School me on mortgages

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Looking at building a new house out here in Spokane,WA. I have a whole bunch of reasons that include but not limited to; tax breaks,home prices in my county are increasing ~4% a year, build exactly what I want, sick of paying rent etc.

So, unfortunately I’ve been dumb and never planned ahead to save for a down payment… I have my emergency fund, and other money put away but i’m not willing to touch that stuff.

Mortgage rates are awesome right now, and I feel they will only go up. The house I’m looking to have built, if I want to do 20% down will require ~$50k. I unfortunately cannot save up $50k by June. I’m looking at maybe 8-10% down. Fortunately I don’t have much debt (few CC that are at 0%)
My gf will be moving in with me, so, dual incomes. I really wanted to avoid PMI, but doesn’t look possible. I know with conventional loans around here, PMI is tacked on until 20% equity.

I’m looking at a few different options…

A:30yr fixed, highest interest rate ~3.75% but low monthly payment…

B: 5/1 ARM, 2.5% for the next 5 years, lowest monthly payment, but i’m gambling on the increase. my goal here would be throw as MUCH money as possible at this loan and when the new interest rate comes into effect, hopefully my principle is much lower, making the interest not effect the payment too much.

C:15yr fixed, highest payment, 3% fixed rate PMI until 20%.

I want to stay away from FHA loans as the PMI is on the loan for the life of the loan, and that’s just throwing money away.

curious what everyones view is on th

EDIT: MY GIRLFRIEND WILL NOT BE ON THE MORTGAGE/DEED UNTIL IF/WHEN WE GET MARRIED, ALSO, I WILL NOT BE USING HER INCOME FOR ANY OF THE BUYING PROCESS.

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Heres your 20%

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Hahahaha

But in reality, go with 30 year…that’s a good rate will be a reasonable payment.
we went with a 20 yr but since you don’t have a large emergency fund and if something happened to one of your jobs, could you pay the larger payment with one income?
We built back in 2009, first mortgage on our other house was congenital too…no issues and transferable rates, which is another advantage.

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Here’s some advice that someone gave me. Buy a house before you build one. I have talked to so many people who built one and said they wished they had owned one before building because they would have done things differently.

How shitty of a feeling would it be to spend that much to build your dream house and then realize a few years down the road, it’s not really the dream house you thought it was.

I mean, obviously this doesn’t apply to everyone, but I come across a lot homeowners throughout my daily adventures of quoting insurance policies. So many people said they wished they had more experience with living in a home, maintaining it, furnishing it, etc…

Also, the sooner you can ditch the rent, the better off you’ll be. My golden rule of my job: “Pay yourself before you pay anybody else”

I was renting an apt her in the WNY area for $450. I paid my dues to own and I now pay just under half that to own. Yeah, I have more work to do and I have to maintain my own house and pay more bills, but it’s mine and I can sell it and get my money back, most of it anyways or I can keep it and rent it out, put my parents in it when they get older, or just sell it and be done with it.

I know some of that may not apply to you, but just trying to give you something you might not have thought about.

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First off. Fixed is the only way to go ATM, in my opinion. With the economy doing nothing but rising and improving…ARM can/will really bite you in the ass. Put an extra $150/mo away and in December make an extra payment.

30 Years is nice, cheap but you’re going to pay for it (interest). You don’t have to keep the mortgage forever. I know plenty of people who have taken out 30 year terms and in 5-10 years, flip it into a 15 year and save themselves 5-15 years off their original 30 year. (This is assuming that rates don’t go from 3.8% to 7% in 5 years.)

But the most important advice I can give you. Don’t get a house with your girlfriend. Have it be in your name (especially if you’re coughing up the DP) and if you want, charge her rent. Oh and don’t build. The house you build now, will not be the house you want in 5 years.

The house I would’ve built 5 years ago, wouldn’t be anything practical or worthwhile now. You really need to live in a house for a long time before you can really dictate what you want/need in a house.

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I don’t really see any reason to go 15 year over 30 year other than the slightly lower interest rate. If you want to pay extra on your mortgage every month to pay it off in half the time, that’s encouraged. But there may be certain months of the year when you’re stretching yourself out a little bit, and it’s much more beneficial to have the option to make the minimum payment on your house, so that credit card statements can be paid off, vacations can be paid for with cash, etc…

Forget about the ARM loan right now. Sub-4% interest rates are historically low for fixed mortgages. You’ll thank yourself 10 years from now.

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All of this.

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you pay less than $225/mo on a mortgage?

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^^oops I meant to say just under double that…

It seems that mortgages def aren’t that hard to nagivate right now. Many banks are offering bottom line rates because it’s so competitive right now. It’s either FHA or Conv. and it you take the 2nd choice, what terms and if you want to buy any points up front.

Then you have to decide if the inspector did a good job and if you are satisfied with the results enough to make the purchase.

I’ve recently been looking to work anyone who does refi’s currently. If a customer of theirs has a $1,000 premium and I can get them down to $600 without sacrificing coverage…that refi just gained an additional $35 a month to play with. It’s in their and the customer’s best interest to have me shop the policy.

I just have to find someone I can link up, which is a tall feat in itself.

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Statistically speaking, 15 year mortgages are generally utilized by people buying their second or third home who have 60%+ down and don’t want to retire with a mortgage payment.

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Home inspectors are such a sham. Obviously you should get one if you don’t know anyone who can help, but it’s such a bullshit business. There’s no liability on their end. “House is great? Oh, it fell down 30 days after moving in? Shit, must have missed that…sorry!”

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and congrats on album of the year…

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… SHOULDA GONE TO BEYONCE AND YOU KNOW IT.

EDIT: Home Ownership :tup:

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I agree with you. I will say though…most people think that it’s the job of the inspector to tell them whether or not to buy the home. It’s not. They present their findings and collect their pay. Most people aren’t thorough enough to go through the report and analyze it correctly or pay someone to do it.

That’s where the fault lies and it’s a big problem. I was guilty of it myself. I was so jaded by the house and exhausted by the process, I failed to actually realize that the things he mentioned were bigger problems than he made them out to be. I was mad and blamed him, but in all reality, I was just too young and dumb to know any better. I didn’t have anyone holding my hand while buying my house, I did it on my own. I was fortunate that I don’t have major problems, but there are/were things that I have to address before I sell the house again. Welcome to home ownership.

I think some people think that the inspectors are supposed to be more vocal about issues and most aren’t. They may make a note about it and say they recommend fixing it or changing something, but they aren’t doom and gloom about it, maybe sometimes when they should be. It’s just not their job.

Now I’m not saying that some aren’t confident and vocal to customers, but to come out and crush someone’s hopes and dreams of buying a house they fell in love requires some big ones and a strong opinion about it. Not many are willing to go that far, especially when it’s easier to present it, move on and let the customer decide.

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I have an inspector that will crush your hopes and dreams. He is the best in the area I have dealt with, and I have dealt with quite a few.

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Don’t forget about tax and insurance cost.

I used my brother for my home inspection. I figured since he built his own house and has been doing construction for 20 years I could trust him.
The problem with home inspectors is because they passed a test they think they know it all. You want someone who has actually worked in the field and knows what is right and wrong. Not someone who just goes off a check list.

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we had a home inspector come out and do a 4 hours inspection and then produce an 88 page report with thermal readings, fucking diagrams with arrows and shit, 100+ images and a detailed report listing items of priority for repair etc.

blew us away.

prior to this experience i was with Beck on they are a sham.

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+1 to everything Beck said but major +1 to this. If she’s not the one you’re ready to enter into legally binding marriage with why the hell would you enter into a legally binding 30 year financial obligation with her?

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Most people keep their homes from 10 years of less. a lot can happen in your life over 10 years so it’s reasonable to assume you may not even have it long term. So if you consider this then all of a sudden comparing 15/30 year loans and arms should re-balance in your mind. With the rate climate today I’d probably go fixed 30. I personally have a penfed 5/5 that can vary but only every 5 years.

PMI is on all loans until 20%. who cares if it’s FSA etc, just take the best rate you can find. odds are you’ll refinance or be gone before 10 years are up.

+100000 on never buy a house with your GF. If she wants a house then let her buy one also you can guys can rent one of them out. If you can’t afford the house by yourself then don’t do it at all. If one of you loses a job you’ll thank me.

to echo others, 90% of home inspectors are unskilled people with a clipboard filling out a form that anybody can, the other 10% are amazing. look for somebody who worked/wonks in the building trade, if they can’t build a house, I don’t trust them to inspect one.

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Maybe its only in NY, but from my understanding PMI is now for the life of the loan. Have to have that good DP these days.

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I only put 12% down on my last purchase and I don’t have PMI ;). You just have to pay damn good attention to what products are out there.

I highly recommend Wells Fargo for the mortgage. They are big but have a very personal touch. I have numerous contacts over there that I can share with you and you will be glad I did. They 100% got me a better deal than any other bank could offer and they did it in record time.

I will Third on buying before building, and I would say never build unless you have major control or are using a very custom home builder. I have remodeled several homes and that is a challenge, but it is a harder bullet to bite when you have to fix and remodel your new build. I have a friend that spent over $400k with Ryan and he learned a tough lesson. He is now an investor in a custom build firm. Your best bet is to find a home that is under budget and close to what you think you want and move in. Wait a few months then start your remodel to what you decide you really want. Then in 5 years sell it because you then know what you actually want.

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PMI for life of loan is only on FHA products.