OP
OP
Correct. Essentially, all loan products/programs have a max DTI to qualify.
Common misconception, but good thinking. Are you in the process of buying now? Did your lender pull credit yet?
-
Ever wanted an RSS feed of all your favorite gaming news sites? Go check out our new Gaming Headlines feed! Read more about it here.
-
We have made minor adjustments to how the search bar works on ResetEra. You can read about the changes here.
Mortgages - 101 and Pro-Tips |OT
- Thread starter Hokahey
- Start date
Correct. Essentially, all loan products/programs have a max DTI to qualify.
Common misconception, but good thinking. Are you in the process of buying now? Did your lender pull credit yet?
Oh, I'm done (thankfully). Was lucky to pick-up 4.125% in early Feb. Found a great local lender, helped me a lot with some last minute complications (last minute repairs over escrow limit). 0 chance that would have happened with a national lender. Closed the last day before rate lock expired.
I feel like everything always closes the day before rate lock expires, lol. I know that must've been super nerve wracking, 4.125% is a good rate too, rates skyrocketed in March, so you bought just before the increase.
...and also for the lender to potentially make a referral to refi your other debt which in some cases can be an unintentional benefit to you.
OP
OP
That is because the longer your rate is locked, the more expensive it is. So your lender will generally lock your rate right up against the closing date to save you money.
I'd second not using online lending services, like rocket mortgage or whatever other providers are out there. It's easier on the buyer maybe, but you end up paying a shit ton more at closing even if the rate might still be competitive.
It's hard to determine the market, but it's an election year so it could fluctuate either way. I bought a year later than I wanted to and went from a 3.2% to a 3.99%, which makes a difference in the end. Most rates I'm closing now are in the 5's though. 5-5.2% is what I'm seeing mostly on the table.
OP
OP
Predicting rates is basically the same as predicting the stock market, because stocks affect bonds, and bonds affect rates.
But yes, we are already seeing rates in the 5% range depending on your qualifications.
I've never purchased a house before and I'm starting to do some research now.
A lot of these affordability calculators list what looks like the max amount you could spend on your mortgage minus any other expenses, which suggest nearly 0 net savings per month. Is this what paying off a mortgage is really like?
A lot of these affordability calculators list what looks like the max amount you could spend on your mortgage minus any other expenses, which suggest nearly 0 net savings per month. Is this what paying off a mortgage is really like?
Last edited:
Don't worry higher rates will depress prices so it won't be that bad. I'm actually waiting to buy a cheap home cash and sold my home recently. If we start seeing 6-8% apr's home buying will dry up considerably and cause a crash in values.
I am honestly expecting home values to come down a bit. I feel like there's been a bit of a bubble again in certain parts of the country and that will theoretically correct itself.
OP
OP
Don't count on it. If inventory remains low then things aren't going to change any time soon. We need more new construction on starter homes.
Inventory doesn't remain low when people stop buying. It's simple math and what people can afford. High interest rates cool real estate prices.
OP
OP
You realize that rates rise in accordance with economic data, right? So when rates go up, it means the economy is doing well and more people should be able to afford a home.
Also, rates are still at historic lows. The people being priced out right now are the entry level buyer, who have very little inventory to choose from right now to begin with.
Median income has moved up? That's news to me! Rates are going up because bonds are going sky high because we need people to buy our debt. The numbers are a simple google search away.
Rates have been historically low. Now they are not and the higher they go the less homes will be bought. If rates get to 6% for a well qualified buyer home sales will absolutely crater. Take that to the bank.
OP
OP
My friend, I've been in housing for over a decade. My family has been in housing for over 40 years. I know how it all works. Bond yields go up when stocks do well. The stock market does well when people have money to invest without as much fear of risk. When the economy is doing poorly, or there are reports of poor numbers (like the jobs report), people move their money back to safety, like bonds. When there is heavy bond investment, yields go down, which leads to lower interest rates. At the risk of sounding harsh, this is economics 101. And do you not realize that even at 6% we would be seeing rates that are overall historically low? They wouldn't crater st 6%. Not even close. Well qualified buyers are pushing 5% now.
Employment is WAY up, as is consumer confidence. There is a reason the feds keep raising the key rate. Do you think they'd push rates to a level that would crater home sales? Do you think they'd push rates in a manner that was not reflective of the health of the overall economy?
OP
OP
Also:
http://www.businessinsider.com/us-census-median-income-2017-9
And the longer we remain at full employment, the faster the median income will continue to rise. The fewer job seekers, the more wages a company must offer for an open position.
No bond yields do not correlate to stock market gains lol. Bonds have been insanely cheap over the bull run of the century we've had. This is easily googlable again.
At the risk of sounding harsh do you understand the difference between a mortgage at 2.75% vs 6%? It would have increased my monthly payment by 60%. Do you think buyers will be affected by that or do you think they will say "it's ok it's historically low"? People react to what they can afford. If someone has a rate of 3% and has to jump to 6% to buy a new house guess what happens? They stay put and remodel. New home buyers see costs rising and can't afford it so they don't buy. This causes prices to deflate and since we are at record highs, most likely crash. And this is just talking about well qualified buyers not people who have a few issues. Those people are roundly screwed with 7-8% mortgages.
I don't think the fed minds hurting home sales on bit to be honest. My home had more than doubled what I paid in 2008. That's called a bubble. Also the fed raising rates and dumping BILLIONS of derivatives at the same time definitely has a destabilizing aspect to our economy. Once again this is all googlable.
2 grand? Once again. Our home buyer is going to say yeah I can afford an extra $400-1000 a month in interest I made 2k more last year! If you're in the housing industry I hope you have savings. I bet 2008 caught you by surprise too.
OP
OP
Oh bud, come on. When the market is doing well, fewer people invest in bonds. Yields thusly go up. This correlates with rates. This is like debating what causes it to rain.
Well, considering I've been writing mortgages as my career, successfully for a decade now, I can reasonably assure you that I do understand. Also, the average rate now on a 30 year is already near 5%. A 200K mortgage is about $100 more a month at 6% compared to 5%. You think home sales will crater over $100 a month?
Where are they going to get the funds to remodel? Most people finance it...which is a loan...which is based on the current market rates.
Even odder is the consideration that people will just stop buying. As if people starting a family will just forego home ownership.
If only we had some precedent to consider how people reacted to rates double what they are now...like decades of economic data that prove people will prioritize home ownership over other purchases in order to afford a home..
The feds are always mindful of the impact rates will have on the purchases that will occur which are impacted by rates, in an effort to maintain economic growth and/or stability. This isn't even a debatable point.
Your math is strange. We were discussing rates at 6% cratering the market. The current market rate is already near 5%. I already outlined above that the difference in payment is near $100, not $1,000.
You said it would be news to you if the average median income went up. I showed you it did. Just take the L.
I started lending in 2008, during the recession. So it didn't catch me by surprise at all. I've enjoyed playing a part in rebounding and reshaping the industry.
I was going to write a response along the same lines, but this pretty much covers it all.
Mentioning rates approaching 6% (especially considering we haven't cleared 5% yet) and 2008 in the same post shows at best a fundamental misunderstanding of the market and at worst chicken little levels of fearmongering.
It's still a borrowers' market, just less so than it was this time 18-24 months ago.
The reason I bought without waiting was because I needed a place of course (and was also a little worried about corporate investments in my area.) I thought about waiting still spring/summer - glad I didn't because nothing seems to be coming onto the market. Many 'starter' prices homes in my area seem to have become corporate owned and are only available for rent or long leases. When prices fell, a lot of local landlords bought out places with cash and I hear some much larger companies have done the same across the country. I don't ever see that inventory being back on the market when they can just collect rent even if the market crashes.
I bought a house in 2016 with a USDA loan. 0% down. Guaranteer Fee and Closing costs all rolled into the loan.
128500 total loan at 3.5%.
I overpay it every month and am hoping to have it paid off in less than 20 years.
The one thing I did see is that these loans seem to have pmi for as long as the loan exists and it doesn't go away at 80%. Is there anyway at all to get rid of pmi? Seems like a huge drawback to this sort of loan.
128500 total loan at 3.5%.
I overpay it every month and am hoping to have it paid off in less than 20 years.
The one thing I did see is that these loans seem to have pmi for as long as the loan exists and it doesn't go away at 80%. Is there anyway at all to get rid of pmi? Seems like a huge drawback to this sort of loan.
OP
OP
USDA indeed has PMI for life. FHA is the same unless put down 10%, and even then you have it for at least 11 years.
But look at this way. Your PMI rate is .35. Your rate is 3.5. So basically, your all in rate is 3.85, which is still a decent bit lower than what anyone is getting today.
Yeah, but part of me feels that the FHA loan with 3% down would have been a better choice if I had known that from the start. Not sure if this actually is true. Would have to run numbers, but it sure feels this way!
So Chase says recasting fees is $0. Anyone have any experience with this? I realise it makes no difference to the total interest paid (just the length of payments) but was wondering what the drawbacks were if I recast annually or something like that.
I think with recent changes, FHA doesn't drop PMI either?
I think with recent changes, FHA doesn't drop PMI either?
OP
OP
Well, a lot of that depends on what your financial circumstances were when you took out the loan. FHA and USDA essentially function the same minus allowable down payment. Unless you had at least 5% down payment available and qualified conventional, I'd say you got a good loan at a good time.
OP
OP
Zero drawbacks. Recasting is a great program. The only debate that could be had as far as I'm concerned is whether it's better to put your money in your house or in to the market.
Alright. And I got this loan just before the USDA stuff was lowered. So I had the 2.75% down and .5 pmi.
I paid $625 for my pmi this year which is basically $52 a month. That feels steep to me, but I guess I have no way of getting rid of it.
OP
OP
Right. For me, the best way to always look at that is to consider the PMI is part of your rate and payment. Because it essentially is. Usually your USDA or FHA rate is lower than conventional and the PMI sort of levels it out.
UK based question here. What are people's views on Part Buy Part Rent schemes ? My current options are basically get a house 50/50 on that scheme, or buy an apartment, but id much rather a house for the plans I have. What are the potential pit falls if any with going with that ? The bank will only lend me 120K so I have no option to buy a house (in this area at least) for full price. I have 20K saved.
Only if you put 10% down, and even then you're still stuck with it for 11 years.
If you're putting down that much, I would think conventional would be a no-brainer unless you have bad credit.
People who are complaining about PMI are exactly the kind of people who should be paying PMI the most. If 100 bucks a month is a major expense to you that probably means you should not be getting a loan. I could have gotten 20% down on my house and would have avoided PMI, but that would eat up all of my savings. That seems risky for no good reason. I just put 10% down and will end up paying extra 6k or so in PMI. Small price to pay for additional financial security over the course of 6-7 years.
Eh, I agree with you in principle. Yet, when I'm looking at a 500k+ loan just to get a 2bd/1ba, and that PMI is $250-300/month on top of the mortgage...
You start to wonder if renting and investing that money instead isn't a better idea.
OP
OP
If that's all you're getting for 500K, then I'm not sure I disagree. Being house poor is not a great financial strategy unless you're confident in upward momentum in values and know you'll sell soon.
It's downtown Seattle. Plenty of upward momentum. And I'm in the very fortunate situation that I can afford it. My rent is in the same ballpark as that mortgage would be.
Doesn't mean it doesn't make me queasy though. And I'm really waffling on whether I want to jump in an apartment/condo downtown or opt for a home that's a bit further out, still a decent work commute, but has more potential for me to put some "sweat-equity" into it.
The fact that listings go from new to sold (or pending inspection at least) within 3 days on average and knowing that my rates are only going to get higher the longer I take, isn't helping the stress levels either.
I moved to Seattle in February and ended up renting. Market moves too damn fast here (not to mention the over-bidding).
I think renting is perfectly viable option. I don't know about Seattle, but in most places in NJ you will be paying in taxes alone more than half of what you would be paying for rent. I held off buying the house for as long as possible for that reason.
Anybody here have experience on buying a home without an agent? It seems like an easy way to save on commission costs.
How hard can it be?
How hard can it be?
OP
OP
Don't do it. You don't pay for the agent. They get a commission from the seller's side. Buying real estate is very complex, and you lose out on a ton of good advice and representation.
Sure, the seller is responsible for paying for agents, but couldn't you do something like instantly take 3% off the asking price simply because they don't have an agent to pay?
Seems logical, but is this just not something people do?
I did a couple of first viewings via redfin. Was a bit of a shit show. An agent brings a lot to a first time home-buyer. And a lot to even an experienced buyer if you are in a sellers market. Without some of the clauses my agent put in, I don't think I would have even had my offer accepted.
Also, even if you don't use an agent, it's not like you can capture the whole 3% they would have made from the sellers. 2% at max.
Doesn't Redfin have some kind of discount or bonus for buyers?
Yes, that is why I was tempted. But you'll notice it is usually in the 0.5% to 1.5% range. But once you start the process, you will realise there are a lot of nuances that you will need to be walked through. Selling is not purely a 'higher price trumps all' scenario.
Same with lending. The online 'get approved and buy tomorrow' sites may work, but only in very few cases where everything goes 100% smoothly is what I gather.
Nah, it's not that bad here. I have family in New York, and before they ended up in Long Island, they were considering Jersey. I helped out, and in the process found out about the 2+% property tax rate there. Seattle is actually just under the national average at 1.01%, although there's chatter about raising it in the near term.
I used Redfin for buying and LOVED it! No pretending that they know shit like the rest of realtors do and scheduling is easy and simple. In addition to that I think I got 2k back from them. Unless you have a realtor that you 100% trust, Redfin is the way to go!
I also used an online lender. Great and smooth process. No issues whatsoever. Way more open about costs than the guy who my realtor recommended. That guy literally was advising for me to pay extra 40k in loan cost over the course of the mortgage because he is "better". This whole system needs to be automated.