Are there any special schemes for first time home buyers?

I also do not have the 20% needed for downpayment. What are some
options I can have?

With today's prices, very few first time buyers will have 20% cash.
It would be nice, though. I sold a house three years ago in a hot
market and was amazed at how many offers came in from people that were
flat broke. They were even financing the closing costs.

Talk to the loan broker at your realtor's office for ideas (you do
have an agent, right?) and then go online to get the best rate. It's
cheaper by a big margin.

Typically you end up with a mortgage for 80% and a home equity loan
for all or part of the remainder. Your down payment ends up being 0%
or 5% (+ closing costs).

There are other ways. There's a deal in my state that will finance up
to 107% of the purchase price in one loan without PMI.

There are FHA loans. If I remember, there are additional flaming
hoops to jump through to qualify for one.

Then there's PMI if you want to go higher than 80% on the first
mortgage. You have to pay PMI until the loan is paid down to 80% of
the original purchase price even if the value increases.

Anyways, there are lots of options and many companies / brokers who
can help you and are desperate for your business right now. Read the
fine print and understand what you're getting into.


-rev



On May 30, 4:57 pm, Slain wrote:
Are there any special schemes for first time home buyers?

I also do not have the 20% needed for downpayment. What are some
options I can have?

In article . com,
Slain wrote:

Are there any special schemes for first time home buyers?

I also do not have the 20% needed for downpayment. What are some
options I can have?

A life time of debt? Bankruptcy? Not being able to save for
retirement? Working until you are 80?

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
================================================== ====================

On May 30, 5:55 pm, The Reverend Natural Light
wrote:
With today's prices, very few first time buyers will have 20% cash.
It would be nice, though. I sold a house three years ago in a hot
market and was amazed at how many offers came in from people that were
flat broke. They were even financing the closing costs.

Talk to the loan broker at your realtor's office for ideas (you do
have an agent, right?) and then go online to get the best rate. It's
cheaper by a big margin.

Typically you end up with a mortgage for 80% and a home equity loan
for all or part of the remainder. Your down payment ends up being 0%
or 5% (+ closing costs).

I don't know where you live, but here in these parts (NJ) it's not
typical to have a down payment of 0 or 5%. Ten percent, with PMI,
gets done on some deals, but typical is 20% down. And the window
on a lot of the sub prime mortgage deals has closed, after idiots that
financed deals with too little down over the last five years went
bankrupt.



There are other ways. There's a deal in my state that will finance up
to 107% of the purchase price in one loan without PMI.

There are FHA loans. If I remember, there are additional flaming
hoops to jump through to qualify for one.

Then there's PMI if you want to go higher than 80% on the first
mortgage. You have to pay PMI until the loan is paid down to 80% of
the original purchase price even if the value increases.

Anyways, there are lots of options and many companies / brokers who
can help you and are desperate for your business right now. Read the
fine print and understand what you're getting into.

-rev

On May 30, 4:57 pm, Slain wrote:



Are there any special schemes for first time home buyers?

I also do not have the 20% needed for downpayment. What are some
options I can have?- Hide quoted text -

- Show quoted text -

In article . com,
Slain wrote:
I also do not have the 20% needed for downpayment. What are some
options I can have?

One possibility is 80-10-10 financing. You take an 80% normal mortgage,
and make a 10% down payment, and take a home equity loan equal to 100%
of your equity (which is 10%). The home equity loan plus your down
payment makes 20%.

Your monthly payment will be your regular mortgage payment on the normal
mortgage, plus your repayment of the home equity loan, which will
usually have a shorter term than the mortgage, and be at a higher
interest rate.

The advantage this has over just doing 10% down and borrowing 90% is
that many lenders will require private mortgage insurance then. That
can cost more per month than the payments on the home equity loan in an
80-10-10 arrangement.

But before doing any of the above, or anything else other than the
common 20% down, 80% loan, consider how long it would take to save 20%.
Go into serious savings mode--eat out less, wait for movies to show up
on pay-per-view or at the rental store instead of going to the theater,
etc. You might be surprised at how fast you can accumulate money if you
really try.

Besides, knowing how much you can get by on is a VERY good thing to know
before buying a house, because a house is much more permanent than an
apartment. In an apartment, if you go through some rough times and need
to spend less, you can put your things in storage, and move into a
smaller, cheaper place, relatively easily. Or if you have to move to a
different city, it is again relatively easy.

In a house, that doesn't work. Sure, it CAN work, if you get very
lucky, and your hard times happen to fall at a time when your area is
booming, and there are plenty of buyers looking for houses. But if your
area is booming, you probably aren't going to be on hard times. Oops.
In real life, it is more likely that you'll fall on hard times when your
whole area is having problems, and it could take weeks, months, or even
YEARS to sell your house, unless you take a big loss. So, you want to
be damned sure that once you get the place, you'll be able to afford it,
even if you have to go through a job change, or other hardship. And
knowing just how much you can actually live on will help you figure out
whether you can do that.

I'd suggest that you take a trip to your local bookstore, and browse
through the books in the real estate section. There will be several for
first time buyers, and some of them are pretty good. There's "Home
Buying for Dummies", and "Mortgages for Dummies", and "Questions Every
First Time Home Buyer Should Ask" and something like "106 Mistakes First
Time Home Buyers Make (And How To Avoid Them)", and "Tips and Traps in
Mortgage Hunting" or something like that. Flip through a few of these,
and whatever others they have. Find a few that seem good to you, and
buy them and read them cover to cover. (And if spending $100 on books
to help prepare you for house hunting will blow your budget, you aren't
ready to buy a house, no matter what 0% down financing you might find).

But, getting back to a point I sort of raised earlier, analyze the hell
out of your finances! What I did was make a spreadsheet that let me
enter things like the following:

1. Financing terms for my loan,

2. House price,

3. Property tax and insurance rates,

4. House square footage,

5. Income details (salary, amount I contribute to my 401k, withholdings
for SS and Medicare),

6. Estimated utility costs other than electricity (electricity was
calculated based on my electric bills from my apartment, and the
assumption that this consists of a fixed portion that would be the same
in the house for things like computers, TV, fridge, etc., and a variable
portion for heating that would be proportional to the square footage of
the house).

7. Expected returns on my mutual funds, and expected appreciation of the
house,

8. Periodic expenses for a bunch of things. For example, I could tell
me spreadsheet that I want to buy a new laptop every 3 years for $2500,
and a new TV every 7 years for $3000, a new car every 7 years for $25k,
and so on.

9. Estimated maintenance costs for the house, as a percentage of the
price. (Although for specific items, like roof replacement, appliance
replacement, and things like that, I handled them under #8).

The spreadsheet would then tell me what my cash flow would be each
month, and draw me nice charts showing how much money I would have in
liquid form (mutual funds, bank) and my overall wealth taking into
account appreciation on the house and how much I'd paid, from now
through the next 20 years.

With this spreadsheet, I could drop in the price and square footage of
any house I looked at, and see if my savings were going to recover and
grow at an acceptable rate afterwards, and fiddle with things like how
often I want a new TV or laptop or car, to see what the effect of those
changes is. (It's a lot...going a year more on the car made a big
difference 20 years from now, for example).

More importantly, I could run this the other way--tell the spreadsheet
that I want to end up with a certain amount in savings, and a certain
amount in my 401k, 20 years from now, and ask it how much house I can
afford. (Result: I could go to around $350k and meet all my financial
goals and afford my desired level of non-house luxaries. My mortgage
company would have approved me to around $700k. This shows why you
should not base your budget on what the mortgage company is willing to
lend you!)

Oh, one more thing when you are figuring out the financial implications
of your future house: taxes. No doubt you've heard that you can deduct
mortgage interest (and for much of the life of the mortgage, most of
your monthly payment is interest!), and property taxes. HOWEVER, to
take those deductions, you have to itemize your deductions. That means
you do NOT get to take the standard deduction. So, if you are going to
have, say, $10k of interest and $2k of property taxes at a house you are
looking at, and are in the 25% bracket, don't make the mistake of
thinking you've got $12k of deductions there, so will be saving $3k/year
($250/month) on taxes compared to what you pay now. You'll lose the
standard deduction. That's around $5000 if your are single or $10000 if
you are married filing jointly. So effectively the house is only
getting you $7k or $2k in additional deductions, for a tax savings of
$146/month or $42/month. Nothing to sneeze at, but a far cry from
$250/month. It would be a shame to buy a place that is just within your
budget, when that budget was counting on the $250/month. People have
done that, I bet.

Let me sum all this up: (1) get books, and (2) analyze the living hell
out of your finances.

--
--Tim Smith

In article .com,
The Reverend Natural Light wrote:
Talk to the loan broker at your realtor's office for ideas (you do
have an agent, right?) and then go online to get the best rate. It's
cheaper by a big margin.

Sometimes it is cheaper by a big margin...and sometimes it is cheaper by
a small margin. And sometimes it isn't. Definitely go online, but
don't count out the traditional mortgage places.

....
Then there's PMI if you want to go higher than 80% on the first
mortgage. You have to pay PMI until the loan is paid down to 80% of
the original purchase price even if the value increases.

And with many just getting it down to 80% isn't enough. You also have
to remind them to take off the PMI! They will happily let you continue
to pay PMI until the loan is paid off if you wish.

I bet they make a lot of money off people who think that PMI continues
until the loan is paid off. After all, they have a fixed rate mortgage,
so they EXPECT to pay the same amount 360 times, right?

--
--Tim Smith

Wed, 30 May 2007 21:42:49 -0700 from Tim Smith reply_in_group@mouse-
potato.com:
One possibility is 80-10-10 financing. You take an 80% normal mortgage,
and make a 10% down payment, and take a home equity loan equal to 100%
of your equity (which is 10%). The home equity loan plus your down
payment makes 20%.

The advantage this has over just doing 10% down and borrowing 90% is
that many lenders will require private mortgage insurance then. That
can cost more per month than the payments on the home equity loan in an
80-10-10 arrangement.

Maybe there's something I don't understand(*), but every time I've
dealt with a mortgage bank they've tried pretty hard to make sure the
down payment isn't borrowed money. For instance, a year ago when I
bought my present home I had to show several months' bank statements
to prove that my down payment was savings and not a recent loan.

This scheme essentially means borrowing half the down payment -- and
simultaneously taking on a second mortgage. Does any decent lender
really go for this?



(*) "Oh, don't be so modest, Stan. There are *many* things you don't
understand!"

--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://OakRoadSystems.com/

30 May 2007 13:57:07 -0700 from Slain :
Are there any special schemes for first time home buyers?

I also do not have the 20% needed for downpayment. What are some
options I can have?

You didn't say where you live, so it's hard to advise you.

In New York State, for instance, there is the SONYMA program for
first-time home buyers. The program provides a lower-than-market
interest rate for the life of your loan, and it also provides an
interest-free loan to cover closing costs. If you stay in your home
10 years, that loan is wiped out and you never have to pay closing
costs.

Ask your local librarian for help in researching programs. Banks and
credit unions that do mortgages would know of any programs that might
help you. Or visit a couple of realtors -- I wouldn't trust their
steering you to specific banks, but if there's a subsidy program that
helps first-time buyers in your area they probably known about it.

--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://OakRoadSystems.com/

In article ,
Tim Smith wrote:

In article . com,
Slain wrote:
I also do not have the 20% needed for downpayment. What are some
options I can have?

One possibility is 80-10-10 financing. You take an 80% normal mortgage,
and make a 10% down payment, and take a home equity loan equal to 100%
of your equity (which is 10%). The home equity loan plus your down
payment makes 20%.

Doesn't the higher interest rate on the HELOC portion offset
the savings of not having PMI? Wouldn't one be better off to
work hard to scrape up as much down payment as they can, take
the PMI, then bust butt to pay down to 80% to eliminate the
PMI fee?

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
================================================== ====================

On May 31, 6:04 am, Stan Brown wrote:
Wed, 30 May 2007 21:42:49 -0700 from Tim Smith reply_in_group@mouse-
potato.com:

One possibility is 80-10-10 financing. You take an 80% normal mortgage,
and make a 10% down payment, and take a home equity loan equal to 100%
of your equity (which is 10%). The home equity loan plus your down
payment makes 20%.

The advantage this has over just doing 10% down and borrowing 90% is
that many lenders will require private mortgage insurance then. That
can cost more per month than the payments on the home equity loan in an
80-10-10 arrangement.

Maybe there's something I don't understand(*), but every time I've
dealt with a mortgage bank they've tried pretty hard to make sure the
down payment isn't borrowed money. For instance, a year ago when I
bought my present home I had to show several months' bank statements
to prove that my down payment was savings and not a recent loan.

This scheme essentially means borrowing half the down payment -- and
simultaneously taking on a second mortgage. Does any decent lender
really go for this?

I also wondered how easy it is to get an agressive loan today. One
difference in the lending process is whether the loan is conforming,
which means it meets requirements so that it can be resold in the
broad secondary market. To make mortgages easily tradeable, they have
to have some consistent standards so that instituitions can buy/sell
them in volume and understand what they are getting. And one of
those standards means you can't be borrowing the down payment, which
is why you see this on conventional loans. Now, there are lenders
that will do non-conforming loans of all types, taking on risk for
higher rates. However, after going overboard making all kinds of
bad loans in the last cycle, some big ones went bankrupt and those
that are still making these loans are being far more cautious.

I'm also surprised by Tims comments where he said you don't need PMI
if only the primary mortgage is no more than 80% of the purchase,
meaning you can borrow more without PMI as long as it's a seperate
loan. That may be true, but it's strange. PMI protects the mortgage
holder, so of course they don't want to be exposed for more than 80%
of the value. But the other obvious part of the equation is if they
do lend 80%, don't they then care about the fact that the buyer
borrowed most or all of the rest of the money? That means they have
no money, no cash reserve, and makes them much riskier. So, whey
would they wave PMI? With only a 20% margin, if they foreclose, they
could still easily wind up screwed, especially in a market like now.
Here in the NJ/NYC area if you bought about 2 years ago and had a
foreclosure now, the property sale price, commissions, expenses, etc
could easily exceeed the 20% safety margin and result in a loss to the
primary mortgage lender.

In this situation I'd look first to any special programs that many
states have for first time home buyers. Then I'd go find out what
kind of loans I could qualify for and what the rates are. Then I'd
think long and hard about the risk involved. With insufficient money
for a down payment, just because someone will make you a loan at some
higher rate, with PMI, etc, doesn't mean it's a wise thing to do.
Think about what happens if one wage earner lost their job or had
reduced hours for 6 months. Or if the car suddenly blows up and you
need a new one. Could your survive or would you wind up in
foreclosure?




(*) "Oh, don't be so modest, Stan. There are *many* things you don't
understand!"

--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://OakRoadSystems.com/

On May 31, 7:35 am, (J Buck) wrote:
wrote: I drive a regular cab pickup truck. I can't

lock my gun in the trunk

You mean the cab? Why not?

No, I mean the trunk, hence I can't use it (since there isn't one).
The way I interpreted the law was to have the gun and ammo in separate
locked compartments in the vehicle to transport it without a LTC.
That would require a separate lockable compartment, i.e. a trunk. If
I have the gun in the cab with me I'm carrying, and need a LTC. If I
had a trunk I could lock the weapon in there and keep the ammo in the
vehicle.


My concern is that I live in a rough neighborhood. I didn't know when
we moved in a little over a year ago, but it's been crazy since. Drug
busts, a home invasion, gunshots, people intentionally hitting other
people with a car, apparent gang-bangers claiming to own the street,
etc.

There are neighborhoods like that In New Hampshire?

Much to my dismay. It flashes blue out front at least a few times per
week, and it's never a traffic stop. Imagine finding this out after
buying a house within sight of where all this goes on.


On May 30, 4:57 pm, Slain wrote:
Are there any special schemes for first time home buyers?

I also do not have the 20% needed for downpayment. What are some
options I can have?

While 20% down is common and nice, with decent credit you can get by
with less. Your credit score & location will determine quite a bit, I
know someone who got a 103% loan a year or so ago to incorporate
closing costs and a new living room set into the mortgage. They had
excellent credit, however.
What I saw for options when I was looking just over a year ago was
80%, 90%, 95%, 98%, 100% & 103%.
Others have warned you of the risk, especially if you fall upon hard
times. Research and plan for unfortunate circumstances when you're
doing this.

I have one regret in my purchase, we didn't research the neighborhood
well enough. We fell in love with the house and the town so we dove
right in. I'd strongly advise you to spend from 8PM-3AM on a fair
weather Friday & Saturday night awake in a car front of the house you
want to buy. If there's a town paper with a police log get back
copies and read up. Had I done my own weekend night observation I'd
have noticed the constant issues, screaming matches, police visits,
etc. Had I read the police logs I'd have known that there is a
newsworthy incident on my block every month or so. Turns out a dead-
end street with little kids riding bikes back and forth in the day
doesn't always translate into nice evenings. Next time I do this I'll
be researching the neighborhood until I'm blue in the face.

On May 30, 4:57 pm, Slain wrote:
Are there any special schemes for first time home buyers?
I also do not have the 20% needed for downpayment. What are some
options I can have?

While 20% down is common and nice, with decent credit you can get by
with less. Your credit score & location will determine quite a bit,
I
know someone who got a 103% loan a year or so ago to incorporate
closing costs and a new living room set into the mortgage. They had
excellent credit, however.
What I saw for options when I was looking just over a year ago was
80%, 90%, 95%, 98%, 100% & 103%.
Others have warned you of the risk, especially if you fall upon hard
times. Research and plan for unfortunate circumstances when you're
doing this.
I have one regret in my purchase, we didn't research the neighborhood
well enough. We fell in love with the house and the town so we dove
right in. I'd strongly advise you to spend from 8PM-3AM on a fair
weather Friday & Saturday night awake in a car front of the house you
want to buy. If there's a town paper with a police log get back
copies and read up. Had I done my own weekend night observation I'd
have noticed the constant issues, screaming matches, police visits,
etc. Had I read the police logs I'd have known that there is a
newsworthy incident on my block every month or so. Turns out a dead-
end street with little kids riding bikes back and forth in the day
doesn't always translate into nice evenings. Next time I do this
I'll
be researching the neighborhood until I'm blue in the face.

On 2007-05-31, Stan Brown wrote:
The advantage this has over just doing 10% down and borrowing 90% is
that many lenders will require private mortgage insurance then. That
can cost more per month than the payments on the home equity loan in an
80-10-10 arrangement.

Maybe there's something I don't understand(*), but every time I've
dealt with a mortgage bank they've tried pretty hard to make sure the
down payment isn't borrowed money. For instance, a year ago when I
bought my present home I had to show several months' bank statements
to prove that my down payment was savings and not a recent loan.

This scheme essentially means borrowing half the down payment -- and
simultaneously taking on a second mortgage. Does any decent lender
really go for this?

Well, it was Countrywide that suggested 80-10-10 to me. I think a lot
depends on your credit rating. Mine is usually in the 790-805 range at
the 3 big credit reporting services, but at the time I was talking to
Countrywide, it happened to be 830 at the one they checked. When they
saw that, they said I could put away the binder I had brought with tax
returns, several months bank statements, etc. All they needed to see
was my last pay stub and my current balances, and they would approve me
up to a 50% debt to income ratio, and allow things like 80-10-10 if I
didn't feel like making a 20% down payment.

Things probably would have been different with a lower credit score.

(The high credit rating also helped later, when I was actually buying.
They waived requiring an appraisal of the house, saving a few hundred
bucks).

On 2007-05-31, John A. Weeks III wrote:
One possibility is 80-10-10 financing. You take an 80% normal mortgage,
and make a 10% down payment, and take a home equity loan equal to 100%
of your equity (which is 10%). The home equity loan plus your down
payment makes 20%.

Doesn't the higher interest rate on the HELOC portion offset
the savings of not having PMI? Wouldn't one be better off to
work hard to scrape up as much down payment as they can, take
the PMI, then bust butt to pay down to 80% to eliminate the
PMI fee?

Possibly. It's going to be one of those "run the numbers" thing and see
which comes out better at the time you have to make the decision,
because it probably varies as interest rates change.

Although one thing to consider is that most people who get the HELOC are
probably going to keep using it. They start out with it at 10% to cover
half the down payment, and then as they pay that down, it becomes
available to borrow again, and a lot of people will then borrow again,
to buy furniture or renovate. So, there is going to be some value to
the lender of getting you into a HELOC from the start, which means there
is some incentive for the lender to make 80-10-10 using a HELOC more
attractive than 90-10 with PMI.

Tim Smith wrote:

Possibly. It's going to be one of those "run the numbers" thing and see
which comes out better at the time you have to make the decision,
because it probably varies as interest rates change.

Although one thing to consider is that most people who get the HELOC are
probably going to keep using it. They start out with it at 10% to cover
half the down payment, and then as they pay that down, it becomes
available to borrow again, and a lot of people will then borrow again,
to buy furniture or renovate. So, there is going to be some value to
the lender of getting you into a HELOC from the start, which means there
is some incentive for the lender to make 80-10-10 using a HELOC more
attractive than 90-10 with PMI.

Excuse me if this was already brought up - There's a couple of other
considerations which may not have been mentioned earlier in this thread: HELOC
interest is generally tax deductable in the US, whereas PMI premiums are not.
This can partially or completely offset the diference between a PMI premium and
the higher HELOC interest.

Second is that some lenders are a pain to deal with to get PMI waived. If they
allow it at all, in many cases you have to pay for a new appraisal. At a minimum
you may need to provide a current real estate tax assessment that supports the
higher valuation.

By going with a HELOC you avoid all of this. The discipline to pay off the HELOC
and not use it for the family vacation or similar discretionary purchase is
critical though...

--
"Tell me what I should do, Annie."
"Stay. Here. Forever." - Life On Mars

On 2007-05-31, Rick Blaine wrote:
Excuse me if this was already brought up - There's a couple of other
considerations which may not have been mentioned earlier in this thread: HELOC
interest is generally tax deductable in the US, whereas PMI premiums are not.
This can partially or completely offset the diference between a PMI premium and
the higher HELOC interest.

Good point.

Basically, when given the choice between a bunch of different ways to
reach a financial goal (buy a house), you just have to sit down and work
out what they really cost. One might have more up front costs, but
better tax consequences. One might have low monthly payments but more
long term interest. And so on.

And to make it more complex, which is "better" might depend on when you
look. On plan A you might end up with more money after 5 years, but
plan B might leave you more after 20 years, and plan C might be even
better than B after 30 years. So, if you are buying a house that you
are only keeping for about 5 years, A might be best, but if this is the
place you are going to retire in, B or C might be best.

The only way I found to compare that made me feel like I had any idea
what the hell was going on was to make a spreadsheet that forecast my
wealth under each plan I considered, projecting out 20 years under
reasonable assumptions about income, inflation, taxes, etc, and then
looking at graphs of those and deciding which overall curve I wanted to
be on.

Slain wrote:

Are there any special schemes for first time home buyers?

I also do not have the 20% needed for downpayment. What are some options
I can have?

Depends on your location and credit rating.

If your FICO rating is very good, there are many favorable first time
buyer loans available.

For example, if you happen have a BB&T bank nearby (they're in several
southeastern states), they have a first time buyer loan with zero down, no
points, no PMI, a 30 year fixed rate at a very decent rate.

You're obviously cash poor, so I suggest you read up on the high rate of
foreclosures. It is ok to buy with zero down, but be sure to have a
substantial cash reserve left after closing on the house. Otherwise, you
just may end up adding to the foreclosure statistics.

--
Tony Sivori