First-time home buyer?

Question

I'm a first time home buyer with excellent credit. I have some credit card debt that I would like to like to roll into my mortgage as this would help me with cash flow. I'm planning on putting 5% down which will be made up of mostly cash and some from a retirement account. What are my options with this and can this be done?

Answer 1

You want to roll current debt into your new mortgage AND put 5% down? That doesn't make any sense.

Regardless, the answer is no. You can't get a mortgage loan for more than the appraised value of the property.

You might consider getting a 100% loan and using your cash to pay down your debts. I wouldn't normally recommend this, but it does satisfy your stated goals.

Good luck.

Answer 2

Here is what you now know ...

1) You can't borrow more than what the home is worth (true)

Here are some explanations and options ...

1) The interest rate on a loan with 5% down is only slightly higher than a loan with zero down. Assuming $100,000 loan, the difference in payment is $35 per month. The mortgage insurance factor difference is also minimal.

2) If the 5% pays off your debt in full or at least saves you a considerable amount, then this makes sense to use these funds for paying off high interest credit card debt assuming you're not going to charge them back up.

3) Another option to assist in cash flow is to visit http://www.irs.gov and play around with their withholding calculator. Type in different scenarios and see what happens. If with the mortgage interest and tax deductions, you save $4,800 per year, then adjust your withholding so that you can receive an extra $400 in your paycheck each month.

4) An 80/15 that was discussed is an option but is not adviseable. First off, in order to borrow against it, you are going to have a home equity line of credit which is based on a current prime rate of 8.25% and adjusts up or down every month. It has only gone up over the last couple of years.

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Answer 3

As a loan officer for 7 years I no of no mortgage company that will legally lend out more than the purchase price on the home. What some people do is right after closing if there is equity in the home, they take a line of credit to pay off bills, debt consolidation, etc. Some people may find ways to try to get around the law, but it usually ends badly.

Answer 4

You really need an analysis of your debt to income and loan to value of the property you are interested in buying.
The first thing you should do is get pre-qualified so you know where you stand as a buyer. Until the actual numbers are hacked you won't know what is possible. When you find out where you stand you can be advised of loan programs that fit your situation and different ways to reach you goal.
You need to do this before you talk to a Realtor because you should have a plan in mind before you start your house search or negotiating with the seller. You don't want to be oversold. You want the house that fits you not what a Realtor wants to sell you. Don't feel that everything needs to come out of your pocket.
If you are shopping for sale by owner then you need to check your choices at propertyshark.com. You have to know if the ratios are really there to make your goal/plan work.
When you buy a house you are financing your future you need to do what works for you now and later. I realize that you have an idea of what you think will work for you, however there could be some other options that might have a better result.
Well, there is always so much to say a such a small space to say it. Really gets frustrating at times.
If you would like a free analysis and free pre-qualification email:
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Answer 5

It really depends on the fair market value of the house and the mortgage amount.

I would suggest, you do NOT go ahead with this plan. Pay off your credit card debt first and save some more. Do not tap into your retirement account.

Paying off your CC debt first will improve your credit rating which will help you with the interest rate. A few percentage point will make a BIG difference in how fast you can pay off your mortgage. You certainly do not want to borrow any more than you need.

Secondly, when-ever you buy a house, you should have a buffer money. Either you buy used or new, you will need money to take care of "stuff" that will happen to you. I went through my $10K buffer very quickly in the first year.

Plus, when you borrow from your retirement account, you will be paying it back (if you do) with after tax money. This will amount to double taxation. Not a smartest way to borrow money.

Don't rush in. It's better to wait than force your way in, struggle, and risk losing everything you have.

Answer 6

In a purchase transaction, the amount you can borrow will typically be limited to a percentage of the purchase price plus closing costs. However, most lenders will offer to open a home equity line of credit with your first mortgage. The amount of your line of credit will be based on the amount of your equity. You can also do this as a 2 step process if you need more cash. The advantage of this method is, in a refinance (which would include a home equity line of credit) the amount of credit you qualify for is based on the appraised value of the home. So, if the home appraises for more than the purchase price, you may be able to qualify for a larger line of credit.

Answer 7

If I were you, I'd ask your loan officer to set you up with an 80/15 loan, but with the 2nd actually being for the full 20% available as a line of credit.

So, right after you put your money down at closing, you can reborrow it from your equity and pay off your credit cards.

You'll get better rates doing it this way, and should accomplish the same goal.

Answer 8

It depends.

Mortgage money is cheap. A lot of people get more mortgage than they need to help with closing costs, etc. It's cheaper than credit card debt. However, before you go ahead with this, you should be sure that you can carry a home. Homes have "hidden" costs like you can't imagine. And I don't just mean repairs/maintenance. Even with a new home, you'll be shocked by the endless amount of stuff you need. Things like gardening supplies (mower, etc.), home insurance, driveway sealing, extra cleanng supplies, more light bulbs, you'll probably entertain more, etc., etc.

Answer 9

The credit card debt is unsecured, the mortgage is secured by the property itself.
I agree with the guy that said to pay it down, then look for a house.