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txtaz
11-01-2004, 05:55 PM
So now the weddings over and life is getting back to normal, we are getting ready to buy a house. It will be our first house (purchased) and first mortgage. We have a house (Fl) and had a condo but no mortgage. One was inheritance and the other inexpensive enough to pay cash. I have talked to tons of people, but they are getting paid somewhere along the way so trust is an issue. Somehow I got pre-approved by 2 mortgage companies in the matter of hours and the only credit I have is a pre-paid credit card I got last year to help build credit. In my past I have always paid cash for everything, but now we would like to have a nice house somewhere around $200k and I don't want to part with that much money. I will put about 50% down. One company quoted me $480/mo for mortgage/insurance/taxes for a 30 year fixed rate. This seems low to me.
I would like to get others opinions on how their experiences with this are. What are the pitfalls, what should I look out for, any tips?
Thank you,
Wes and Jennifer

TuxedoPk
11-01-2004, 06:45 PM
So now the weddings over and life is getting back to normal, we are getting ready to buy a house. It will be our first house (purchased) and first mortgage. We have a house (Fl) and had a condo but no mortgage. One was inheritance and the other inexpensive enough to pay cash. I have talked to tons of people, but they are getting paid somewhere along the way so trust is an issue. Somehow I got pre-approved by 2 mortgage companies in the matter of hours and the only credit I have is a pre-paid credit card I got last year to help build credit. In my past I have always paid cash for everything, but now we would like to have a nice house somewhere around $200k and I don't want to part with that much money. I will put about 50% down. One company quoted me $480/mo for mortgage/insurance/taxes for a 30 year fixed rate. This seems low to me.
I would like to get others opinions on how their experiences with this are. What are the pitfalls, what should I look out for, any tips?
Thank you,
Wes and Jennifer

Wes,
The first issue to consider is how long you expect to be in the house. The average home ownership today stands at 7 years and has been declining. If you envision yourself owning a home for less than this period of time definately consider an adjustable rate mortgage- Why pay a higher rate for the next several years for a guaranteed rate that you'll not fully or possibly ever use.

The second type of financing to consider is a home equity loan. As you're probably seeing there are a ton of costs associated with getting a mortgage such as a home appraisal, etc. These are passed on to you as a cost when you obtain your mortgage. When you own a home and take out a home equity loan many of these types of fees are assumed by the lender and not passed along to you. If you purchase the home for cash and then turn around and take out a home equity line you may find yourself saving some $$$.

If you should go the route of a fixed rate mortgage try to take a 15 year v. 30 year mortgage. While the monthly payment is higher the rate is going to be lower. While you can always 'double up' with your monthly payments on a 30 year mortgage keep in mind that you are still paying a higher interest rate.

Insurance- I'm a bit confused as to why a lender would be including insurance on a mortgage unless Texas real estate transactions are conducted different than in many other parts of the country. Based on your downpayment the only insurance you'll typically need/want is title insurance and casualty/liability insurance. Lender's will typically require title insurance at least as great as the value of the loan for their protection-you'll probably want to up the policy for the full purchase price to protect your downpayment.

It is typically the buyer's job to shop for the best rate/coverage for casualty (fire/theft/etc.) insurance although most lender's have a provision in your note that allows them to obtain coverage in the amount of the outstanding loan should you have a lapse in coverage to protect their investment. The rates charged for forced coverage exceed what you can get on your own- Get your own insurance and leave it out of the payments to your lender.

Tax issue-Because you are working for yourself take a look at how you time taking income. While you can carry forward Subchapter S business losses to future years if you don't have enough current year income to offset it, you can not do the same with mortage interest and real estate taxes.

Not knowing your specific concerns I'm shooting a little bit in the dark trying to be helpful. If you've got any specific questions hit me with email or give me a call. Sorry we didn't get to talk more but I was going thru a crazy period and then you went off and got married...

Rich

txtaz
11-01-2004, 10:16 PM
Sorry we didn't get to talk more but I was going thru a crazy period and then you went off and got married...
Rich
Uhmmm, to the casual observer, this might look a little wierd. :jestera:
Thanks for the info, I like the idea of paying for it and taking an equity loan. I need to talk to my "personal" banker and attorney to get some more input. What is blowing me away is how inexpensive this is coming out to be. I told my realtor "if this works out as presented, I'll get some rent houses".
I'll give you a call so we can catch up, or finish our conversation.
Wes

boxy
11-01-2004, 10:26 PM
Rich, the insurance the bank may be talking about is their "charge" to insure the mortgage in the event of the demise of a title holder. Here in Canada you can typically obtain about double the coverage from a term life insurance company for the same money. For example if your total debt load to a bank was $250,000, the amount they would want to insure that amount would buy you $500,000 worth of life insurance from a term company, you just may have to name the mortgagor as a co-pay on the policy.

ToonaFish
11-01-2004, 10:44 PM
Does anyone else want to be TxTaz, or is it just me? :D

txtaz
11-01-2004, 11:24 PM
Boxy, We only need 20% down to exclude mortgage insurance if that is what you are referring to. I would not like to link a life policy to any debt. That would defiet the purpose of the life policy IMHO.

Toona, PLEASE you can be me, I need a friggin break. AND while you are being me, would you mind closing on the house, take care of the parents ( they have a long list since they just came home ), deal with the wifeys ex's past financial discretions, change oil on the bike to syn ( I know weak ), polish the boat ( no SERIOUSLY ), move the 12' couch to a donation shelter, pack the apartment for moving, clean out all the clothes I don't need and donate them, feed the cat, buy a dog for the new house, move the boat to the new freshly painted garage ( uhmm, that means paint it ), Ohhhhhh and finish the hundreds of thank you notes from the wedding (stamp donations welcome), move Dads stuff to a smaller storage room, get the Firebird plugs changed ( yeah, you think thats easy in a 68' 350 with AC ), Ohhhhhh and run the business.

Actually, truth be known, we are only using the money we made in the last year ( not bragging ), but I was always taught to save money and pay for things and not owe anyone. I wish I could take credit for that, but it was my Dad who taught me. I think it's a good lesson to learn. BTW, it only took me 42 years to buy a house, so what's the deal? :party: :party: :party:
Wes

TuxedoPk
11-02-2004, 09:29 AM
Wes, it sounds like you are being very conservative concerning the price of the house and what you have the ability to purchase. I've also purchased houses for cash and am in favor of living within one's means but you might want to consider the cost of selling this house and relocating to a larger home as part of the 'financing costs'.

In other words, it might be financially better in the long run to purchase more house today and avoid the sales commission and moving expenses down the road if you envision this home as a stepping stone to a larger investment in a few years. Just a thought, don't know if it has any applicability to your situation.

As the owner of an old money pit I'm less inclined to own large homes again. Less tax, less maintenance, shorter walks to the refridge and bathroom....

If GWB loses today, personally I'd consider renting rather than ownership in anticipation of a decline in housing prices as interest rates rise.

gold-n-rod
11-02-2004, 09:42 AM
If GWB loses today, personally I'd consider renting rather than ownership in anticipation of a decline in housing prices as interest rates rise.

Umm, Rich, the Fed has been foreshadowing rising rates for a couple of months. It's not new news and I don't see the tie to the election outcome. It's more tied to the GWB economy :toiletpap :frown:

another Randy

TuxedoPk
11-02-2004, 10:42 AM
Umm, Rich, the Fed has been foreshadowing rising rates for a couple of months. It's not new news and I don't see the tie to the election outcome. It's more tied to the GWB economy :toiletpap :frown:

another Randy

Randy, There is a difference between a rise in interest rates and a radical rise in interest rates ala the Carter years. I believe that at least in the NY metro area we are going to have a decline in real estate reguardless of who wins, but the extend of the decline could be significantly different.

BUIZILLA
11-02-2004, 11:06 AM
:toiletpap :frown:another Randy
constipated are we.. ;) must be an uninformed democrat thing lately :bonk:

gold-n-rod
11-02-2004, 11:07 AM
Randy, There is a difference between a rise in interest rates and a radical rise in interest rates ala the Carter years. I believe that at least in the NY metro area we are going to have a decline in real estate reguardless of who wins, but the extend of the decline could be significantly different.

But weren't the obscene rates of the 80's the result of unregulated money policies (basically a hands-off Fed for 40 some years)? My understanding is that the Fed's influence in the market is what's given us the rate stabilty of the past 25 years, not any administration's economic policy.

I do not see where fear of another rate rise of the 80's ought to scare anyone into how they punch their ballot. Other reason, yes, but not that.

Just wondering?

another Randy

Last Tango
11-02-2004, 11:30 AM
Never "escrow" property taxes or homeowners insurance into your mortgage, if any. It's a cash cow for the bank because you pay up front for the whole year and they loan the money to others until it's time it's time to pay your bill. If a bank/mortgage company is insisting on having you escrow these two items, then keep shopping. Most insurance companies allow you to pay your homeowners insurance in monthly installments to THEM. Why pay for months ahead in insurance if you haven't actually lived in the house those months. And YOU have the use of the money until you pay it. Same with property taxes. Many taxing authorities allow partial payments throughout the year.
The BIG advantage to paying cash and then using the home equity line of credit is that the rates are generally very low although they are open-ended (interest rates go up, so does your minimum payment). You can dip and pay back as often as on your income taxes. You can use the funds for whatever you want when ever you feel like it. In a regular mortgage, you are locked into payments, but the big money is still yours. In a cash and loan arrangement, the house is yours, and you take whatever funds you need from it to fund other projects. If you are thinking of buying a large enough boat that it has toilet, galley, and sleeping berths, do NOT use your home equity line because the boat loan interest would also be deductible under the "second home" rule. If you use the home equity line to pay cash, you have a rapidly depreciating asset and ONE long term deductible loan. Get a separate loan on the boat, and you have TWO deductible loans.
Paying cash for a home ties up your assets. But there is a nice sense of security in not having a mortgage. Then again, how much is theat sense of security really worth to you?

BUIZILLA
11-02-2004, 11:32 AM
But weren't the obscene rates of the 80's the result of unregulated money policies (basically a hands-off Fed for 40 some years)? My understanding is that the Fed's influence in the market is what's given us the rate stabilty of the past 25 years, not any administration's economic policy.I would say that is a reasonable and accurate assumption.


I do not see where fear of another rate rise of the 80's ought to scare anyone into how they punch their ballot.
your kidding here, right?

another thing here Randy.. I have heard umpteen hundreds of times how Kerry is *for the middle class*, yet he has REFUSED to characterize what his view of the middle class is?? show me just one quote that he has made, just one, that exemplify's his vision of the middle class by earnings, class, creed or color. Or does he think that anyone that makes between $10,000 to $200,000 a year is all the *new middle class*. His new proposed burden on the over $200k group sure puts a whallop on any Sub S owner, now doesn't it???
At the exit poll of where I voted last week, 60% +++ of the respondee's that voted for Kerry were 1)unemployed 2)on welfare 3)on food stamps. NONE of these Kerry respondee's were ever in military service. NONE of these Kerry respondee's were self employed.
At the Publix market I was at last Saturday afternoon, the well dressed black lady in front of me used food stamps to buy top shelf beef, cheese's etc. She then went out and put her grocery's in an almost new $45,000 Sedan Deville Caddy, with a HUGE Kerry/Edwards sticker on her back window. She also had a handicapped sticker on her rear view mirror, and parked in those marked spaces. Sorry pal, but I have a HUGE, and I emphasize HUGE problem with free-loaders.

JH

Last Tango
11-02-2004, 11:51 AM
G-n-R, et al.,
You are absolutely correct. NO Presidency has EVER had any effect on the economy. The Fed controls the economy by adjusting rates at which the banks can borrow overnight money from the Fed, raising or lowering the reserve level required by banks (how much cash they must keep on deposit at the Fed in order to cover their loans), or purchasing government bonds on the open market. Any one of these will open or constrict the flow of money through the economy.
Banks individually change their rates based on the Feds' actions. The Fed does not FORCE any action to change rates by changing their monetary policy. The banks REACT to the Fed policy changes in order to maintain a certain spread for profitability. The President and his Cabinet have no say in this.
The Chairman of the Federal Reserve Bank is autonomous to make his descisions. He meets with his staff and member banks to determine the need and direction of interest rates. Alan Greenspan has been the Chairman of the Fed for over 20 years, now. How many Republicans and Democrats have passed throught the Whitehouse in that same period?
When the Chairman of the Fed makes his bi-monthly report before congress, he is not ASKING for PERMITION to adjust the economy, he is telling them what he plans to do, that today is that day, and then allows any congressman or senator to ask him questions (should they be bold enough to believe that they are smarter than he is in these matters - a real mistake, and nobody is foolhardy enough anymore to question Mr. Greenspans decisions).
And his decisions are based on real economic data. Not on the political wiles of the current administration or the ruling party. He does not run the Treasury. THAT is the part that the big spenders or taxers in congress affect from politics and pork-barreling.

gold-n-rod
11-02-2004, 12:09 PM
At the Publix market I was at last Saturday afternoon, the well dressed black lady in front of me used food stamps to buy top shelf beef, cheese's etc. She then went out and put her grocery's in an almost new $45,000 Sedan Deville Caddy, with a HUGE Kerry/Edwards sticker on her back window. She also had a handicapped sticker on her rear view mirror, and parked in those marked spaces. Sorry pal, but I have a HUGE, and I emphasize HUGE problem with free-loaders.

JH

I usually lump these stories into the urban myth category, but you are a stand up guy and wouldn't lie, so I guess what I'll do instead is describe what I saw this weekend. In line ahead of me was a woman with a infant. She bought a cartload of food with food stamps and WIC coupons. She bought baby cereal, juices, veggies, fruit, store brand canned foods, store brand breakfast cereals, milk, some hamburger, boxes of mac and cheeze, eggs, white breads and some american cheese. No booze, no smokes, no steaks or candy. I have no idea what kind of vehicle she got into or if she pushed the cart home. What I did wonder about was how she got into such a situation. Is she an unwed mother who gets no support from the baby's father? Is he in jail? Did the child have a chronic health problem that consumes her financial resources? Did she not get called back to work after her maternity leave because the economy is slow? Is the mother (and or child) somehow disabled (it wasn't obvious to me)?

I don't know the answers to my ponderings. What I do believe, Jim, is that the lady I saw more closely resembles the typical food stamp recipient in this country than does your Cadillac lady. I hate freeloaders, too. Your Cadillac lady would piss me off, too. But I'm also willing to offer a hand to the lady in line before me. It's what civilized people do.

Randy

gold-n-rod
11-02-2004, 12:19 PM
G-n-R, et al.,
You are absolutely correct. NO Presidency has EVER had any effect on the economy.

What I meant to state is that no administration had any effect on interest rates (high or low). I believe that president and their administrations DO have an effect on the economy. Spending policies, decisions (such as asking Congress to declare war) and other presidential decisions do affect the economy. WHO the president appoints to head the Fed affects the economy. How the administration works with (or against) Congress in setting budgets affects the economy. The tone the president sets for the country and its citizens affects the economy.

Clinton focused his sights on improving the economy. It was one of his priorities. Our country experienced unprecidented economic health during his term. Does he get all the credit? No. But he worked it.

another Randy

gold-n-rod
11-02-2004, 12:21 PM
Sorry, Wes, to hi-jack your thread. :cussball:

:smash:
Randy

BUIZILLA
11-02-2004, 12:52 PM
I hate freeloaders, too. Your Cadillac lady would piss me off, too. But I'm also willing to offer a hand to the lady in line before me. It's what civilized people do. Randythis is NO urban myth. I witnessed it with my own eyes. My eyes don't lie to my brain. Unfortunately, at least around here, it's not an unusual occurance...

JH

gcarter
11-02-2004, 01:09 PM
I'm about as conservative as they come. Over the years as an employer I've helped out some people who were willing to work.
My first employee, sixteen years ago, was living in a fruit pickers house he was renting for $250.00/mo. He recently left me for an offer I couildn't come close to matching. In the interum, he bought a new house, three new cars, and was succeeding far beyond his expectations.
Another time I hired an overweight woman w/six Hispanic kids. After several years, she was making so much, she lost her Medicaid for her kids. Also she was able to purchase a house. Likewise, whenever I run adds for jobs, you can tell they would just as soon stay on un-employment.
:banghead: This is how I feel sometimes.

DonziChick
11-02-2004, 01:57 PM
my quick .02

I just got a mortgage a month ago or so and got a 5.65% rate with $0 down. I'm 23 with only a past car loan to add to my credit history. I just thought I'd give you a little idea of what I got for maybe comparison.

Edit: it was for a condo (under $100k)