About to buy a house

[chaas4747]

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What is an 80/20 loan?

What percentage is Property Mortgage Insurance tax?

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80/20 means you put 20% down, and get a mortgage for the remaining 80%.

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This is not what an 80/20 loan is. The 20 part is a second loan for 20% of what you're paying. It lets you get around PMI, which you have to pay up until you have 20% equity in your home. Basically, think of it as you're getting your mortgage for 80% and then you're borrowing the other 20% (at a higher interest rate) to put up as your 20% down so you don't have to pay PMI.

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This is correct. The mortgage that you put up 20% (or more) for the down payment is known as a conventional home loan.

[Hiding]

Expanding on PMI... Its not tax deductable, while the 20%HELOC or 2nd mtrg would be.

[Cased Heel]

So this just boils down to going to another lender and talking them into loaning you 20%?

Seems like they'd be hesitant to do this, knowing what you're getting it for (simply to forego the PMI).

Basically, you're trying to get a cash loan from another bank?

[James Boston]

Not to sidetrack too much, but can you get around PMI with the equity in property you already own, pending its sale? In other words, if I find a house I like, can I get another mortgage and postpone the downpayment until I sell the house I'm in now?

[ThisHo]

if its a new build find out if the builder has a mortgage company they "work with". They usually do, they also usually have some incentive to go with them - find out what that is and if its worth it.

Be VERY REALISTIC about how long you plan to live in the house. I'm in my 2nd place in 4 years and probably will be moving in the next 12 months. Both places my wife and I figured we'd be in for AT LEAST 5 - 10 years, so we got conventional 30yr fixed .. we would have saved a TON of $$$ if we had been realistic about the good/bad of the home and how long we'd stay and gotten 5yr variable or some other shorter term loan. Be realistic! There are a TON of finance options out there -- talk to your lender and pic the one that really meets your needs.

Not sure exactly where you are or the property tax laws where you are, but find out if you're going to be hit with a "supplemental property tax" within 12mo of moving in.

ThisHo

[ericd]

Hire a decent attorney and listen to their advice. If all goes well then you might feel you wasted some money. But if not...

[HDPM]

Ignore all the new fancy financing and advice to borrow a ton of money. If you can't put 20% down you cant afford the house. (Yes, I have violated this rule.) If you are going to move quickly it might be a problem. People underestimate how bad mortgage debt is and overestimate its benefits IMO. Think in terms of owning outright sooner rather than later. You may not be able to do it right now, but don't think you'll have a mortgage forever and don't think in terms of paying for 30 years IMO. (That doesn't mean don't get a 30 yr. mortgage tho.) I understand people are looking at 40 year mortgages now. that's nuts IMO. Most people carry too much debt, avoid that if you can.

[Cased Heel]

yeah me and my GF are moving into an apartment this weekend and her dad was going on and on and on about how we should buy a house and that we're "throwing money away" by renting. Blah blah blah.

I tried to explain to him that I'm not ready for a house yet, I don't want the responsibility, I don't have a down payment, I don't know where I'd want to live, and me and her aren't even MARRIED yet. lol.

He's like "buy a house--you're building equity". Well I ran the numbers and a $140,000 loan at 7% for 30 years yield about a $950/mo payment (of which only $120 goes to the principal. $830 to interest).

Yeah...nice "equity". We're moving into an apartment for $730/mo. right now which means we're paying $220/mo. less (of which will go to our future equity, as we are saving right now).

not to mention a large downpayment in the future will mean we pay less to the bank (AND if we wait 5 years it means we'll have a 5-year newer house than if we buy today).

This all coming from a guy who just invested thousands of dollars into remodelling his 30-year old home.

I wish I could tell him what I really think. But I just say "I'm not ready for the responsibility yet."

[HDPM]

Good thinking. A lot of people have done great buying houses for just a little down and then having prices skyrocket. If you can do this mortgage debt makes more sense obviously. But a lot of people haven't done as well. I know our first house didn't appreciate much. We came out OK, but I was surprised at how little equity we had after a 5% down payment and 5 years of payments, sometimes extra payments. I doubt our second house will appreciate a ton given the market we are in, but so what. A house is something to live in, and we aren't crippled by debt. Borrowing a ton for something that is more of a consumer purchase/lifestyle choice than a real investment doesn't make sense to me. If you can time your purchase and sale in a hot market and make a ton, well, then I am wrong. Your grandparents knew somethig when they put a bunch down and got it paid off.

[Jersey Nick]

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Yeah...nice "equity". We're moving into an apartment for $730/mo. right now which means we're paying $220/mo. less (of which will go to our future equity, as we are saving right now).

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-You'll only save $13,200 in 5 years
-Historically 7% ain't a bad mortgage rate
-4% annual increase in your housing market means a $155,000 house will be worth >$181,000, or more than $26,000 in equity

Or the housing market could take a dive, the girl could dump you, and you could work 3 jobs trying to stay out of bankruptcy. [img]/images/graemlins/smile.gif[/img]