planning on going with them as their rates aint the best in the business nor do they show any signs of great service.

Something kept me from applying to different lenders, is that if every lender pulls my credit record, it will tumbling down like a fat lady slip on a banana pill on top of a hill. but to get the best rate, is there any common number of lenders to apply for just to compare their rates and programs. suggestion? Thank you

 

[Rapidskies]

I went with an 80-15-5 loan. The thing you must keep in mind is that the 2nd loan for 15% is a conventional loan, and you are getting raked over the coals for the interest rate. Priority #1 is pay off the second loan! I would not go 80-20 unless you *really* need that extra money for other things.

As for going somewhere else for the 2nd loan, it is a standard conventional loan that you can get anywhere, we got ours at the same bank for conveniance. Take care!

 

[nebula]

I'm closing on my refi on Monday, also did an 80-20 deal. When we bought the house, we didn't have alot of savings so we were paying PMI. I hated paying that, knowing that it was never going to be an issue for us. So hence, 80-20 to drop that worthless crap, good move there.

Anyway, we didn't have to worry at all about the 2nd mortgage, as far as who was supplying it. My lender figured out the 2nd and it actually is going through a local bank. But then again, my lender is a broker and they'll sell my mortgage shortly anyway. My thoughts on that, I did call a couple of other banks to see what their rate was on home equity loans, (that's what the 2nd mortgage is), I came to the conclusion that it was going to be more hassle to coordinate the two lenders myself, so I let the lender/broker do it. Of course, they were also getting me a good rate.

I thought an 80-15-5 was just a different way to accomplish the same thing as an 80-20?? But as a general rule, use your savings to pay off the highest interest loan. I guess if your car loans are 2% and your mortgage is 5%, then maybe hold on to the savings or put it on the house and your equity will build faster.

 

[Ameesh]

i just bought my first house a few months ago, as far as morgatges go, i suggest you shop around, there is no harm in this. Also don't be a sucker first time buyer and think 30 yr fixed is the only way to go, i ended up getting a great rate on a 7 year fixed which worked out perfect for me as i probably wont be in the house for much longer then that and most people end up refinancing any way before 7 years.

 

[FeathersMcGraw]

Originally posted by: SCSIfreek

I was pre-approved for a loan but would like to seek alternatives/options. At first, we thought the best solution would be doing a 80-15-5 loan but after much thoughts and processing. We might as well go with a 80-20 loan and use our downpayment/saving to pay off our car loans. Here is my question: do people tend to stay with the same lender for both loans or get the second loan from someone else?

Paying off higher interest debt is probably a good idea, particularly since you'll be able to turn those interest payments into additional principal payments against the 20 loan once your car debt is paid off.

I would stick with the same lender for both loans, primarily because it will reduce fees and coordination issues. If you go with two different lenders, they may need to duplicate paperwork (with the associated charges). And heaven forbid one mortgage goes through while the other one is delayed or rejected, which can hamper your closing.

 

[SCSIfreek]

Right now the car loan is at 7.14% which is high but only with a $19000 balance. and the interest I'm payig for the car isn't tax deductable. thats why I would go for the 80-20 loan and use my existing savings to pay off the car loan. Sound good?


--SCsi

 

[CPA]

Originally posted by: SCSIfreek
Right now the car loan is at 7.14% which is high but only with a $19000 balance. and the interest I'm payig for the car isn't tax deductable. thats why I would go for the 80-20 loan and use my existing savings to pay off the car loan. Sound good?


--SCsi

Yes.

 

[SCSIfreek]

Originally posted by: CPA

Originally posted by: SCSIfreek
Right now the car loan is at 7.14% which is high but only with a $19000 balance. and the interest I'm payig for the car isn't tax deductable. thats why I would go for the 80-20 loan and use my existing savings to pay off the car loan. Sound good?


--SCsi

Yes.

CPA, knew you were going to said that. Have any word of wisdom for me? Suggestions in getting a quote from any lenders? thanks in advance.

Scsi

 

[Cyberian]

I'm not familiar with this 80-20 terminology. Does that mean that the entire house is financed, with no down payment at all?
I'm not really a newbie, but our house was paid off almost 20 years ago and I don't remember much about the original application process.

 

[nebula]

Originally posted by: Whade
I went with an 80-15-5 loan. The thing you must keep in mind is that the 2nd loan for 15% is a conventional loan, and you are getting raked over the coals for the interest rate. Priority #1 is pay off the second loan! I would not go 80-20 unless you *really* need that extra money for other things.

Hmmm, my 2nd is a home equity line of credit. The interest rate I got was prime + 1.5% Yes this is variable, but it is based on the short term money rate, not 30yr mortgage rates, i.e. it doesn't swing as drastically. How do you get extra money? You take the HELOC for the remainder you need, no more. Maybe I got the HELOC 'cause I'm refinancing and I had equity?? don't understand all the subtleties, my lender is great...

I also got a 7/1 ARM, fixed for 7 years...

 

[sciencetoy]

Keep in mind that there's a good chance whoever does your mortgage will probably sell the mortgage to someone else, so don't get hung up on who you get your mortgage from.

With interest rates this low, borrow as much as you possibly can. Don't go over 100 per cent if you have reservations about your housing market, but mortgage money is still some of the cheapest money you can borrow after taxes, etc.

Make a lot of calls. All the books will have a list of fees, etc that you can ask questions about. It's a numbers game. Find out what numbers you need to know, and then fill in your spreadsheets. The little things can mean a lot.

Once you decide, don't take anyone's word for what you are getting. Read every line of the contract, fine print and all, and understand everything. Verbal doesn't mean a thing, it's all in the contract.

Congrats on your house.

 

[SCSIfreek]

Originally posted by: Cyberian
I'm not familiar with this 80-20 terminology. Does that mean that the entire house is financed, with no down payment at all?
I'm not really a newbie, but our house was paid off almost 20 years ago and I don't remember much about the original application process.

yes, that is no money down. 80% 1st loan and 20% second loan. although your rates will be higher on the second loan it might be worth it to pay off non-tax deductable items such as CC bills, Car loans, etc....


--Scsi

 

[nebula]

Originally posted by: Cyberian
I'm not familiar with this 80-20 terminology. Does that mean that the entire house is financed, with no down payment at all?
I'm not really a newbie, but our house was paid off almost 20 years ago and I don't remember much about the original application process.

It's a way to avoid paying PMI. If you don't have 20% equity or down payment, they make you pay that. With an 80-20, you get a conventional loan for 80% of the homes value and a 2nd mortgage for the other 20%.

 

[Doggiedog]

Originally posted by: DurocShark
Just a heads up... Don't let Washington Mutual be your lender or your servicer. They have lots of lawsuits pending from people whose taxes weren't paid properly, insurance wasn't paid, etc from their escrow accounts.

I've worked in the IT side of the mortgage industry for years now, including for WAMU, and I'll say there are lots of problems with them (and countrywide).

As for what kind of loan, if you can pay off higher interest stuff, it's always worth it. Mortgage rates are so rediculously low right now, pay off as much as you can. And most lenders have no problem holding both the 1st and 2nd papers. To them each mortgage is a separate deal.

You serious? They are my lender. Damnit!

 

[nebula]

Originally posted by: sciencetoyWith interest rates this low, borrow as much as you possibly can. Don't go over 100 per cent if you have reservations about your housing market, but mortgage money is still some of the cheapest money you can borrow after taxes, etc.

Agreed, if the rate is lower or close to your car loan rate, get as much as you can and pay down the car loan. As you mentioned, tax deductible, car loan is not.

 

[Cyberian]

Originally posted by: SCSIfreek

Originally posted by: Cyberian
I'm not familiar with this 80-20 terminology. Does that mean that the entire house is financed, with no down payment at all?
I'm not really a newbie, but our house was paid off almost 20 years ago and I don't remember much about the original application process.

yes, that is no money down. 80% 1st loan and 20% second loan. although your rates will be higher on the second loan it might be worth it to pay off non-tax deductable items such as CC bills, Car loans, etc....


--Scsi

Oh - OK.
I thought the banks insisted on at least 5-10% down and preferred 20%.
I guess things have changed quite a bit.

Good luck to you in your new home!

 

[royaldank]

If you aren't going to stay in the home for more than a few years, you can get an ARM rate super low right now. I'm closing the end of the month and went with an ARM. It's my first house so it's nothing all that special. Basically, I want to get in, pay off a bit, and then sell it and get something better in 3-6 years. So, I went with a 1/1 ARM rate. I'm at 3.5% until October '04 when it will be adjusted. Max adjustment is 1%. So, I can pay a bit more now towards the principle since my actual payment is so low. Sort of like throwing it into a bank account.

Shop around. When a mortgage company pulls your credit, it's not being reported the same as if a CC company is trying to qualify you. There is no harm in having say 12 companies pull your credit for a pre-qual on a home loan. It wont affect your score at all. However, if you applied for 12 CC tonight, that would be a big mistake and affect your credit score.

Make sure your state doesn't have state programs to help first time buyers. That has helped buddies of mine that didn't have money to put down.

If you use a mortgage investment company, don't be afraid to call a different LO. Some places buy bulk loans and then re-sell them. Most of the time, they turn around and unload it onto another Lender for servicing on the loan. So, sometimes you can get a better rate because these places offer more programs and they have a number of companies trying to beat each other. LOs make their money off sticking you with points and other needless crap. Different LOs charge different amounts. Check 2 or 3 to see what they can do for you. Hopefully you can get someone good that doesn't rip off folks. Sometimes, beginning LOs are great to deal with if they are competent. The beginning guys need to close anything they can and will take much larger cuts in their pay to close them.

Maybe some of that helps...

 

[nebula]

Originally posted by: CyberianOh - OK.
I thought the banks insisted on at least 5-10% down and preferred 20%.
I guess things have changed quite a bit.

There are alot of programs nowadays to get people into a home. With little or no money down, you're probably looking at an FHA loan and I'm sure there are many others. We had about $1000 or so in the bank when we bought our $175K house, we went FHA (first time homebuyers). So conventional with no money down, I don't think is possible.

EDIT: But with the refi, we now have conventional 7/1 ARM. ARMs are great if you know you will be leaving or refinancing in a certain period of time. The rate is lower, they have 1,3,5,7 and the rate is proportional to time.

 

[SCSIfreek]

Originally posted by: royaldank
If you aren't going to stay in the home for more than a few years, you can get an ARM rate super low right now. I'm closing the end of the month and went with an ARM. It's my first house so it's nothing all that special. Basically, I want to get in, pay off a bit, and then sell it and get something better in 3-6 years. So, I went with a 1/1 ARM rate. I'm at 3.5% until October '04 when it will be adjusted. Max adjustment is 1%. So, I can pay a bit more now towards the principle since my actual payment is so low. Sort of like throwing it into a bank account.

Shop around. When a mortgage company pulls your credit, it's not being reported the same as if a CC company is trying to qualify you. There is no harm in having say 12 companies pull your credit for a pre-qual on a home loan. It wont affect your score at all. However, if you applied for 12 CC tonight, that would be a big mistake and affect your credit score.

Make sure your state doesn't have state programs to help first time buyers. That has helped buddies of mine that didn't have money to put down.

If you use a mortgage investment company, don't be afraid to call a different LO. Some places buy bulk loans and then re-sell them. Most of the time, they turn around and unload it onto another Lender for servicing on the loan. So, sometimes you can get a better rate because these places offer more programs and they have a number of companies trying to beat each other. LOs make their money off sticking you with points and other needless crap. Different LOs charge different amounts. Check 2 or 3 to see what they can do for you. Hopefully you can get someone good that doesn't rip off folks. Sometimes, beginning LOs are great to deal with if they are competent. The beginning guys need to close anything they can and will take much larger cuts in their pay to close them.

Maybe some of that helps...

Thank you. It does help. everyone who had replied to this thread helped out in all sorts of way thanks everyone. all suggestions are well taken. Keep them coming.


--Scsi

 

[Budmantom]

80-20 is a great way to go, "most" of the time it is with the same lending institution. That interest rate did you get?

 

[alkemyst]

You need to determine what product is best for you, if you are moving in a short time an ARM is usually the way to go, especially if there is a teaser rate. Beware of additional fees and make sure you are comparing equal products (say a 30yr fixed, one may be 0 points, one may be 2 points but a lot lower rate...they are not equal).

Right now I'd say you are better putting down as little as possible on a house and using the money somewhere with a better yield. Paying off consumer debt like CC's and cars with a home equity is smart....some lenders will lend more than 100% for the equity line.

Some lenders will give an equity line if they are not the primary mortgage holders, some won't...some will have different terms whether or not you have your mortgage with them/not and if you elect direct debit, etc.