30yrs fixed, Arm, Interest Only, 80/20????

Question

My husband and I are thinking to get a new home in San Diego,Ca, there are so many types of mortgages that can be confusing, we don't know which mortgage is better.
Our credit scores is in the700's, but have one problem no money for closing cost or down payment. I'm not sure if the builder (we are looking at new homes) be willing to work with us.
My question is which mortgage is best for our situation?
Serious answers please.

Answer 1

This is a very good question and you are a common case in southern Cal.

I run a large mortgage company in Orange County and have seen many borrowers needing 90 - 100% financing. The fact is there is plenty of option with that score but what needs to be determined is your short and long term objectives.

I train loan officers and coach borrowers on choosing the right mortgage based on goals. This can simplify the proccess a great deal.

I also write a blog on the subject of credit management, mortgages, real estate trends, etc. Check it out for more information that may be helpful. Again, I am in southern Cal so if you need more information and would like to better understand the options get in touch with me.

Answer 2

There are hundreds of different ways you can structure your financing these days, and it all depends on what makes sense for you. ARM's are great loans if you only plan on being in the property for a set time, like 5 years, let's say. However, based on today's market, short-term money is in most instances more expensive than long-term. What this means is that zero-point rates on ARM's are currently the same or higher than 30 year fixed loans. However, if you buy down your rate thru points, you can get a lot lower of a rate on an ARM than a fixed loan, since you pay more to buy it down depending on how long it's fixed for.

80/20 loans are specifically designed to avoid PMI insurance, or Private Mortgage Insurance. If you finance over 80% of the value of a home on one loan, you will have to pay PMI insurance, which doesn't go towards your loan, i.e. interest or principal. It is charged by lenders because of the high rate of default or foreclosure on properties in which the borrower has financed over 80%. So what happens is that you finance 80% on the first loan (since it is only 80% of the value there is no PMI) and the rest (up to 20%) would go onto the second loan.

What you need to do is work with an expert, who can provide you sound options based on your goals for the future. Your home is typically your largest asset, so plan carefully.

Good luck!

Answer 3

If your scores are in the 700's then I would go with 100% financing fixed rate on one loan. With an 80/20 you are getting two loans and the second will have a high interest rate. Those loans are really designed for people who can't qualify for 100% financing, but with your scores you should qualify easily.I wouldn't do a interest only loan because that digs into your equity.

If you are looking to buy a new home, find one where the builder is paying closing costs. There are many out there, especially since the market is slow now. If one builder won't pay closing cost, then find another builder who will.They may ask that you put a $500. deposit on the home.

Good luck with your new home!

Answer 4

Doing an 80/20 is the best idea because you will avoid PMI. If you have one loan over 80% you have to pay mortgage insurance which is pointless. Your payments will be much lower going with the 80/20. An interest only program is also a good idea on the first mortgage because you can write off you interest payments on your taxes every year and get about 30% of what you paid in interest back and apply it to your principal balance.

Answer 5

Well your problem is the types of mortgage becuase the answer to that is simple if you are looking to stay in the home for over an extended period of time you would want a 30 fully amortized mortgage that way you are paying down the balace. With scores like that you will have no problems getting 100% financing. The catch is this because new home builders attract so many people they are almost never willing to assist with closing cost or give consessions where as if you were to buy from a personal seller they are more motivated. Fell free to log onto http://www.justgetaloan.net for a fast free mortgage approval with great rates and loan programs we have plenty of satisfied customers who have never put a dime down to purchase a home. Feel free also to contact me at 866 530 7300 ext 7305 or by email at [e-mail] for further assistance

Answer 6

30 year fixed, and write the deal to include closing costs. If you really want to offer full price, add 3% to the price and write "Seller to pay buyer's closing costs, up to $______,000."

BTW, 80/20 loans are the dumbest thing I've ever heard, and I think anyone who likes them hasn't done the math.

Your second loan at 20% is a much higher interest rate, so it evens out for the PMI. And yes, that interest is deductible, but think about this. In five years, will your house be worth a little more than it is now? Most likely. With your payments and market increases, the PMI can disappear on its own in around 5 years. An 80/20 loan has that higher interest rate for the ENTIRE 30 YEARS.

Answer 7

If you have no savings you are inviting disaster. What happens when the car blows up or something goes wrong in your life? Do not buy until you have at least 5% down payment and at least an additional 6 months worth of living expenses in the bank and your closing cost in hand. I am a mortgage banker and you could be a foreclosure waiting to happen with such bad financial planning in place. You can save money and buy later. It is not the end of the world.

Answer 8

If interest rates are low, a 30 year fixed is the safest way to go. ARMs and Interest Only are gambling on rates in the future...if interest rates go up and housing prices go down, you're screwed. I'm not sure what an 80/20 even is. We started out with a 30 year fixed at a whopping 10%. We paid $50 to $100 extra each month. When interest rates went down in a couple of years, we refinanced for a 8% 15 year fixed and still paid extra each month. When interest rates went down again a few years later, we refinanced again. This time we got 6% 7 year fixed and still paid extra. We paid the house off in 12 years (even with a whopping interest rate to start with). It can be done. Best of luck.

Answer 9

Each situation is different. What works for one doesn't work for another.

You need to sit down and figure out how long you'll be planning to stay in the house, what your job situation is, are you going to have major expenses in the next few years (i.e. buying new car or having kids), what can you afford to pay per month for mortgage, early pay-off penalty if you need to sell the house before your mortgage is done or you decide to refinance, do you have a cushion of money to help with unexpected expenses or job loss and a host of other variables.

I'd suggest you go to a few banks and get quotes on options and rates and find out all the fine print and conditions.

Answer 10

30 yr fixed, 80/20.

There are some grant programs to do FHA with little or no money out of pocket, but I don't know if you'll find that in San Diego.