First Time Buyer 50% down

[Anonymous]

Trying to figure this all out. I've been reading the forums for months now and have learned a lot--- thanks for a great place to exchange info. So here it is. My wife and I finally found a house. We are in the NE, ct to be exact. We are looking at a house that I think we could get for $515,000. I have about 250k to put down including all the costs---of which I'm not sure would be associated with the loan. I can get approved within about 10 mins b/c I'm putting so much down. What am I missing here? We want our monthly payment to be no more than $2100 including tax and insurance. Taxes are 8100 and figure 710 for insurance. I've been looking up good questions to ask the broker, so I'll be doing that to find out all of their fees, should I look out for something specific. I would still have about 60k in savings after the downpayment. my Wife takes home about 4k a month and I can range anywhere between 2k-13k a month, depending on business and that number should only be getting better for me. I've also been reading about points? Is there a good plan anyone can advise with the amount of money I have saved up. Should I invest more, not really sure what to do...my head is spinning a bit. We have not always had good credit--both scores are between 660-690. In the past few months we've been cleaning up our credit hoping that will help us get a better loan, but it doesn't seem to matter with the large down payment. how should i be shopping for a broker in my case? I've only talked to one based on my realtor referrel. Sorry for the big post, but as a first time home buyer---well, you know the rest. thanks LI

[Anonymous]

Welcome!

My head is spinning just from reading your post.

Have you included all the closing costs?

FWIW, from a financial standpoint, I wouldn't put down $250k.  Otherwise you could end up house-rich and cash-poor.  All your money gets tied up in a house and if heaven-forbid you lose your job, all you have is your wife's $4k per month.  Save some of your cash as an emergency fund in a high interest-bearing money market fund like GMAC Bank (although rates have slipped below 5%).  It's great you have $60k (in addition to the $250k, right?) but unexpected emergencies, particularly if medical, can be pretty pricy.

Just my humble, OT opinion.

[Anonymous]

Our big catch is the monthly mortgage payments...we don't want to go higher than about $2200 a month, that's why the big downpayment.
With that said, we should be able to tuck away at least a few thousand in savings each month.
So that cash reserve will always be growing.
I figured if something happened to me, she could still afford the house with the mortgage payments under $2500 a month and have a cash reserve of OVER 60k in a cd or something high interest.

That 250k I've saved explictly for a home. I have many other assest that I guess could be sold too. Cars, boat, all my business stuff--I'm in TV--so there is a lot of $$$ in assest for my business too.

I realize this is somewhat unconventional.
I just can't see spending $3-4k a month in payments including taxes and insurance.

Am I way off base with my thinking?

[ShanetheMortgageMan]

By putting less down, like 20%, you would still qualify for the same rates as if you put 50% down... and wouldn't have any mortgage insurance either.  Then with the $150k you didn't put down, invest it in conservative investment vehicles and use the returns to supplement the mortgage payment to get it down to your target.  I, too, agree that you shouldn't be house rich and cash poor... it's much easier to get cash now, when you don't need it, rather than in an emergency situation.  Further, the interest on the mortgage is tax deductible... which could help out with taxes.

Have you consulted with a financial planner on your situation?  I know of a great one at Wachovia if you want a referral.

[Anonymous]

I do have an advisor that I have not consulted. duhhh

I guess I figured it would be like paying rent, which is what we pay now and I've managed to save that over the course of 5 years...but you're right---you never know.

I'll see what he can do.

based on that assumption, our payments are going to be in the neighborhood of about $2600-2900/month with about 120k down.

thanks, I'll let you know how I make out.
Should I also be shopping for brokers in my situation.
We are going to call a few cold, so I'm not sure if a recommendation from somone really makes a difference.

[ShanetheMortgageMan]

I really wouldn't advise you to call mortgage brokers "cold", you really want to work with someone who is recommend or someone you already trust.  Calling up a mortgage broker cold is a pretty scary thing, as most mortgage brokers tend to not be career oriented, and might try to take advantage of you.  It's tough to admit that my own "kind" are mostly that way, but it's true, I talk to several mortgage brokers each day and they are always quick to jump to assumptions without asking questions, can't figure out why their loans ger declined, or just give out wrong information... so if you are referred to one, one know of one who does do thorough research/asks the right questions, that would be who'd I recommend you talk to.  Just like a financial advisor... you wouldn't just call up a random company asking for financial advice without doing some research on them, the same care should be taken when choosing a mortgage professional.

[Anonymous]

thanks Shane, very sound advice. My fear is that we'll get ripped off with the amount that I have available. Trust is hard to come by these days. Do you know anyone over here in the NE?

[ShanetheMortgageMan]

Yeah trust is very hard to come by especially when you have lots of money... some people think, "Oh, they won't miss this much if I charge higher than my normal fees".  I replied to your PM.

[Anonymous]

I can thank my Grandpa for that...he was and IDS advisor his whole life. Saving for the future was drilled into me as a kid, I might have been the only HS freshman putting money into mutual funds from my summer job. I hated doing it too, and now...well, I couldn't be happier and continue to tuck it away. You should always put something in savings from each paycheck--even if it's just 10 bucks, you'd be surprised how quickly your money can grow.

[Anonymous]

Wow!  You are in the driver's seat.  I'm no mortgage expert and certainly no authority on what's going on in Connecticut, but here's the little I know.

The higher the downpayment, the lower the amount you are going to finance.   So, if you want a $500,000 home but want payments more in line with a $250,000 home, then you would pay 50% downpayment.

The more points you pay, the lower your interest rate will be.  A point is 1% of the loan amount.  As a general rule, each 1% point you pay will lower the interest rate about 0.25%.  So, if you paid 3 points, your interest rate would go down 0.75%, 4 points = 1.0%, 5 points = 1.25%, etc.  In other words, a 7.5% interest rate, with 2 points paid, would be 7.0%; with 3 points paid, 6.25%.  You should check with several lenders in your area to find out what the interest rates are in your area.

Here's my (maybe wholly unqualified advice):  you want a mix of four things:

1.   high downpayment to lower the loan amount

2.   paying a couple of points (or more) to lower the interest rate

3    keeping some of the money to pay off consumer debt (credit cards, etc.)

4.   keeping some of the money in savings to grow

So, if you buy this house for $515,000, put 38% down (or about $200,000), the loan amount would be $315,000, and each point would be about 3,150; pay 4 points (or about $12,600) to reduce your interest rate a full 1% (or more depending upon rates in your area); that would leave you with $37,400 to pay off high interest consumer debt (if any) and the rest to put in liquid savings (CD's, savings accounts, etc.).  Or any combination of the above.

You are in great shape!  Congratulations.