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Alley, PMI is not always 20%... PMI is insurance you pay where if you default on the loan the lender doesnt lose money will they sell your house in foreclosure.
Also, VA and USDA loans allow for 100% financing with no monthly mortgage insurance. You dont have to have 20% down... FHA allows for only a 3.5% downpayment and a loan for 96.5% of the purchase price(plus a 1% fha fee is added to loan.) I know of 0 lenders that require 20% down on a primary residence... they will on a investment property.
Not to defend Tim as he will be able to do that himself, but it is a great time to buy. Home ownership is not a right but sure beats renting.
That is if she qualifies which few people do. I know that PMI is not always 20% but in situations where people don't have any money to put down on a house, the lenders usually want 20% PMI - at least the ones that are offering nice interest rates. Buying just because you think the market is good and soon to be on the rebound (which none of us know for sure right now) is taking the same path as those that decided to flip houses and didn't know what they were doing. People should buy houses because they are ready to buy a house. There is nothing wrong with waiting and we don't know what market they are in which can make a big difference with someone's decision. Not all markets are equal and not all will recover at the same time.
I still dont follow what you are saying. FHA only requires a 3.5% down payment and the monthly mortgage insurance is .9% of the loan amount divided by 12. What do you mean when you say lenders want 20% PMI?
Who said he is buying in a decling market? S&P/Case Shiller Home Price index has shown many parts of the country where home values are going up. You are assuming and you know what that does.
I could bog you down in links showing exactly where the RE market is headed, but you work in the business based on your posting history and I would suspect that you know the reality. If you'd like some reading beyond a 2 month trailing indicator, please let me know.
Wow. It's amazing how the OP's seemingly simple inquiry can turn into such a heated discussion.
I'm new here but IMHO, purchasing a home is not a purely dollars and cents proposition for most people. It's about pride of ownership, having a back yard for your kids to play in and things like that. Those are things that don't figure into calculations like declining markets, return on investment or anything else.
When it comes down to it, the OP is on the right track in terms of what she is trying to accomplish. In my experience the credit card debt she has or will have at the time she is planning to purchase will not be an issue for her qualifying for an FHA loan. The advice concerning paying as little as possible on the credit cards at this point and putting as much as possible into the bank toward the purchase is dead on for the following reasons.
1. Underwriters want to see as large a cash reserve figure as possible. The more money that will be left in the bank after the down payment and closing costs are paid, the better off you are as a buyer. This is also the emergency fund.
2. There are always unexpected expenses that come up when moving into your new home that you would want to pay for in cash rather than racking up your credit card balances to deal with them.
3. Though the OP is planning on an FHA loan, building up savings so you can possibly pay a higher down payment and open up your options for your purchase is always a wise idea. What most people don't realize is that when getting an FHA, VA or USDA loan you can be turned down because the property you want to purchase does not, for some reason, meet the government standards. I know of one instance where a property was declined due to the condition of the road leading to the property at the time it was appraised.
Alley - I'm going to try and keep my response such that I don't get banned.
My rush has nothing to do with home prices or interest rates, it has to do with the fact that as of next spring I'll either have to sign another lease or buy, and I'm in a decent position to buy.
My salary is not going to be revealed here but I'm doing fine if I'm able to save and pay down debt in the same month. This wasn't always the case, which is why I don't have 20% to put down.
Oh, forget it. Wish I hadn't posted, though thank you to those who gave good advice. To those who made bizarre judgments about my simple inquiry - well, I'd get banned. True, homeownership isn't a "right" but the fact is I know what I'm paying in rent and some other items that won't be an issue when I have a mortgage, I am buying in an area where home values have not depreciated much if at all, and I just have nothing else to say here.
And Alley - I will qualify. The issue is down payment vs. a couple of thousand in credit card debt, not whether I'd qualify.
That is if she qualifies which few people do. I know that PMI is not always 20% but in situations where people don't have any money to put down on a house, the lenders usually want 20% PMI - at least the ones that are offering nice interest rates. Buying just because you think the market is good and soon to be on the rebound (which none of us know for sure right now) is taking the same path as those that decided to flip houses and didn't know what they were doing. People should buy houses because they are ready to buy a house. There is nothing wrong with waiting and we don't know what market they are in which can make a big difference with someone's decision. Not all markets are equal and not all will recover at the same time.
We are lenders (a few of the posters). Most people can qualify with a 3.5% down payment on a FHA insured loan. It's one 30 yr fixed rate loan, currently running from 3.75%-4.25% at 96.5% of the purchase price (i.e. $96,500 loan granted on a $100,000 purchase).
Or, you can do a 5% down (one loan at 95%) conventional loan (10% if your market is declining.)
Both of the above would require mortgage insurance.
Last edited by TimtheGuy; 10-12-2010 at 07:54 PM..
What part of that was pointing me out? The only reason rates have fallen to where they are is our economy is not doing well (dont think i would say it has fallen off a cliff though). When i wrote that, the economic data from consumer confidence, manufacturing data, and job losses where all hinting at an improving economy. I guess i didnt realize how bad this current govt is with handling the economy.
By the way, what was your prediction or do you just Monday morning quarterback?
It's just that people on these forums have been saying for years that it's such a great time to buy and interest rates are so low. It's very tiresome.
I have multiple posts since I've joined stating 'don't buy into the hype' and telling people not to jump in just because of rates. Got into many arguments over it in the Charlotte forum lol.
Quote:
Originally Posted by NorasMom
Thanks all - I can pay double and have been, which is why my savings isn't higher. I'm confused by the poster who asked why I have $2K in credit card debt as if that's a lot of credit card debt ... it's not (I actually have more right now, but I'm thinking next spring that's what I'll have). My finances ARE in order, my job is as stable as it can be in this economy, and I'm buying within my means. Sheenie, how I got into credit card debt is nobody's business, but if you must know, my dog was dying AND so was my father, and I needed to make trips home and pay vet bills.
This is helpful though I have no idea how the thread turned into me possibly not being able to afford my credit card payments and/or buy a home.
Anyway...that's interesting about the minimum payment, and about the lender view of paying cards off completely. I think what I'll do is focus a little more on savings right now - maybe not pay the minimum payment but not pump the money into it that I have been doing. I do want to make sure I have the cash for those unforseen items that pop up after you move in.
Sorry to be defensive but I find the judgment just odd, esp when my situation is pretty good.
You don't need to answer to me about your cc debt, it was a question that you just need to answer yourself. But IF it's possible to save for these types of emergencies in the future, because we ALL know that life throws curveballs and tragic circumstances (and you unfortunately know firsthand), why NOT prepare for it?
Many people here have an agenda (and obviously here people in this forum are mortgage brokers/lenders, so they need to promote their work otherwise they can't make a living). But you have to do what's best for you. Maybe I'm extreme in my savings/finances or too conservative, I don't know. You don't need to agree, but it's just another perspective. I could easily follow what everyone else is saying and tell you to go for it. But why not analyze it from all angles. The beauty of this forum is getting multiple opinions and perspectives.
My opinion is plan for the worst and hope for the best. Especially when embarking on taking a 30 year mortgage. Because in 30 years, something WILL happen because that's how life is.
Another thing to think about is, what if God forbid you need to sell in a year or two and home prices stayed flat or declined. You only put 3.5% down yet need to pay 6% in realtor fees, how do you get rid of the house?
Maybe I overanalyze things, but I think most scenarios can be planned for.
Alley - I'm going to try and keep my response such that I don't get banned.
My rush has nothing to do with home prices or interest rates, it has to do with the fact that as of next spring I'll either have to sign another lease or buy, and I'm in a decent position to buy.
My salary is not going to be revealed here but I'm doing fine if I'm able to save and pay down debt in the same month. This wasn't always the case, which is why I don't have 20% to put down.
Oh, forget it. Wish I hadn't posted, though thank you to those who gave good advice. To those who made bizarre judgments about my simple inquiry - well, I'd get banned. True, homeownership isn't a "right" but the fact is I know what I'm paying in rent and some other items that won't be an issue when I have a mortgage, I am buying in an area where home values have not depreciated much if at all, and I just have nothing else to say here.
And Alley - I will qualify. The issue is down payment vs. a couple of thousand in credit card debt, not whether I'd qualify.
You asked for an opinion and you got it. If you didn't want the truth from those of us that aren't lenders, then you should have just applied for the mortgage and been done with it. Just because one qualifies doesn't mean that the decision to buy is the best one. Remember...mortgage brokers, bankers and real estate agents are ultimately in the business for themselves and especially in this economy when most are losing their jobs, they could care less if buying a house was the best thing for you...but it is the best thing for them! I was responding to the other poster about qualifications and since you didn't state where you lived or if you had been prequalified for a mortgage, how would anyone know what situation you were in? If I was as emotional about this decision as you seem to be, I would take a break and wait to buy a house. No one should be convinced to buy a house.
I agree with the above poster about researching like crazy when making such a big move. Whatever you do, research on your own, listen to Clark Howard and other advisors. But, don't expect 100% honesty from brokers or anyone invested in real estate...that is what got so many people into trouble. Good Luck to you with your decision but cool down first before you make a decision. No one is saying you are poor, stupid, or anything else in the insulting category. We are sharing our personal experiences and you can choose what ultimately happens. I could care less what decision you make...but if you ask a question, I have ever right to answer it!
I could bog you down in links showing exactly where the RE market is headed, but you work in the business based on your posting history and I would suspect that you know the reality. If you'd like some reading beyond a 2 month trailing indicator, please let me know.
If not, we'll have to agree to disagree.
You can provide me links for exactly where the real estate market is headed? WOW.... What is the weather going to be like on 12/13 of this year? Or could you tell me what my wife plans on getting me for Christmas?
Come on... to say something as ridiculus as you know exactly where we are heading... Nobody knows, they are all just guesses. Plenty of data to support we have hit bottom in some areas, plenty of data to support we havent. At the end of the day, it is still a good time to buy a home and become a home owner.
You can provide me links for exactly where the real estate market is headed? WOW.... What is the weather going to be like on 12/13 of this year? Or could you tell me what my wife plans on getting me for Christmas?
Come on... to say something as ridiculus as you know exactly where we are heading... Nobody knows, they are all just guesses. Plenty of data to support we have hit bottom in some areas, plenty of data to support we havent. At the end of the day, it is still a good time to buy a home and become a home owner.
I would like for you to email those links.
Listen, it's not magic... You can pretend that we "don't have a crystal ball" and what not - that's fine. But, putting home prices and interest rates in the same category as the weather and gifts is a joke.
The Fed meets and releases minutes, the local leaders are consistently discussing the economy and you can see what they're saying about what they're going to do. There is no mystery. They will continue to print money and manipulate the stock market under ZIRP and that's that. More QE means interest rates will stay where they are and there will be a continued push to debase the USD globally. In a perfect scenario where people are working and spending, you might convince me people will leverage to push home values higher. But the reality is that the only way home prices can move up is via taking on more debt - that's it. Who is doing that these days?! Look at the price of gold - look at the stock market performance relative to that gold price - look at the fact that for 22 straight weeks there have been net outflows OUT of the stock market - record people tapping into 401ks - record bankruptcies - ALL of that geared towards deleveraging and paying DOWN debt (or in the case of bankruptcies / foreclosures - defaulting on debt). How do you not read about these things?
Since you chose the S&P Case Shiller Index, I'll give you a link to read on what Case Shiller is generally saying about the future. Remember the Home Price Index you referenced a few posts back is a trailing indicator - it lags at least 2 months behind. You can read up on how they determine it at the S&P web site.
Anyway, here's a pretty good read on how many experts see further home price declines based on that index:
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