Curious About Home Mortgages

Another loan type is FHA where you pay a higher APR to insure the loan for a lender, usally 1/2% higher. Some times it makes a difference in "if" you can afford the payments. Upon early FHA pay off don't to forget to file for a refund of the unused loan insured amount.

Another alternive is a used 5th wheel RV on a private piece of property. This also makes a good starter home without a heavy up front cost and beats paying rent if you buy right. Uaually 10yrs or older, RV prices stablize until there 15yrs to 20yrs old then they drop in 1/2. Good advantage if you don't know where you wanna live or have to travel for work or school.

T_Bone

1. The general rule of thumb is that the monthly rental OR purchase cost of a home is around one percent of the total price of the property. So if the house is worth $100,000, it will cost you 1000 a month to own it or to rent it. (In theory this number changes with interest rates, but in practice it's not much, due to fixed escrow costs.)

2. Another rule of thumb is that your house payments should not be more than one-third of your gross (before-tax) income. One-quarter is better, because you need some money for repairs, particularly on an older home.

3. When shopping for a mortgage, ask for the payments on 30, 25, 20 and 15 year loans. The mortgage company will always quote a thirty year loan, saying "it's the standard". But after they're done grumbling, you will find that there is almost NO difference in the payments on 25 and 30 year mortgages! 20 year mortgages will be a little higher. 15 year mortages will be quite a bit higher, but they will usually give you a lower interest rate on a 15 year mortgage which will help to offset the shorter term. And when you do the closing CHECK to see that they gave you the term you asked for. Mortgage companies will often make out the paperwork for 30 years even if you applied for a shorter term.

3. Buy a book of "Loan Amortization Tables". You'll find them at most bookstores. Sure, today you can find calculators on the web, but I like to have the numbers right in front of me where I can quickly do "what-ifs" just by looking in a different column. I bought mine thirty years ago and I still use it every time I think about taking out a load.

4. You need to save AT LEAST ten percent of the purchase price of the house, even if you only have to put five percent down. You will need the other five percent for closing costs and "pre-paid" items. (Pre-paid means it goes into your escrow account.

One last thing: A house is NOT an investment, it is a place to live. If you think you're going to move in the next two or three years, think carefully about purchasing a home. Remember: It is ALWAYS easier to BUY real estate than it is to SELL it. You need to keep your house for at lease two years to recoup the costs of buying and selling it.

I is poor, and paid alot of intrest in my life, and try to keep the 20% plus intrest rates away from my kids door.

Good Luck on your decesion, rent isn't always a fun thing to pay either.

You could obtain the following loans for $500 per month at 6.9% APR:
15 Years / loan amount $55,975
20 Years / loan amount $64,993
25 Years / loan amount $71,386
30 Years / loan amount $75,918

Good luck.

Good luck.

Dave

Owning a house means you not only pay the mortgage, taxes, and insurance, but also any repairs (roof, furnace, etc). So save up enough to make the down payment and still have some left over for emergencies.

Also compare monthly payments for different loans. Last time I checked (a few years ago) the interest rate was enough lower on a 15 year loan versus a 30 year that the monthly payment was not all that much different (and of course a lot more went toward paying off the load and less to interest).

While you're saving you might consider putting your money in a Roth IRA. There is some tax benefit, and no penalty to withdraw it for a first time home buyer.

My recommendation for you is to save as much as you can for a few years. The more you can pay up front the less you need to borrow. Closing costs can be expensive. These may include lawyer fees, survey costs, mortgage fees, title costs, 1st years insurance, etc. Usually totaling in the thousands of dollars. It will be good practice to squeaze your income too, because the home will end up costing you more than you think it will...

Good luck, at 20 you still have lots of time to buy.

1. Good on ya' to be looking at a fixed rate loan. That way you know what your monthly payment will be for the term of the loan. 2. You may need to be 21 to sign for a home loan, but I don't know for sure.
3. The typical home mortgage payment will consist of 4 parts - Interest, principle, and possibly mortgage insurance and escrow payments (the last two depend on the specific loan):

Interest is what you pay for the priviledge to use "their" money.
Principle is where you (slowly) return the initial amount you borrowed.
Mortgage insurance is an extra fee to "insure" against you failing to pay off the loan. If you can put 20% down (or take a 2nd mortgage for the difference between 80% of the loan value and your down-payment), the mortgage lender is not allowed to charge mortgage insurance
Escrow payments are where the mortgage company will collect ~1/12 of the homeowners insurance, property taxes, homeowners assn fees, etc. each month, then pay those bills as they come due.

4. Based on a quick calculation, for a $500/mo payment, you can probably borrow ~56,000 for 15 years. If you spread that to 20 years, ~$65,000; at 30 years, ~$76,000.

4b. If you are able to additional $$ on the loan each month, you can really speed up the pay-off. Make sure that there is not pre-payment penalty (most reputable mortgage companies have NO pre-payment penalty - in my experience).

More questions? Holler if this isn't very clear.

Nathaniel

On the escrow payments, if you are disciplined to save that money through the year, you at least get a couple bucks in interest in your CU savings acct.

On the other hand, if you're likely to be short on cash (and you know exactly when those bills are due), you're much better off to handle that through the monthly escrow payments

We put $5k down on our house, and the various closing costs came to ~$3k on top of that. There will be lender fees, 1st month's payment, and I don't recall what else.

A little story:
When I bought my house, I had a mortgage broker and WellsFargo both provide an estimate for the loan -

As it happened, WellsFargo had a slightly different fee structure - I told the broker that "her quote was competitive, but 'another lender' was not charging an origination fee" (or something like that) - at which point she waived the fee and knocked another $400 off the closing costs.

Nathaniel

Nathaniel

Haha no doubt about that. I don't think I'd even wear a hat going into the building.

Thank you for the advice.