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@MovingForward_2012 wrote:
@foofighter74 wrote:
@playboy wrote:What if I turned into a smurf
Then you'd have to try and obtain financing on a 3 bedroom, 2.5 bath mushroom home. lol
Haha! You two are funny! Great post foofighter!
I'm just trying to entertain myself i suppose. lol My wife and I have been waiting since December 29th to officially apply for a loan with our preferred lender (waiting out a 2 year bankruptcy discharge), and that day is finally here next Thursday. We were pre-approved, and since that time, my wife's credit scores, which needed to go up dramatically, have done so. She's also boosted her income by at least $15,000, and we've paid our $5,000 good faith deposit. On the downside, we got aggressive with paying down debt to get her scores up and the bank account and 401k is not quite as healthy as it was. There is some slight concern on my part about the bank account, but thankfully, we have no chargeoffs, collections, or anything of that nature to worry about. Regardless, we're starting to get nervous. ha.
To the OP, I say go for it if it's right for you. But only your family can really make the most informed decision here.
@indecison wrote:
@Adalen wrote:What if the house is worth more than you financed it for?
What if the economy tanks again and it is now worth less than the loan? For me I would just not do a 100% finance anymore. Its just a YMMV type thing.
I'm not doing 100% financing. It was just a hypothetical question posed with the assumption of a stabilized market.
@nitedoc wrote:
What if you r aVeteren? We are approved for 100 0/0 financing.
Every ones situation is different.
If 100% financing works for you and your situation at the present time, then there is absolutely nothing wrong with it.
With zero down, you'll have to cough up money for PMI which will add a couple of hundred bucks to the monthly payment. That being out of the way, I personally wouldn't buy a house with the way things stand. Housing prices are way over what they should be, at least in a lot of US markets.
Like other posters have mentioned, it all depends on your individual situation. Previous poster mentioned PMI if your mortgage is more than 80% of the home value. This is a pretty good point for those it would affect. Those with VA loans don't need to worry about PMI. I did 100% financing in 1995 through VA. I don't regret it at all. As my income increased and interest rates changed, I adjusted. In 2003 I refinanced to a 15 year mortgage. By 2010 I paid my house off in full. One of the reasons I was able to do this, is because I bought a house that was only 1/2 of what I qualified for. I didn't feel comfortable with the "rule" of the payment being 25% of income. My payment was around 10% of my household income (as a sergeant in the Army). I retired from the Army in 2003, and then switched to the civilian sector. By the time I paid my house off (15 years after 100% financing with a 30 year loan), I was making about 5 times as much as when I originally bought my house.
So in my particular circumstance, in the end it didn't matter that I had 100% financing.
Those who look it at from the perspective of not planning on the staying in the house forever? I would do one of two things:
1. Rent instead of buy.
2. Buy, with the intention of turning it into a rental property when you do move. (This is what I do. I live overseas, and the rent I collect from my house in the US pays for my rent, utilities, food and maid).
I'll add my .02.
Circa 2005, my wife and I were looking at buying a house. We rate shopped and when a lender contacted us about 100% financing, we jumped all over it, without knowing any better.
It was rough. Our credit was in the best shape and the lender's 100% financing was 2 mortgages, one at 80% and the other at 20% with a combined interest rate of almost 20% (8.x% for the 80% mortgage and 12.x% for the 20% mortgage). Knowing that in a year, we would have to refinance since the APR was going to variable, we refinanced for a static rate and took some cash out.
On a 157k house, our payment was $1200/month.
It didn't end well and to this day, I wished we had done some homework first. The point of all this is to say, don't get trapped in shopping for a home that is close to your max approved limit just because you can. We ended up in foreclosure and ashamed of ourselves.
Since that experience, I have asked some friends of mine and one friend used NACA and swears by it as it helped him get his family a nice home with a decent interest rate (3.x%).
On the flip side, if the 100% financing is legit and you're getting a prime interest rate, then by all means go for it. Just be careful.
Pros: no need to save up, move in quickly,
Cons: “What-if” the market drops & I’m upside down? (may not matter)
“What-if” I have to move sooner than I thought? (You’ll have to pay to sell your house—will you have the money for it?) Equity builds up slowest at the beginning, so if you do have to sell unexpectedly, 3 years is not enough time to build up enough equity to cover closing costs or the agent’s commission. & many—including agents—don’t know how to do a successful short sale if it’s necessary.
Things to consider:
The psychology behind discouraging 100% financing is because those who aren’t disciplined enough to save the money usually can’t handle the obligation (and extra expense) of a mortgage. The foreclosure rate drops steadily the more the buyer pays himself. I know I didn’t phrase that well, let me try again. Those that have 100% financing are much more likely to go through foreclosure than those that only have 80% financing, hence the reason for PMI.
It may work for you. It has worked for some, but it gets most people into more financial trouble than they can handle. Hope that helps.