Which loan should I get for house?

[Charlesbusa]

Please vote only if you are knowledgeable about home loans(ie you have done one, or your job or schooling are related).  I don't know how long I'll be in the house, with my job I could be in it 30+yrs or 3yrs, just don't know. My job is very secure, just might get the oppurtunity to make more money somewhere else or close by.  So here are the options;
I can save $500 a month with a 7 yr arm over the 30yr fixed.  10yr arm will save somewhere in the middle.  Even with the 30yr fixed I have money for repairs/emergencies/fun.  This extra money is additional to that.

Go 7 or 10yr arm;
1)Put the extra money back into the principle so if I refi or sell in  7-10 yrs I have more equity.
2)Put the extra money into house improvements for a larger selling price, ie using other people's money to make my own.
3)Use the extra money for fun  ie  high maintenance girls , motorcycles, vacations, etc..

Go 30 yr fixed and know I have a great rate locked in.

Or another option, please explain below.

Thank you for this, its a big decision and apprieciate all of your guy's experience in this.



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[Charlesbusa]

 

[Projekt]

I voted for 7/1 arm with extra for improvements. There are a lot of factors to think about. Consider the local market, what prices it will bear as well as historical peaks and valleys pertaining to real estate market price fluctuations. Knowing that the economy as a whole is cyclical with recessions and bull markets on a roughly 10 year rotation, you should factor that into your long term goals. If you plan to unload the house in the next 5-7 years research the local market cycles in order to time your sale for the next peak so as to maximize profits. Improvements should be made to the kitchen and bathrooms as these two areas have the most return on investment dollar for dollar. Don't put alot into additions or much else. You want to keep curb appeal up so a sanitary simple front garden will suffice. You will find that since you bought below market there may be quite a lot of areas to spruce up. Have you had the home inspection yet? This will uncover the problem areas that need attention. How does the roof look? Foundation? Considering the seller's willingness to accept an offer at $50-60k below comps, was the house listed as a &quot;Diamond in the Rough&quot;? If so you will benefit greatly from minor asthetic improvements. Southern California is a great market to invest in so you will definitely get your investment returned to you.
Another thing to think about is that presently the domestic housing market has inflated significantly. This is during the same period that the Stock Market deflated and people's stock portfolios shrunk. This seems like no coincidence, people took their money out of stocks and sunk it into real estate. The significance of this is the very probable collapse of real estate prices in the near future. One very good example of this took place in Japan and the Japanese economy suffered greatly and many banking institution CEOs committed suicide.
Yeah this is a lot of rambling, I know. There may be some useful info in it all.

 

[1127 TO 1299]

rates are great, they were at a 40yrs low back in March
we don't know about the future.
I am in the market for buying and this is what i am choosing even if i plan moving in 4-5 years.
I might be able to move and rent the condo.

 

[thesnake]

Here's what I said in the random thoughts thread:


Before you can ask which is best, you need to determine how long your going to be in the residence. Most people flip on average around every 5 years.

With that said, rates will go up from here. It's pretty simple, if you plan on being in the house longer than the fix portion of the ARM, your going to get raked. If your planning on flipping it sometime during the fixed portion, by all means use to to save some financing cash.

I ain't one for moving, so I went with a 15yr fixed at 4.75 w/ no points (refi a few months ago). Rates have ticked up since then, but are still  pretty low now. The rate your quoted is way to high assuming you have very good credit. In CA right now, a 30yr fixed can be had for around 5.4% w/ no points. It all depends on the credit, lock period, etc though.

Assuming your not broke, never touch any morgage deal that offers &quot;no money closing / free closing&quot; as all they are doing is scalping you on the rate. In effect your paying them points in the form of a mortgage rate.

let me know if you have any specific questions-- glad to help.


I personally love the 15yr fixed. It's allows me to lock in a very low rate and I like the thought of paying a little extra now and having it paid for/equity later.

If you have no insight into how long your going to be there and can't affort the payments comfortably on a 15yr fixed, I would og with a 30yr, which is still somewhat near 30 year lows. buying an ARM with rates at historical lows make sense only if you plan to flip it before your fixed rate expires.



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[thesnake]

projekt-- how do you feel our real estate market and economic conditions mirror that of Japan? It is a fairly simple formula, supply (somewhat limited in desirable areas), demand (f of demographics, and economic factors (f of housing disposable income, which is a f of interest rates and middle/upper middle, high income projections).


We're not in a wild relaestate speculation frenzy as the market has been driven by single family homes sales. Supply is a constant, demand is projected to be constant and/or slightly increasing, and the ecomony has been slowly upticking after 2 years of decline hense interest rates are starting to inch up to prevent inflation pressures on the dollar as the economy improves. What does all that mean? Depending on where you buy the house (ie= desirable region), the pricing should be fairly solid. It may decrease 5% or so, may inch up, or remain flat until we have a new wave of job job growth (i.e. demand increases). That's my take.



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[thesnake]

also rememebr the old adage, buy your first house as a place to live, not to speculate on the RE market. Your making the right decision on buying, just make sure you don't over extend yourself as there are plenty of incidental costs that pop up, which projekt highlighted.

 

[Charlesbusa]

 

[Projekt]

Snake,
The Japanese scenario was tossed in there just as a food for thought tidbit. Just saying it happened there, it can happen in the states too. Don't really think the domestic market mirrors it though. Japan's economic crisis was based on overvaluation of large scale office buildings and high rise developments (many of which are still sitting unfinished), not exclusively residential property.
Thinking about it further I would have to lean more to the 30year fixed mortgage because you are unlikely to refinance down to a significantly lower rate for the life of the mortgage. Take advantage of the low rates and just hang onto your loan. My opinion was more based on the typical buyer who spends approximately 5-7 years in a home before selling it, or buying another &quot;upgrade&quot; home.
Heck, Charles might be the type to settle in that home and still reside in it when he makes his 360th and final payment. Who knows what the neighborhood will be like 30 years in the future when his grandkids are visiting.
I know that I would have benefitted from a 5/1 or 7/1 Arm.
My first mortgage was a &quot;good&quot; rate at 8% 30 year fixed back in May 2000.

 

[Revlis]

Um, one other type of loan to consider would be an Interest only loan. Basically you only pay the interest on the loan, which all comes off your taxes. Bonus, however yo udo place yourself at the whim of the market, property values rarely drop but what your counting on in an interest only loan is soaring property values so the market can provide the equity. If your planning on staying in the house then an Interest Only loan probably isn't the way to go.

I also don't know about the &quot;Don't look at your first home as a re-sale&quot; I mean I don't intend to be in my first home for more than another couple of years tops. I bought my first home as a stepping stone, a way to get to the &quot;Barbi Dream Home&quot; the wife and I are really after. If you are buying a house for this reason though, there is only one thing to worry about... Location. Home's in my area are on the market for an average of two weeks, and sell for more than asking price... Makes it easy to sell in a hurry if you have to for some reason... FWIW

I looked at the ARMs and all of them sounded to me like a loansharks wet dream, no thanks... It's just me yeah, there are bonuses for sure especially initially when money may be a little tight anyway. I went with a 30 year fixed two years ago.

Another option could be the VA loan if your prior or current military. I used the VA mostly because I was in a hurry and I only had about 1/2 of what I needed for a down payment for the size and type of home I was after. You'll hear some horror stories regarding the VA loan program but I am here to tell you that it's mostly BS. I had the whole process done and wrapped up in under a month, and it was a point free, pain free experiance.

My best recommendation is to read online everything you can about the home mortgage process, it will help you decide what will work for you better than anything anyone can tell you.

Oh, Watch out for taxes... they will have a way of sneaking up on you... meaning what the taxes are currently set at can change dramatically after you sell the home.

-Be sure to have it inspected prior to closing, and watch the contract carefully when it comes down to fee's, points, etc...

But do your research online and don't sweat it...

 

[Charlesbusa]

 

[Charlesbusa]

oops double post, damn dial modem, sometimes everuthing goes weirdo.



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[thesnake]

whore

 

[Charlesbusa]

whore

What!!! never!!! I just trying to get as many votes as possible before the end of the week. That's when I have to decide on the type of loan. This site is great, I get to hear many different view points that otherwise wouldn't be available to me.

But thanks for bumping my poll back up, you da best!!

 

[thesnake]

Given you have an answer for:

determine how apprx. how long your going to be in the residence. If you don't know, err on the side of caution (fixed)

it's as much of a no-brainer as one gets.

 

[Col_Mustard]

Given you have an answer for:

determine how apprx. how long your going to be in the residence. If you don't know, err on the side of caution (fixed)

it's as much of a no-brainer as one gets.

I like the old fashioned Fixed plus with rates low they may well go up making the extra money a thing of the past and in fact you could pay more than the fixed.