Well, I'm trying to make the big leap and go into debt for the next oh, 30 years or so. I'm still young at 23 and with a fiance that's 21 and in the last year or so of college it's safe to say we are not loaded with cash.
Right now we are looking into a local HUD foreclosure home. It's about a 98-01 2000 sq ft doublewide on a permenant fondation with I think about 5 acres of land and no city water yet. Hud's current listing price is $77,400 with an appraised value of $86,000. Of course with a HUD home you sumbit a reasonable bid so you may get it cheaper. Have any of you out there ever bought Hud home? If so tell me all about it and how it went. If anyone wants to comment on the above one feel free to do so.
Second thing is, can anyone out there offer any sound mortage advice?
I mean Wells Fargo offered us a FHA loan (3% down) at a 6% rate and closing costs of about $2200. The thing is we do not have 20% down so PMI is required and that is expensive and I see it as another cost that is not needed and overpriced not to mention paying the closing fees. I think the PMI would cost us around $32 and month plus there might be a 1100 cost included into the loan also. Hud will pay up to #% on closing costs but that money is deducted from that bid amount basically. All they care about is net profit they can get.
The other option is a local bank loan. For it you need 20% also but I may be able to use a piece (1 acre) of property of my parents as colateral plus some money down. This loan would be at 6.7% but no PMI and closing is around 600.
What is the better deal in your opinion? Either way it's about $5000 out of pocket the way I see it. To mee it makes more sense to try for the bank loan. It would save money on PMI, would allow us to bid more but still allow Hud to make about the same amount of profit.

 

Congratulations on the upcoming marriage and on possibly buying a house.

Instead of a conventional 80% mortgage with 20% down, you might look into an 80% first mortgage, 10% 'interest only' second mortgage, and 10% downpayment.

A GOOD mortgage broker is a HUGE advantage for the borrower. Pump your friends and family for recommendations. You want the best mortgage for YOU. A good mortgage broker will try to match you with the best available loan package for your needs, not the loan that pays him the most commission.

With an 80/10/10 as described above, there will be no costly PMI. Howver, the 2nd mortgage will be at a higher interest rate than your first mortgage and there will be some additional upfront fees. It may be at a shorter term (due in 5 or 10 years is typical). Basically, you will have low payments, but you will need to refi or pay off the 10% mortgage during the loan term. If property values increase or interest rates go down, you may be able to refi the 2nd into a new, larger first mortgage before the term of the 2nd mortgage is due. Also, maybe you plan to move before the 2nd mortgage is due.

Before you commit to a mortgage, think about your long term plans. How long do you plan to keep the house? If not very long, it makes sense to get a loan with small upfront fees, even though the interest rate may be higher.

I really don't like PMI (rip-off, IMO), so virtually any scenario in which it can be avoided is preferable to paying PMI. In most cases, when your equity is 20%, the PMI is supposed to be removed. If values are rising, you will get 20% equity before your loan is paid down very much. However, you may have to fight with the PMI company, as they can be very reluctant to remove the highly profitable PMI. To get rid of the PMI, you may have to pay for an appraisal, or new loan fees as you refinance.

BTW, I am not a mortgage broker but have had the good fortune of knowing an excellent one. His advice and help saved me thousands of $$.

 

The first thing I learned about buying a house is everything is negotiable, even your name. The PMI thing is a tricky one. Right now it is not tax deductable. However the interest on a second mortgage is. Once you have PMI to get rid of it you actually need about 78% loan to value (LTV) and you have to refinance the property, but you have to wait one year if you use the same lender. What irritates me is that the PMI isn't really based on the value when you buy the house it is based on the purchase price. So if you get a good deal on the house and have some initial equity and the house prices continue to go up in your area the PMI might not be such a bad idea. i doubt interst rates will remain low for much longer though.

What is your degree in? There are loans for specific job types. There one for emerging professionals that isn't too bad. You have to be a college grad and work in certain type jobs.

Good luck and I hope you purchase goes well.

 

There are first time homebuyey classes. If you can find one in your area, take it. They will tell about all sort of programs for your needs. I took it and when I was able to buy a house the goverment pitched in $5k+ all sort of intrest reductions and such. It was a little longer for closing but I don't care for the help it provided.

 

Thanks for the advice guys.
Just went to my local bank today and I'm about 99% sure I'm going with them. 30yr fixed note at 6.839% it's a 80/20 loan so no stupid PMI. My parents were gracious enough to deed me a 1 acre plot they bought for $1000 in 94. I am now using it as $9000 worth of collatoral(sp) and paying the rest of the downpayment with my own cash funds. Clsoing costs will be under $1000. The land will then later be deeded back to them once I actually pay down to the 20% equity mark or I refi. Which could be done right after I move in I hope due to I'm buying it way under value.
The Wells Fargo FHA loan is a very good setup and the broker was very nice and helpful and did setup us up the best way she could. I was just able to setup a much better deal on my own with my bank. Their rate of 6.00% is better but that's due to them being a bigger corporation and them selling to the secondary market (Freddie Mac and Fannie Mae), which at this point my bank does not due.

 

You normally won't be able to get any good discounts (i.e. no PMI) until you own it for one year. It has to do with Freddie and Fannie putting a limit on the time frame for comparables on the appraisers. They can only use sales newer than 1 year for comparables in the appraisals.

I thought the policy was screwed up. When we bought our current house with the housing market inflation and the few improvements we did our house was valued high enough to refi and lose the PMI but the banks around here would not budge on the one year rule.

If you are dealing with a bank that will put your loan in their portfolio then they have much more leeway then ones that sell to Freddie and Fannie.

 

When we bought our house, we didn't have the full 20% either - here is what we did - My parents took out a home equity loan and lent us the money. As soon as we got our mortgage, we got our own home equity loan and paid my parents off. Then a couple of years later, we refinanced both loans into one.

It's amazing, no one wnats to lend you money until you have a mortgage. As soon as you have a mortgage everyone wants to lend you money.

 

Oh yeah, as long as you're not loaning more than 80% of the places APPRAISED value, you don't need PMI. If you're getting a really good deal on it, you may not be required to have it.

However, having said that, I will also say that the appraisers know the amount you paying for the place before you go out, and the appraisal often comes back very close to that amount.

Since this is a HUD home, and it already has been appraised at $86,000, they shouldn't be requiring PMI unless you are loaning more than $68,800.

 

36fan--

It's 80% of the sales price or appraised value, whichever is lower.

 

36fan
According to my brother who is a part-time real estate investor that is what he daid too and I agreed. According to all the mortage places it doesn't work that way. No matter how cheap I buy it or high it's valued any equity in it is not mine. Now once I buy it for whatever price then that equity is mine. So I could buy it, wait 1 year then refi and wind up with cash out or home equity credit line I wished.
None of the PMI matters now as I'm going with the bank loan and will use the 1 acre and some cash for 20%. Tomorrow I make my first bid, wish me lots of luck.