Reality of Home Loans

[ayndim]

Since your salary will be going up significantly after residency have you considered an interest only loan. Basically, you would only pay the interrest for x amount of years, then you would either refi with a traditional loan (usually best bet) or start making principal and interest payments. Usually the interest only is about 5 years. Not great for the long term as you aren't paying your principal down (you can choose to send in principal money each month) but makes it a little easier to manage.

I don't care how much I come ahead in the end I love having my own house. I can do what I want to it and not have to answer to anyone. If I want my daughters room pink (we just painted it) or my kitchen blue (painted that too) I only have to wait until my husband goes out of town for his job And I can put up as many pics as I want on the walls. There is just something about it being yours. We are lucky to live in Phoenix, AZ (except when it is 115 in the summer) where you can get a nice house(2000 + sq ft) for 150,000 and a brand new one for the same price on the outskirts

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[InGasWeTrust]

Ayndim,

That is the way my wife and have deceided to go with a interest only loan.

Instead of getting some mediocore house for 275k which is what we would qualify for on a 30yr traditional. We are now looking up to 400k for a decent place.

Our reasoning for doing this is several, hopefully we will have the income to be able to refi in 4-5 yrs. Second, the tax benefit will basically allow us to spend ALL of our money and avoid taxes as much as possible. third, in theory/historically the house should be worth more than we paid for it it in 4-5yrs, thus creating some favorable refi options for us.

I will add that we are previous homeowners, and will have about 30k cash going into the house for decorations, emergencies, etc..

FYI-
I was last quoted on a interest only loan for 5 yrs, 0 down, no PMI
300k-1400
400k-1850

Plus taxes, Homeowners insurance

Figure property taxes at 1.75% of purchase price.


And remember that all the payment and property tax is tax deductible!

 

[Sessamoid]

Originally posted by chef
car payment of $700/mo??? wowow what r u driving a bmw M3 or something.. must be a $50k car

Can you even get an M3 for 50K? My brother had a convertible M3 which came to a little over 70K. 700/mo seems a lot to pay for a car loan during residency, though.

 

[aphistis]

Originally posted by InGasWeTrust
Instead of getting some mediocore house for 275k which is what we would qualify for on a 30yr traditional. We are now looking up to 400k for a decent place.

...I'm awfully curious where you live that a "mediocre" house costs $275,000, and a "decent" one $400,000. My fiancée and I will be able to pick from some absolutely palatial residences & properties for little more than that.

 

[Homunculus]

Originally posted by aphistis
...I'm awfully curious where you live that a "mediocre" house costs $275,000, and a "decent" one $400,000. My fiancée and I will be able to pick from some absolutely palatial residences & properties for little more than that.

the DC area for one. i'm looking for housing there, and the single family housing that you can get for 225-275k is definitely a step below "mediocre", especially considering that 250k in the midwest will buy you a damn fine house.

go to realtor.com or lendingtree.com and check out the housing searches there. you'll be surprised how little you can buy for what seems like a boatload of $$$.

the upside is that you are almost guaranteed your home will appreciate.

 

[tcw2u]

You can get a stripped down version of the non-convertible M3 coupe at about 46k MSRP. Any options you add to the car is going to cost more. For this car the usual goodies like leather and traction control and hid headlights will probably put it in the 50k range. Actually my car payment is around 600 per month but adding insurance it comes out to 700/month, and no it's not a BMW. I think it's not bad at all during residency if you are single and have no other liabilities like feeding the kids or wife. I was glad to hear that you can get a 150,000 house for a monthly mortgage of around 800/month. That leaves about 800-900/month for paying bills and having fun. I live in the SE and not in DC so that goes a long way.

 

[Stinky Tofu]

Originally posted by Sessamoid
Can you even get an M3 for 50K? My brother had a convertible M3 which came to a little over 70K. 700/mo seems a lot to pay for a car loan during residency, though.

Did your brother get the M3 when it first came out? There was a huge markup for the first 1-2 years after it came out. The markup was even worse in California. MSRP just went up to $47,795 for the M3 coupe and $56,295 for the convertible.

 

[Sessamoid]

Originally posted by Stinky Tofu
Did your brother get the M3 when it first came out? There was a huge markup for the first 1-2 years after it came out. The markup was even worse in California. MSRP just went up to $47,795 for the M3 coupe and $56,295 for the convertible.

California, where everything is obscenely expensive, and the state is still broke.

 

[chef]

Originally posted by aphistis
...I'm awfully curious where you live that a "mediocre" house costs $275,000, and a "decent" one $400,000. My fiancée and I will be able to pick from some absolutely palatial residences & properties for little more than that.

i started laughing (not at you) when i read this - then i saw where you are located ... lol

just visit any major cities on either coasts and check out real estate prices.. and have some nitro ready for a heartattack!!

 

[chef]

Originally posted by Stinky Tofu
Did your brother get the M3 when it first came out? There was a huge markup for the first 1-2 years after it came out. The markup was even worse in California. MSRP just went up to $47,795 for the M3 coupe and $56,295 for the convertible.

stinky, u must be a huge bmw fan.. you know the M3 prices down to the dollar! you would own priceisright if they had a M3.. lol

btw if i had the $ i'd get the current M3 before bangle screws up the next M3!!

 

[Stinky Tofu]

Originally posted by chef
stinky, u must be a huge bmw fan.. you know the M3 prices down to the dollar! you would own priceisright if they had a M3.. lol

btw if i had the $ i'd get the current M3 before bangle screws up the next M3!!

I am a huge fan of the M3 and that's why I bought one as an intern. The only reason I know the current prices is because I had a copy of one of the BMW magazines (Roundel) next to me and it had an article regarding the price increases. By the way, anyway considering a BMW in the future should join BMW Car Club of America because you get $500-$1500 off the cost of the car if you've been a member for over one year.

 

[chef]

thats awesome stinky... did u get the 6sp or SMG? u need snow tires for boston winters right? lol

check out bimmer.org - i lurk there too.

 

[Stinky Tofu]

I bought the 6-speed because the SMG II wasn't available when I bought my M3. I do need snow tires and I bought some 17-inch BMW replicas and put Blizzaks on them for the winter. Bimmer.org has been a great resource for me -- especially the M3 forum.

 

[Global Disrobal]

Awesome thread gang,

I had a question. I am also looking at getting a physician loan through Sun Trust, BofA, or Compass...In getting ready to apply I checked my credit score and its 653. Now here is my question:

1. Is this credit score the same as FICO that everyone refers to on this thread (sorry if this is a stupid question)

2. Are my student loans factoring into the score right now? And if yes, will it be higher when the bank starts evaluating my app?

Thanks a million for all the info on the thread and good luck everyone on the match!

 

[ayndim]

I had a question. I am also looking at getting a physician loan through Sun Trust, BofA, or Compass...In getting ready to apply I checked my credit score and its 653. Now here is my question:

1. Is this credit score the same as FICO that everyone refers to on this thread (sorry if this is a stupid question) Yes it is the same. However, what you pull as a consumer can be different than the score the bank gets. I recently found this out as we are buying a new house. Boy was I pissed. Even considering that you shouldn't be a sub-prime borrower. You should get a good interest rate.

2. Are my student loans factoring into the score right now? And if yes, will it be higher when the bank starts evaluating my app? Not too sure about that one. I think if it is in repayment and you have a good payment history it should raise your score. If your loan is in repayment it will count against your debt to income ratio. If it is not in repayment in the near future is shouldn't count in the debt/income ratio.

For everyone considering buying their first house a word of warning. Lenders will max you out if you let them. We are in the processes of selling our current house and buying a new one. I figured out the payments I thought we could afford and came up with the amount of house we could buy. I figured we could afford a $150,000 home, which in phoenix will buy a decent house. The bank wanted to approve us for $250,000! We would have money for nothing else. Luckily, I was an accountant before being a mom and am good with a finances. I know people who weren't so lucky and bought the max the bank approved them for. Seems like they are always broke and living paycheck to paycheck. Figure out the house you can afford and stick too it. Just my $.02

 

[Global Disrobal]

Thanks for the info and the tips!

We'll see what happens. I'm going to apply solely on my 37K income since the wifey is just getting out of law school and is going to wait to pass the bar. If I find oiut any new info, I'll post it here.

 

[edmadison]

Ahh, your credit score is actually calculated by you bank. The number you get with the credit report is only their estimate. The actual information on the reports should be the same.

Ed

 

[chef]

i am buying a condo very soon but i am pretty much clueless how the process works. is there a website that explains everything in plain english? pmi, home insurance, closing costs, arm, 30 yr, 15 yr, arrrrrrrrrrrrgh


question about loans:

is it true that if you open a 30 yr mortgage, your interest for 30 years is calculated and added to the prinicipal UP FRONT??? so even if you pay off your entire loan in 5 yrs, you will still pay for interest for the other 25 yrs.

i cant stand paying the bank more than 100K for a 300k home. i can put down 30% up front, and i think i'll have enough cash to pay off the house in 5 years.

w/ 5 yr ARM 5%, i'll pay $50k in interest, or $840/month. is that right?

 

[ayndim]

Originally posted by chef
i am buying a condo very soon but i am pretty much clueless how the process works. is there a website that explains everything in plain english? pmi, home insurance, closing costs, arm, 30 yr, 15 yr, arrrrrrrrrrrrgh


question about loans:

is it true that if you open a 30 yr mortgage, your interest for 30 years is calculated and added to the prinicipal UP FRONT??? so even if you pay off your entire loan in 5 yrs, you will still pay for interest for the other 25 yrs.

i cant stand paying the bank more than 100K for a 300k home. i can put down 30% up front, and i think i'll have enough cash to pay off the house in 5 years.

w/ 5 yr ARM 5%, i'll pay $50k in interest, or $840/month. is that right?

The interest is not tacked onto the loan upfront. It is amortized over the life of the loan. The reason the interest payment is higher at the beginning is that your interest is determined by your principal balance. Every month your payment is divided between the two. So your principal is slowly reducing and the amount of interest you pay gets lower, while the amount that goes towards principal gets higher. I hope that makes sense. It is getting late and I am not thinking too well.

PMI is insurance that you are required to pay if you put less than 20 % down. Arm stands for adjustable rate mortgage. You rate will change according to the current rates, ours was limited to 1% in either direction, at certain intervals (ours was every year). We locked in the rates since they were so low and are expected to rise. 15 and 30 year is simply the amount of time you will be paying the loan if you make the minimum monthly payment. You can knock 10 years off of a 30 year mortgage if you make just one extra payment a year!

 

[chef]

ok, so i bought a home (will close in 2 months) and need a mortgage.

do credit unions always have the best rates? what about some online places?

also what are some traps and pitfalls I need to avoid in unnecessary hidden charges? what is included in "closing costs"?

looking for 5 yr ARM interest only loan


any help appreciated. i'm a first time buyer and all the fees are giving me headaches. i'm googling for mortage help websites

 

[jason952]

I would recommend you future home buyers checking you credit scores yourself prior to buying. I found a small error that was hurting my score and am trying to correct it.

you can check your own without penalty, but allow the bank to "do it for you" will be seen as an outside inquiry and lower your score if done repeatedly, this is the same reason that having lots of individual store credit cards will lower the score.

Anyway, I went to www.myfico.com and bought the $38.95 report that shows all 3 credit agencies. Since they don't share information, you should look at them separately and look for inequities, late payment citations, etc. One of the companies had me for a late payment (in '97!) and the others didn't, this is what I am trying to correct.

When you select the page to buy the report, you can put in promotional code " myfico20 " for a 20% discount on the price of the report.

Otherwise, the BOA 5/1 product is also what I plan to go with, and my banker told me that they were able to extend the deal to most all the states.

jason

 

[RedBlanket]

An interesting article on Alan Greenspan's praise of ARMs by Slate (hits some of the pros and cons):

ARMed and Dangerous

 

[ophtho1122]

What is BOA 5/1?

 

[chef]

Originally posted by jason952
I would recommend you future home buyers checking you credit scores yourself prior to buying. I found a small error that was hurting my score and am trying to correct it.

you can check your own without penalty, but allow the bank to "do it for you" will be seen as an outside inquiry and lower your score if done repeatedly, this is the same reason that having lots of individual store credit cards will lower the score.

Anyway, I went to www.myfico.com and bought the $38.95 report that shows all 3 credit agencies. Since they don't share information, you should look at them separately and look for inequities, late payment citations, etc. One of the companies had me for a late payment (in '97!) and the others didn't, this is what I am trying to correct.

When you select the page to buy the report, you can put in promotional code " myfico20 " for a 20% discount on the price of the report.

Otherwise, the BOA 5/1 product is also what I plan to go with, and my banker told me that they were able to extend the deal to most all the states.

jason

thx for the fico tip. i checked mine for the first time ever and they were 758, 788, and 771. do u think that's good enough to get approved on a 200k loan? (300k home, 100k downpayment)

 

[gaspasser2004]

My top choice for residency is in San Antonio and I have been looking for mortgages. Far and away the best deal I have found is with Bank of America. They offered me a 7/1 ARM at 5.125% with 100% financing and no PMI. The only caveat is that I was told the FICO score has to be above 720, which thankfully both me and my fiance have, and that we will have to pay the closing costs (about $4,000). Our expected combined income will be about $62,000 with one $250/month car payment (no credit cards, student loans in deferrment) and the loan officer said we could borrow up to $185,000. Below is the name of the loan officer I spoke to (who is based in San Antonio) if any of you want to contact her:

Sonnette Lewis Account Executive
Bank of America
800-811-9087 x 5007
210-525-5007
210-525-5085 fax
[email protected]

Hope this is helpful.

 

[edmadison]

Originally posted by gaspasser2004
My top choice for residency is in San Antonio and I have been looking for mortgages. Far and away the best deal I have found is with Bank of America. They offered me a 7/1 ARM at 5.125% with 100% financing and no PMI. The

That rate is really high. I would think you can do better. The FHA rate is 3.97% with and APR of 2.28% (WOW) according to mortgage101.com. You may do better with an 3% down FHA mortgage paying the PMI -- you should run the numbers both ways.

Ed

 

[chef]

this is what i'm offered

$200k loan, 5 yr ARM, 4.25%, 0 pts, no prepay penalty