General Home Mortgage Advice

[GlockSpock]

My Wife and I are close to purchasing a house, we just don't know which one yet! I've did quite a bit of reading about FHA and USDA loans over the years and generally know how those programs work. USDA seems great if the house you purchase is eligible. However, if it isn't and FHA is the only option, I don't like the idea of PMI at I believe .85%.

This leads to this discussion. I'm a member of two credit unions (Bowater Employee Credit Union and Tennessee Valley Federal Credit Union). How do these mortgages generally work? For example, I notice that BECU offers "up to 97% financing". I'd love to put down 20% but it has taken forever to save the 3.5% I've saved for a $150,000 home. Do these credit union loans work supplementary with something like FHA or as another option entirely? Can I possibly avoid PMI through a credit union? I assume closing costs could be cheaper through one, is this true?

 

I have plans to speak to a loan officer at BECU and TVFCU soon, but I figured TGO might could save me a lot of research time by forewarning me or recommending me towards certain things.

[Ronald_55]

5 minutes ago, CZ9MM said:

My Wife and I are close to purchasing a house, we just don't know which one yet! I've did quite a bit of reading about FHA and USDA loans over the years and generally know how those programs work. USDA seems great if the house you purchase is eligible. However, if it isn't and FHA is the only option, I don't like the idea of PMI at I believe .85%.

This leads to this discussion. I'm a member of two credit unions (Bowater Employee Credit Union and Tennessee Valley Federal Credit Union). How do these mortgages generally work? For example, I notice that BECU offers "up to 97% financing". I'd love to put down 20% but it has taken forever to save the 3.5% I've saved for a $150,000 home. Do these credit union loans work supplementary with something like FHA or as another option entirely? Can I possibly avoid PMI through a credit union? I assume closing costs could be cheaper through one, is this true?

 

I have plans to speak to a loan officer at BECU and TVFCU soon, but I figured TGO might could save me a lot of research time by forewarning me or recommending me towards certain things.

A word of advice from my experience. Go about this the opposite way most people do. Find out what payment you can afford, then from that figure what house you can afford. Be sure to leave room in that amount for closing costs. Each lender might have different costs, so at least get a ball park from them. I do prefer my credit union, but shop around. Some lenders will let you roll in closing costs if you want and can't cover them up front. It just ups the payment. The real reason to shop is interest rate. On a house a 1% lower rate can make a big difference in the long haul.

In the future as you pay down, also look if you can refinance if rates lower. I was able to refinance from a 1st and second(100%) mortgage to just one. I saved $200 per month and shaved 5 years off. Of course I had a really crappy rate to begin with, so that made a bunch of difference in the changes.

A second set of stuff to keep in mind. Look at other costs. I moved from an apartment to a house with a good sized piece of land. So I had to buy a riding mower. Well I could have let it grown up, but the wife would have left me in the house alone if I did that. Just leave some breathing room. I had a buddy that mortgaged himself to the brink. Lasted about 3 years before he defaulted.

Anyway, just my double pennies.

 

[peejman]

Honestly, with 3.5% down... keep saving.  I wouldn't expect you to get a very good rate with that little down regardless of your credit.  I'd be really surprised if you can avoid pmi at 3.5%. 

But, do some mortgage shopping and get pre-approved through at least 2 lenders prior to making any offers. As mentioned, figure out what payment you can afford and stick to it.  Being "house poor" is no fun at all.

Owning a house is very expensive.  Whatever you find, you'll spend thousands on all sorts of little things in the first year or two.   Stuff that breaks always costs hundreds, and sometimes thousands, to fix.

Be very wary of home warranties, and read the fine print thoroughly. A lot of them don't cover anything that normally breaks. 

Don't sign a contract with a realtor, and don't be afraid to drop one and get another if you're not happy. They work off commission so their job is to sell you the most expensive house you'll buy. Don't get talked into something you really can't afford. 

Location, location, location.  After that, build quality, build quality, build quality.  Research local builders, who's good and who's not. The realtor should pretty well know already, and should also tell you who built every house you look at.  

Get a home inspection from a known good inspector.  Be there for the inspection, ask lots of questions, and expect to get dirty. 

Everything is negotiable. 

[Ronald_55]

11 minutes ago, peejman said:

Everything is negotiable. 

One thing a lot of new buyers do not know is that you can write into the offer things that are expected to come with the house. If the kitchen fridge has cabinets build snug around it, ask for the fridge. If your wife loves the porch swing, ask for it. If there is a Yard Barn, don't assume it stays unless the paperwork says so. Now, stay reasonable, and understand asking for some stuff might hurt your price negotiation, but I have even seen people get the riding mower with the house. Some of these are just icing, but some (like the fridge) could really limit you or force you to pull out the cabinets to fit a new one.

Plus a few sellers will take anything not specifically noted, as much as it seems like it should stay. One house I knew of the lady dug up all the nice flowers out of the beds after the contract was signed. Left the new owners a dirty mess. She argued that they were from her grandmother's garden and not listed in the paperwork.

 

Above all, if you feel pressured or unsure of the deal, walk away to look it over. In most cases you are signing up for a 30 year mortgage. That is a long time to not be happy with it. And it sounds like you are like me. Once in a house, there is not the financial option to sell and move. 
 

[gregintenn]

You won't like my advice, but I'm with peejman. You don't sound like your financially ready to buy a house.

I would strongly suggest reading the book "Financial Peace" by Dave Ramsey.

Edited December 1, 2016 by gregintenn

[hipower]

Great advice. I listened to Dave while I was a route sales guy for about 13 years. His principals are sound. I finally used most of them and got us in pretty good shape. Then my medical bills jumped in and we are no longer out of debt. But working towards it again.

And for honesty in my post...I didn't strictly adhere to all Dave's rules, but enough took with me that I saw the value and used them in my life. 

[reed1285]

Not much that I can add that hasnt already been said. We bought a house this time last year, just as the rates were starting to climb up from the high 3's into the low 4's. We had 18% down and still had to pay pmi for a year (it just recently dropped off). I  pay extra on our mortgage every month so that helped us get to where we needed to be.  Our realtor told us the "magic mark" for conventional 30 year home loans is a 20% or more down payment. Anything under that (even our 18%) is subject to pmi. Ridiculous I know

[Sam1]

In a bit of a crunch... interest rates are about to start going up (according to fed rumors) so you will be paying more for the same house.  Think they're around 70% probability for the increase on december 14th

http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

You get into a lot of numbers game playing Russian roulette when buying a house.  Personally, if it was my money, I would look deeper into the expected interest rate hikes and see what kind of a difference that will make as well - if you are really close at locking something in asap.

[btq96r]

20 minutes ago, Sam1 said:

In a bit of a crunch... interest rates are about to start going up (according to fed rumors) so you will be paying more for the same house.  Think they're around 70% probability for the increase on december 14th

I'm thinking about a potential home buy in the April time frame if I have a stable job in the area by then...and I'm lamenting how  the interest rate hike will be a factor against me, even with 20-25% down.  I hate the way housing is a racket.

[GlockSpock]

In all honesty I wish I'd purchased the house we have been renting 4 years ago if it were possible. It was possible truly but I didn't make it priority. I've been pre-approved twice for more than I'd ever want to spend. The math as to what I can afford depends somewhat on what sort of loan I get and whether PMI is applicable. USDA is probably the smartest choice if I can find a house for it. Otherwise, FHA (or THDA) are about my only other options, both with PMI and slightly inflated interest rate.

As originally stated, if obtaining financing through a local credit union could possibly avoid PMI, that would likely be a preferred option. I suppose I will just have to discuss it with a credit union, but I was hoping someone may have experience with this here.

As stated above, it is very likely my landlord is going to put our house up for sale. I haven't had a rent increase since we moved in 4.5 years ago. I'm underpaying on rent truthfully, all the other rent in the area is $200 or so more for a compatible house, or it isn't as nice an area.

I can continue saving, but if the interest rates are raised and the market generally increases, to some point those savings are null.

I myself have listened to Dave Ramsey a lot and have heeded much of his advice. I'm also human and have ignored some of it. It is due to him that I have a Zero-Sum budget. I have a very, very stable job and just recently received a nice little pay jump. I wanted to save enough for 3.5% of a $150,000 FHA loan, just in case. I'm steering closer to $100,000 though if I find a nice place with what we need. I'm doing all of this from the monthly payment standpoint of what we can and cannot make work. While we could technically make $150,000 work we'd be closer to house poor than I'd like to be. Closer to $100,000 we'd be so close to breaking even or even potentially coming out cheaper than current rent. That means all the money I have been saving for a house fund can be funneled into a home repair fund.

So, has anyone used a local credit union for a mortgage, and if so, what sort of PMI and closing costs did you have with a lower down payment?

[bud]

.

Edited April 26, 2017 by bud

[Sam1]

I don't think you're going to avoid PMI, as much as you want someone to tell you otherwise.  PMI is a money scheme that the originators are not going to pass up willingly.

The only way to find out for sure is to start calling around and asking specifically about PMI.  I just refi'd my house last month and the best thing that happened was Wells Fargo made me mad so I put in a request at lendingtree.com and had a bazillion calls within 24 hours with offers better than Wells Fargo was offering.  Ended up saving $8000 up front AND saved .40% on the APR.

[Ronald_55]

1 hour ago, bud said:

Sell everything that isn't nailed down, move down to reliable 4-5k cars, and build the 30k you need to put down. It would be foolish for someone to loan you 145k on top of your 5k without insuring their risk, so I doubt you'll find an institution to do that, as they didn't get rich by making foolish bets.

There's a fine line here between blessing and curse. 

If I had it to do over again, I would have probably just bought an RV...... Of course I would be living in it alone after she divorced me. Not sure if that is bad or good. lol 

[peejman]

3 hours ago, Ronald_55 said:

One thing a lot of new buyers do not know is that you can write into the offer things that are expected to come with the house. If the kitchen fridge has cabinets build snug around it, ask for the fridge. If your wife loves the porch swing, ask for it. If there is a Yard Barn, don't assume it stays unless the paperwork says so. Now, stay reasonable, and understand asking for some stuff might hurt your price negotiation, but I have even seen people get the riding mower with the house. Some of these are just icing, but some (like the fridge) could really limit you or force you to pull out the cabinets to fit a new one.

Plus a few sellers will take anything not specifically noted, as much as it seems like it should stay. One house I knew of the lady dug up all the nice flowers out of the beds after the contract was signed. Left the new owners a dirty mess. She argued that they were from her grandmother's garden and not listed in the paperwork.

 

Above all, if you feel pressured or unsure of the deal, walk away to look it over. In most cases you are signing up for a 30 year mortgage. That is a long time to not be happy with it. And it sounds like you are like me. Once in a house, there is not the financial option to sell and move. 
 

I got the mower and the fridge.  The fridge died about a month after closing, but I'm still using the mower 10 yrs later. Win some, lose some. 

In general, houses haven't been a great investment for me. Just bad timing I suppose.  We lived in our first house for 7 yrs and I made 0.7% on it when I sold it, which didn't touch what we spent on improvements. We bought the current house and immediately spent $20k on renovations and have probably spent that much again in the 10 yrs since then (most of which was a new roof and HVAC).  Only recently have I gained hope I could at least get my money back.  If I'd had to sell it 5 yrs ago, i probably would've lost $50k.

But it's still better than renting. 

[Bobber]

3 hours ago, gregintenn said:

You won't like my advice, but I'm with peejman. You don't sound like your financially ready to buy a house.

I would strongly suggest reading the book "Financial Peace" by Dave Ramsey.

I agree (fwiw).  Save more.