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Mortgage Questions (Long)

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Anonymous
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Mortgage Questions (Long)

Now that my scores have gotten a little more respectable, what can I expect to get as far a mortgage? My current scores are:

EX 679
EQ 646
TU 599 (2 more weeks max until the 11+ disputes are resolved).

I think my TU should be up to 620-650 when everything is done.

Now my income last year was 87k but this year will probably be 78-79k. Most houses in my area are 200-330k for what I NEED. I have about 5k in savings, 4k in personal investments, my car is worth about 8k and paid off and about 20k in a 401k. My DTI is less than 10% and I only have about $3400 in available credit on all 7 of my new cards that were obtained this year. The balances stay at less than 10% of available credit every month as well.

Knowing this, is a 0 down loan possible or maybe even an interest only loan? I ask because I will only be in this house for a max of 5 years as my kids will all be off to college by then and I will be able to downsize at that time.

I'm not a first time buyer. I went through a divorce and long unemployment that caused me to lose my car and almost have my house forclosed on during 2004. My last house was done with a VA guarqantee but that is not an option for me this time as I had to do a short sale to avoid the forclosure. I have one 60 day late payment on a school loan in Feb 06 as my only baddie since 2004. So what are my options and where should I start?
Message 1 of 6
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Anonymous
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Re: Mortgage Questions (Long)

I am a mortgage banker and heavily involved in the Real Estate market in Los Angeles.  Your question is not easy to answer.  Yes, there are zero down programs that you can qualify for, albeit much fewer then in the past. 
 
The biggest question is whether you are making the best decision.  I would not advise any of my clients to buy a house with no money down in this market if they are looking to get out of it in <5 years.  There is too big of a chance that the property won't appreciate enough so that you can get out without taking a loss.  Keep in mind that in most cases it takes the seller 5-6% of the sales price to sell the house when you count for commissions and escrow and title fees.
 
I dont know what area you live in but there are not many hot markets throughout the country, which is essential when buying something without a down payment.
 
You might want to consider renting for a while and investing the additional money that you would be saving each month.  You wont have the pride of ownership, but that might be a good thing for right now. 
This is just my opinion and sorry it is so long, feel free to contact me with any more questions.
Message 2 of 6
Anonymous
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Re: Mortgage Questions (Long)


@Anonymous wrote:
I am a mortgage banker and heavily involved in the Real Estate market in Los Angeles. Your question is not easy to answer. Yes, there are zero down programs that you can qualify for, albeit much fewer then in the past.
The biggest question is whether you are making the best decision. I would not advise any of my clients to buy a house with no money down in this market if they are looking to get out of it in 5 years. There is too big of a chance that the property won't appreciate enough so that you can get out without taking a loss. Keep in mind that in most cases it takes the seller 5-6% of the sales price to sell the house when you count for commissions and escrow and title fees.
I dont know what area you live in but there are not many hot markets throughout the country, which is essential when buying something without a down payment.
You might want to consider renting for a while and investing the additional money that you would be saving each month. You wont have the pride of ownership, but that might be a good thing for right now.
This is just my opinion and sorry it is so long, feel free to contact me with any more questions.



I understand what you are saying. I live close to Harrisburg, PA. The market here right now is very soft and very much a buyers market. My original goal was to be looking by the end of the year/early next year which would have let me get over 10k in savings but the soft market and the possibility of the fed lowering interest rates in the near future has me wanting to start looking now with just a basic pre-approval.

If I HAD to I could pull 9k out of my 401k, cash in my small investment and have about 18k to put down on a home but then I'm back to square 1 and have to repay that 9k in addition to making my normal 401k contribution. Then I have to furnish the house etc etc etc. I'd rather get in as cost effectively as possible and have the ability to take care of all the normal new house things before I start worrying about what the market may look like in 5 years. I know there are risks to doing this but between the tax savings and pride of ownership etc I think they are well worth taking...ASSUMING I can find a mortgage that will let me do what I want. Thoughts??
Message 3 of 6
Anonymous
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Re: Mortgage Questions (Long)

Your philosophy makes sense but, here are the problems I see.  First, you are betting on 7% appreciation over 5 years in a market that is currently declining.  Yes it is a buyers market but nobody knows when that is going to change.
 
Second, I do not agree with you that the fed is going to decrease interest rates in the near future.  That was the talk a couple months ago but the economy has been stable and there have even been talks about a rate increase.  While there has been no official announcement prior to this week rates have been rising steadily for the last 45 days.
Message 4 of 6
Anonymous
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Re: Mortgage Questions (Long)


@Anonymous wrote:
Your philosophy makes sense but, here are the problems I see. First, you are betting on 7% appreciation over 5 years in a market that is currently declining. Yes it is a buyers market but nobody knows when that is going to change.
Second, I do not agree with you that the fed is going to decrease interest rates in the near future. That was the talk a couple months ago but the economy has been stable and there have even been talks about a rate increase. While there has been no official announcement prior to this week rates have been rising steadily for the last 45 days.



7% would be nice but even if a 200k house appreciated only 10% total it's worth enough to payoff an entire 200k mortgage and all closing costs and I've had the benefit of 5 years worth of tax deductions. My last house was 200k and the difference in my returns during and post home ownership was in excess of 3k per year. That's 15k extra in my bank vs renting.

Your points are not falling on deaf ears though, I do understand the risks of buying into a market where who knows what might happen. Maybe there will be a major correction and my 200k house will be worth 130k overnight. There is always the chance to keep the house if something like that happens as I will not take a mortgage that doesn't make sense for me or will leave me teetering on the edge where I could go off the cliff if anything small happens. BUT let's say the FED raises rates....wouldn't I want to be looking now to avoid a 8.5-9% loan in maybe 6 or 12 months?
Message 5 of 6
Anonymous
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Re: Mortgage Questions (Long)

The Feds rasing of the funds rate does not mean rates on your conventional mortgages will increase. Your traditional 30 year mortgages are not directly tied to Prime rate. True, many commercial mortgages and Residential HELOCS are directly ties to prime, and these will be affected by every move.
 
Your conventional mortgages are impacted more by inflationary worries. The next time you hear the fed's say that inflation is getting out of control, rates will increase in response. That is why, often times when the funds rate is increased, we see an immediate benefit to mortgage rates because the feds are attempting to control inflation.
 
By the way, I agree with premierjg. No one knows when these markets are going to turn around. Personally, I believe we still have another round of foreclosures to confront as the previous A paper clients see their mortgage begin to adjust. This will only hurt values more. That being said, if you still want to buy, and understand that you may be forced to keep the house longer than 5 years and are ok with it, then go for it. Just don't expect to be able to get out in 5 years.
Message 6 of 6
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