So...

I'm buying a house and man my brain feels like swiss cheese from all the lender jargon and different types of programs out there. I eventually decided to just go with a conventional 30yr fixed rate but I started wondering if others went with the 2-28s, 3-27s, 30-15s, the ARMs, etc.

In the end I could have done a 10yr interest only that was an 80-20 both loans would have been fixed with the rate higher on the second loan. The second loan would have been a 15yr fixed loan as well that I could have paid off in 7rs if I dumped an extra $124 a month to it. My overall payment would have been a little over $150 less a month. But I got a little scared and decided that $150 was worth the security for the next several years. I don't plan on moving any time soon and at the rate houses are increasing in value around me I can hopefully get enough equitity to ditch the PMI which...oddly enough is $150 a month.

This is my second home but I didn't have the 20% down payment, christ in this market I can't imagine who would have that kind of money...but I digress.

So does anyone out there have an opinion on the different mortgage loans, the rates, etc? How risky do you think an ARM is? or an interest only with a fixed rate for (x) years?

I'm happy with my rate, it's in the 6s. Sad thing is in June when I was first pre-approved they quoted me a 5ish rate. :eek: I have watched the houses around me go up in value by 70k in the past 4 months. It's sick. As it were, this house was on the market for 3 days!!!!!! Just 3 and we beat out 6 others by offering full price and closing. What are the markets like elsewhere in the country?

I wouldn't go with an ARM at this time. I haven't looked in a while but I would say a 30 year fixed in the 6's is probably the going rate. 10 years left on a 15year 4.25% here!

I so wished I could afford a 15yr mortgage lol. I probably could have 2yrs ago but not now. The market here is absolutely booming. I'm hearing stories of some houses not even making it to the open market before offers are placed and in some cases people will offer several grand *OVER* the asking price just to make sure they get it. It's nucking futs!

Yeah, no ARM or interest only at this point. You might get lucky if they drop rates to compensate for the fallout from the hurricanes (and/or bird flu), but it would be relatively short term. All those people that jumped on the interest-only-buy-way-more-than-I-can-afford bandwagon are already getting killed. It's going to be ugly for them in the next few years.

So...
I have watched the houses around me go up in value by 70k in the past 4 months. It's sick. As it were, this house was on the market for 3 days!!!!!! Just 3 and we beat out 6 others by offering full price and closing.

This is exactly the reason people are taking out interest only loans. It's not worth the miniscule amount that goes towards your principle to take out a conventional loan. Add to that the appreciation rates and the fact that you will have $150 more a month in disposable income and I'd go with the interest only 80-20.

The only kicker here is that you said you are planning to stay a while in that home. If you're thinking like more than 10 years than just go ahead with a conventional. You only get the value of an interest only if you can sell the home and realize the appreciation.

Yeah that was the argument I kept posing in my head. But... the uncertainty of the future is what swung me to the 30yrs fixed. What if the prices of houses fall in 10 yrs and I can't sell? That 11th year I'm at the mercy of my lender for the rate.

Anyone who can't afford $150 more a month IMO probably shouldn't be buying that house. My lender told me lots of horror stories and I listened to her. I had 3 lenders fighting for my business it was actually kind of fun and made me think of that commercial on TV. In the end the safe path won. Here's to hoping my school taxes don't rise, mine are the highest in the county! I might be wishing for that interest only then =\

Good choice.
30 year is the best way to go imo, at least for a primary dwelling that you intend to be in for a while.
But you can make a 30 a 15 by doing some simple things that are in your control. Add like a 100/mo to you monthly payment and/or paying a double mortage once or twice a year. Very simple steps that can save you years, and put you in a much better position alot quicker.
Greenspan seems determined to deflate the housing bubble for some reason. Eventually he will cool the market down, one way or the other.

Fild, couple things you need to know before deciding on which MTG program you want to go with. I'll toss out some options...

ARMs are good if you don't intend to live at that residence for a while. You will have a low/lower rate, and be done with it after 3-7 years (depending on lender).

The fixed rates are nice. 30 year and 15 year. These are good if you plan on staying in the home for a while. There shouldn't be too much of a difference in rate between the 30 and 15 year notes. For instance right now (today) the rates on a 30 is 5.875, and 15 year is 5.5% with no points. You would be better setting up the 30, just incase. The nice thing now a days is that you can make payments for greater than your required payment. This amount should go to the principal of your loan balance (once again may vary based on lender). So this is a nice way to pay down your MTG faster while having the benefit of the lower payment but not being locked in for 30 years.

Another thing to consider is finding a lender who will do an 80/20 loan. Where 80% is your primary MTG, and the other 20% is a Home Equity. No PMI. This may vary based on your local financials, but I know it's possible to do this. I see this happening all the time.

I would advise against the interest only loans. You might as well rent. Because after 5,6,7,10 years or more you will still owe what you bought the home for, and you have to hope that the home appreciated. But there is some speculation that due to the interest only loans and the 125% MTG loans that they may not appreciate like they have in the past. And these loan products could actually cause a decline in property values. Which would suck.

Just my two cents, hope it helps.

BTW the interest will be heaviest in the first years(10). Like Lleauric said if you can put that extra $100+ a month to the loan payment it will help tremendously. Just ask your lender to run an amoritzation at the normal payment and one at the increased amount and you will see a drastic difference in the term and total interest paid over the life of the loan.

First, thanks all for the advice. This was no doubt one of the most stressful things I've gone through in the past 10 years. Buying my first house wasn't anything like this, nor was getting a divorce! I feel over absorbed and took in too much info about all the loans and programs out there.

Yeah I considered the 80/20 loan but damn the closing costs were lofty on that vs just one loan. And that lender tried to charge me a 1/4 point. I eventually went with the one I not only felt more comfortable with but whom dare I say....trusted. She seemed a heck of allot more honest than the other two old geezers.

I'm a little worried I will admit. I'm not home free yet. They still have to appraise the house and it has to pass all the inspections. So we'll see next week.

Another big reason to go with an ARM over a 30 year fixed is if your credit isnt good. If you have say a 580 score you will be much better off getting a 2/28 and keeping up on all your paytments because in 2 years you will probably break into the 620+ area and at that point you can refinance with a prime lender. In the long run you will end up spending alot less due to the lower rate on the ARM.

Never invest with "hope"

Never invest with "hope"

Exactly. So we walk in tonight to fill out the final application and the broker says hey guess what!?! I got you a better rate. woooowhooo nearly 1/2 point lower. Was a good feeling =)

Homes in my neighborhood went from 400k to over 1M in the last 4 years. It's absolutely sickening the number of flyers I get from realtors/agents pestering me to sell. The huge gain in housing price is partially due to the very low interest rates available, but also partially due to the increased amount banks are willing to lend and the new, more flexible types of loans available. It's a demand increasing trifecta that will not last.

I've had similiar experinces as the rest of you in home values skyrocketing. I bought my house 1 year ago and in less than a year it had gone from 300k to 400k+. I got a 5 year ARM or some such bullshit and now i want to Refi to a 30 year fixed. I had thought i was going to get in and out of it in under 3 years but have decided that i like my house enough that i would like to stay there for a long time. So we'll see how the Re-fi goes.

I've had similiar experinces as the rest of you in home values skyrocketing. I bought my house 1 year ago and in less than a year it had gone from 300k to 400k+. I got a 5 year ARM or some such bullshit and now i want to Refi to a 30 year fixed. I had thought i was going to get in and out of it in under 3 years but have decided that i like my house enough that i would like to stay there for a long time. So we'll see how the Re-fi goes.

Long as they dont have a no minion policy its all good.

fucking minions, i can never escape you.

You could also consider forcing yourself to pay 1/2 of your monthly payment every two weeks instead of the entire payment monthly. By the end of the year you'll be one payment ahead (26 half payments versus 12 full payments).

Another reason I'm happy with my 30yrs fixed loan.

http://www.msnbc.msn.com/id/9503454/

WASHINGTON - Federal Reserve Chairman Alan Greenspan issued a fresh warning on Tuesday that investors shouldn’t be lulled into a false sense of security by the economy’s long stretch of low interest rates.

“History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets,” Greenspan said in a speech delivered via satellite to a meeting of the National Association for Business Economics in Chicago.

Greenspan, in Tuesday’s speech, didn’t specify what risky assets he was referring to. But the Fed chief has been sounding an alarm for months — including an emphatic warning on Monday — about the perils to home owners and lenders using risky and exotic types of mortgages.



http://www.msnbc.msn.com/id/9493012/


“The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices,” he said in remarks delivered via satellite to a banking conference in Palm Desert, Calif.



UNLESS YOU JUST BOUGHT ONE!!!!!!!!

Or cashed it all out to upgrade the home or pay off bills (which might not be bad except that people tend to rack more up with their freshly paid off credit cards).