Home Loan Question - Seeking Advice and Insights

[sajesak]

Hey everyone,

I have a question regarding home loans and I was hoping to get some advice and insights from this community. I'm currently in the process of purchasing a new home and exploring different financing options. I wanted to gather some opinions and experiences related to home loans, particularly those offered by banks.

I have been considering traditional bank financing for my home purchase, but I'm open to exploring other alternatives as well. I've heard about owner financing, where the seller carries a note for the buyer. Has anyone here had any experience with owner financing? I'm curious to know about the advantages and disadvantages compared to bank loans. Are there any specific things I should be aware of or consider before deciding on owner financing?

Additionally, I would appreciate any insights on the current interest rate trends for home loans. I understand that interest rates can vary depending on various factors, but a general idea would be helpful. Are interest rates currently favorable for home buyers? Any tips on how to secure a competitive interest rate or any factors that could affect the rates in the near future?

Another aspect I'm interested in is down payments. What is the typical down payment required for a home loan? I'm aware that it can vary based on factors such as credit score, loan amount, and loan type, but I would like to hear about your experiences or any general guidelines to consider.

Lastly, I'm wondering if there are any specific loan programs or incentives that I should explore. Are there any government-backed loan programs or special initiatives that offer advantages to home buyers? It would be great to hear about any programs that could potentially help me in securing a home loan.

 

[sajesak]

Hey everyone,

I have a question regarding home loans and I was hoping to get some advice and insights from this community. I'm currently in the process of purchasing a new home and exploring different financing options. I wanted to gather some opinions and experiences related to home loans, particularly those offered by banks.

I have been considering traditional bank financing for my home purchase, but I'm open to exploring other alternatives as well. I've heard about owner financing, where the seller carries a note for the buyer. Has anyone here had any experience with owner financing? I'm curious to know about the advantages and disadvantages compared to bank loans. Are there any specific things I should be aware of or consider before deciding on owner financing?

Additionally, I would appreciate any insights on the current interest rate trends for home loans. I understand that interest rates can vary depending on various factors, but a general idea would be helpful. Are interest rates currently favorable for home buyers? Any tips on how to secure a competitive interest rate or any factors that could affect the rates in the near future?

Another aspect I'm interested in is down payments. What is the typical down payment required for a home loan? I'm aware that it can vary based on factors such as credit score, loan amount Broker Price Opinion, and loan type, but I would like to hear about your experiences or any general guidelines to consider.

Lastly, I'm wondering if there are any specific loan programs or incentives that I should explore. Are there any government-backed loan programs or special initiatives that offer advantages to home buyers? It would be great to hear about any programs that could potentially help me in securing a home loan.

I would greatly appreciate any advice, personal experiences, or resources you can provide. This is a significant decision for me, and I believe your insights will be invaluable in guiding me through the process. Thank you all in advance for your help and support!

 

[WJBertrand]

Lots of questions there. I’ve bought 3 homes so can speak a little from my limited experience.

It would seem to me the risk for seller financed loans would mostly be with the seller holding the note. It’d be mostly the same for the buyer. Check the terms carefully for any unusual conditions.

Currently finance rates are not as favorable as a couple years ago. The biggest influence on rates is going to be what the fed does with rates. Most experts expect the fed to raise rates a couple more times this year in their attempt to rein in inflation. There are websites out there that track rates from all the lenders that are live and updated every few minutes. Government backed loans like VA (if you’re a veteran) or FHA usually have lower rates that straight bank, or conventional, loans. The longer your term the higher the rate generally.

How much you put down depends on the type of loan and how much cash you have. Most lenders will require you to buy mortgage insurance, which is pricy, if you’re putting down less than 20%.

Beware of variable rate and balloon loans. Make sure you understand all the terms and be prepared for them years out.

Happy house hunting!


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[joe_momma]

Rates are not favorable for home purchases presently. We built a home in '21, and our construction loan was 3%. By the time we could close on our traditional mortgage, it had risen to 5%, and I think they're even higher now. 2% makes a huge difference in your monthly payment when you're talking about home loans, several hundred dollars/month. The shorter the loan term the more favorable your loan rate will be. Most places are going to be very close in rate, but shop around. Also something to note - whoever you get your initial loan from will likely sell it to another broker at some point, often times before you even make your first payment.

The government does (or at least used to) offer incentives for first time buyers. I'm not sure if those are still available, I'd wager they are. There are also 100% financing options if you qualify. Stay away from any sort of variable rate as mentioned.

Down payment amounts can vary. Typically, you have to put 20% down to avoid mortgage insurance (PMI).

I'm not an expert or money guy, but I've bought and refinanced several times.

 

[skwerl]

I will offer my experience from when I bought my home 7 years ago. I had the 20% down payment so I could avoid the mortgage insurance that the mortgage companies love to tack on. Unfortunately the law had recently changed and I was told they would add mortgage insurance anyway, and it would remain for the life of the loan. This was for an FHA loan at 3.5%. The mortgage insurance was .75% making my total cost 4.25%. So instead of playing their games I just went with a conventional loan at 4.25% and skipped all the bullshit FHA inspections and requirements. My house was a Fannie Mae repo and was trashed, so it wouldn't have qualified for the FHA loan anyway without a bunch of work and time.

If you want the security of an FHA mortgage and all the crap that goes with it, please ignore my post.

 

[Juice]

Rates only really matter if you ONLY pay your monthly payment.
Pay extra every month, this goes toward the principal and drives down the interest you pay.
Get a 15 yr loan. If you say you cannot afford a 15yr loan, but can afford a 30? That tells me you cannot afford that house.
Did I say pay extra monthly?
Also, do not borrow as much as they tell you you can. In my experience, they tell you you can afford about 3x what you really can afford.

 

[thailand]

Interest rates are not in your favor right now. Refinancing is always an option in the future. As I don't want to pry, and you may have to move, one tip I can give is to see if you can use a little trick to get out of paying PMI (Private Mortgage Insurance).
If possible, try to take a 2nd mortgage on your home, equal to the amount you'd have to put down to prevent PMI. Usually 20%. The difference will be your main mortgage. Example - Home $200k = 40k loan + 160k mortgage. Usually the interest on the loan isn't nearly as big a factor as PMI, since PMI won't go towards the principle of the loan. That is, if you don't have the money to put down, like me...
Also, look into credit unions, as their rates are sometimes more favorable than others. VA loan, if applicable is a great way forward.
And as others have said, its easy to overspend. Don't. Keep a budget, even go under to plan for things that happen.
Good luck to you, and don't be afraid to explore for the best rates.

 

[JimC]

Hey everyone,


I have been considering traditional bank financing for my home purchase, but I'm open to exploring other alternatives as well. I've heard about owner financing, where the seller carries a note for the buyer. Has anyone here had any experience with owner financing? I'm curious to know about the advantages and disadvantages compared to bank loans. Are there any specific things I should be aware of or consider before deciding on owner financing?

"Owner financing" is called a land contract. Usually someone goes with a land contract where they may have some credit issues getting a conventional loan. Because of the risk to the seller, most land contracts are at higher rates than a conventional mortgage.

There is also a risk to the buyer on a land contract. If the seller hasn't paid off their loan, or if there are other liens on the property, you may not be aware of them and if the seller defaults you can lose your home. In conventional financing the closing process takes care of all those items and removes any cloud on the title. I you get a land contract then be very sure that you understand the contract, and insure that all potential clouds on the title are identified and addressed at closing.

One other risk is that your seller may die before you pay off the land contract - and what often happens is that you never get the deed or record the payoff of the land contract. Many years later you find out that according to the records with the county the seller still owns the property, or you don't have clear title even though you paid it off. Those aren't addressed very often in the estate settlement for your seller and you are stuck with a quiet title action to get clear title. Sure a conventional mortgage can sometimes not get released properly, but it is much rarer for the bank (or credit union) to "forget" to record the lien release.

 

[WJBertrand]

Another thought based on our first home buying experience. We got a loan financed by bond sales. In this case your state or local community sells home loan bonds to investors and then offers mortgages. These are usually targeted to first time and lower income buyers and come with a lot of restrictions such as requiring it to be the buyer’s actual residence, usually for a number of years. This is done to discourage speculative buyers. There are also caps on your income to qualify, and how much you can sell it for later after your residency commitment expires.
The upside is that the interest rates can be significantly lower. When we bought our first house FHA rates were 18% (in 1980), but we got a bond loan for 9.25%. These numbers sound ridiculous now (they were then too!) but it serves as an example. In California, these bond sales are approved by voters and the money can run out before the next election and disappear, so they’re definitely hit or miss.


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[skwerl]

Rates only really matter if you ONLY pay your monthly payment.
Pay extra every month, this goes toward the principal and drives down the interest you pay.
Get a 15 yr loan. If you say you cannot afford a 15yr loan, but can afford a 30? That tells me you cannot afford that house.
Did I say pay extra monthly?
Also, do not borrow as much as they tell you you can. In my experience, they tell you you can afford about 3x what you really can afford.

A lot of times inflation works to the buyer's advantage. I probably could have swung a 15 year mortgage but I chose a 30 and just pay extra every month. When I had my heart issues I was glad for the lower minimum payment. I was on track to have my mortgage paid off in about 15-16 years, now it will be closer to 19-20. But who knows?

 

[Juice]

If you were to add up all the payments for a 15yr, vs a 30yr loan.
On a 15 year you will pay back the bank roughly 2x the purchase price of the home.
On a 30 year, it is close to 3x the purchase price.
But the bank does not want you to know that! 3-10% interest rate my ass. Oh the hidden fun in compounding interest.
Any so called 'financial advice" we ever got was: Oh, you NEED a mortgage for a tax write off. This is a LIE.

Ps: don't carry a CC balance. Do not pay interest!

 

[Ret]

We're all assuming you're in the states and not Canada or, some other country where Mustang owners reside. Rates are not favorable to the buyer at this time.
I used my VA, three years ago and went from a 4.75 to 2.25. If you qualify look at VA loans. I totally, refinanced my house to add a $140,000 addition to my house. The refinancing paid for the addition and my house payment went down $250.00 a month. I went from a conventional loan to a VA... Look at Credit Unions rather than banks.

I haven't seen anyone mention variable rates. Don't know what they are today but, in 1984 I bought a home with a variable rate. Interest rates at that time were 14 to 16 percent. I took a variable rate around 8.75 percent and luckily, when I bought interest was at a high, each year my loan interest/payments dropped. When I bought the house, my payment was 1200. to 1400.00 per month, about five years later I was at $500.00. (Not exact numbers).

I don't want to discourage you but here in the states this isn't a good time to be buying a house because of the rates.

 

[gbstang]

Always----Always have a Real estate Attorney for the closing.. In South Carolina you have to have one (good thing)
Variable interests rate loan--ABSOLUTE NO! Those loans are only good if the markets are stable. How they work, you get a loan for lets say 5%, they are usually tied to a government bond. The deal is if the bond goes up so does your mortgage payment. If the bond goes down, again so does your mortgage. Here is where they normally get you! If the bond goes up they immediately change your rate up, in the contract they will say for your mortgage to go down (rate) the bond has to be steady for a period of time, mostly 6 months.. Sound good right? But the bonds vary almost daily so your note goes up and never comes down! My ex got a house that had a variable, in the whole time we were together that dang thing did nothing but go up, started as a $850 house note and ended up at over $1300...

FHA loans require a 20% down. Closing cost etc are extra.. VA loan could get you zero down..
Previous poster is right, pay extra a month, what he did not say is this, when you send extra money per month YOU HAVE TO STATE THAT IT BE APPLIED TO THE PRINCIPAL! else the bank will apply it to interest.

its an incredible racket real estate is... Cash is king but if you have to finance put as much down as you can and ease the total interest you give to the bank for the life of the loan.