Looking to get a condo for $500K in southern california. Would like to put zero down. My wife and I likely plan to live there for only 3 years. We have no debt. Together we make $110K per year. We have good credit. This would be our first home. Should I get 30 year fixed, interest only, or another product? I am not too clear on the benefits of each. Thank you in advance for your help.
2007-01-16 17:54:32 · 7 answers · asked by Precisio 1 in Business & Finance ➔ Renting & Real Estate
30 year fixed......It's a must, don't take any chances with your future with interest..
2007-01-16 17:58:33 · answer #1 · answered by j d 3 · 0⤊ 0⤋
A zero down loan is considered high risk to a lender. The default rate for such loans is higher. With closing fees and other such things a lender is really upside down before they start if the borrower defaults.
If you are only going to stay 3 years then consider what will happen if the property does not go up in value. You will have closing costs on both sides plus HOA fees and the mortgage. Hence you could be looking at a loss and something that has to be covered out of pocket when you sell.
Hence be open to the idea that you might not want to sell when you want to move. That way you can defer selling until you have made some money even if that means renting the unit after you move out. Hence the loan that might make sense could be in place longer than you live there.
Check to see if there are any HOA restrictions on renting a unit if you move out in the future.
Most of the time when someone is getting a 100% loan they are really getting two loans. A 1st at about 80% LTV and a second for the difference. The second will have a higher interest rate and a shorter term in most cases.
When considering such a loan be real sure you can handle the monthly. Remember to add in the insurance, taxes, HOA and other such things. Some fees will be covered through the HOA or through an escrow account with the loan. How the payments are made is less important than the total monthly cash flow.
100% mortgages are not always a good idea. If prices drop by 1% you are underwater (you own more than the property is worth). Just because you put up nothing out of pocket does not mean you have a better deal than if you put down 10% or more.
Note that some lenders will not allow 100% loans on a condo as the condo market is slightly higher risk than a single family residence (SFR). Such restrictions can be in specific markets. Expect that have many fewer loan choices when 100% compared to 95% LTV loans.
It might be possible to buy a property where the seller is willing to carry 5% as a loan after the sale. That means the new lender may view the loan as 95% and offer better terms. Or the seller might be able to credit back to you 5% (some lenders will go to 6%) and have that be considered a down payment. Or the lender will not allow it to be the down payment but will allow the seller to cover your closing costs so you can use your cash as a small down payment.
I assume you sense that I am saying that a small down payment can make a dramatic difference in your loan options.
2007-01-17 01:57:59 · answer #2 · answered by Anonymous · 0⤊ 0⤋
The loan that you should get should be consistent with you goals for the home in the future. If this is going to be the only home you will ever live in than I would suggest that you go with something like a 30 or 40 year fixed program. It will be stable and you won't have to worry about market interest rate changes. However if you don't have a lot of cash and want to get into a more expensive home then I would recommend something like a 2/28 program that is fixed for 2 years and adjusts there after. Now the point of this kind of program is not to stick with it for 30 years it's to take advantage of the lower payments for the first 2 years and then refi after that.
2007-01-16 19:28:11 · answer #3 · answered by James M 1 · 1⤊ 0⤋
if you are only planning on staying for 3 years.......maybe it would be wise to buy sort of a fixer upper in an area with nice places, improve on it and make double house payments. In that 3 years you'll build a huge amount of equity, then you can figure out where you really want to live, and get a better house or condo for cheaper due to equity from the first place. Although right now you don't have outstanding debt, SOMETHING could happen where you did have to aquire some debt, or god forbid one of you got really sick or hurt and go on disibility pay which is only like 60% of your income. With a big condo/house payment that could mean big trouble. I'm sure you'll be fine with whatever you do, but just be careful!
2007-01-16 23:14:49 · answer #4 · answered by sleep_chic 3 · 0⤊ 0⤋
I think that for the 500k plus insurance taxes etc.. making only 110k per year will be pretty rough to do in the first place! But the 30 year fixed will do,, but your still goin to be house poor, if you can swing it at all!
At 7percent an 0 down you looking at a 3,326.51 a month ,, can you afford that making only 110k a year combined,, thats almost 40 grand a year ,, then taxes an insurance? just something to consider..
2007-01-16 18:07:00 · answer #5 · answered by KB 2 · 0⤊ 0⤋
Here is an article http://wiz.sc/Loans with some information on loan options and the best plans.
2007-01-16 20:15:43 · answer #6 · answered by mikalob092 1 · 0⤊ 0⤋
Do you honestly think you should trust a decision this big to the people who are answering questions at 2 a.m.?
2007-01-16 18:03:30 · answer #7 · answered by balderarrow 5 · 1⤊ 0⤋