Posted on: 06th Oct, 2006 06:52 pm
Wanted to write a quick post here (thought it was a good section), in order to mention a few things to be careful of during the home-hunting (and mortgage-hunting) process:
1. Some brokers and lenders make it very easy to get in over your head. Sure, there are some underwriting guidelines that they need to comply with, but just because one person says a loan "can" be written for you- doesn't mean that it should. Don't take their word for it. Do all the monthly and yearly math yourself. If you think it will be too tight, it likely will be.
2. Don't get suckered into the various "option" ARMs with low, low first year rates, and minimum monthly payments that look more like credit card payments instead of house payments. Sure, for a year you make out great, but soon afterwards the payments will change and reality will "set in". The banks/lenders have to make their money somehow. Why would they give you a loan of $200,000 for 1.50% ?? It doesn't make sense- unless there are many catches and fine print.
3. Fannie Mae and Freddie Mac have general guidelines for what an "affordable" house is for any given person or couple. Though I still believe everyone should do their own math, exceeding their recommendations usually WILL spell trouble.
4. 80/20 mortgages- even if you qualify for them- are generally a bad idea.
The gist of the Post is that most people (present company included) feel that they are entitled to the best, the most, the biggest, the most expensive (house) they can possibly attain. The problem is their bank accounts or their salaries don't match up with their desires and expectations. I do realize that in a few metro areas of the country people MUST stretch more than they should, but in general people need to make OWNING their home the priority. Anything to the contrary could have the home owning you.
See what you can "afford" comfortably with either a 30 year fixed rate mortgage, or possibly a 3/1 ARM (if you KNOW you will be moving within that 3 years), and leave the rest to all the other people out there.
Just my opinion. Happy hunting!
Ken L.
KLME
1. Some brokers and lenders make it very easy to get in over your head. Sure, there are some underwriting guidelines that they need to comply with, but just because one person says a loan "can" be written for you- doesn't mean that it should. Don't take their word for it. Do all the monthly and yearly math yourself. If you think it will be too tight, it likely will be.
2. Don't get suckered into the various "option" ARMs with low, low first year rates, and minimum monthly payments that look more like credit card payments instead of house payments. Sure, for a year you make out great, but soon afterwards the payments will change and reality will "set in". The banks/lenders have to make their money somehow. Why would they give you a loan of $200,000 for 1.50% ?? It doesn't make sense- unless there are many catches and fine print.
3. Fannie Mae and Freddie Mac have general guidelines for what an "affordable" house is for any given person or couple. Though I still believe everyone should do their own math, exceeding their recommendations usually WILL spell trouble.
4. 80/20 mortgages- even if you qualify for them- are generally a bad idea.
The gist of the Post is that most people (present company included) feel that they are entitled to the best, the most, the biggest, the most expensive (house) they can possibly attain. The problem is their bank accounts or their salaries don't match up with their desires and expectations. I do realize that in a few metro areas of the country people MUST stretch more than they should, but in general people need to make OWNING their home the priority. Anything to the contrary could have the home owning you.
See what you can "afford" comfortably with either a 30 year fixed rate mortgage, or possibly a 3/1 ARM (if you KNOW you will be moving within that 3 years), and leave the rest to all the other people out there.
Just my opinion. Happy hunting!
Ken L.
KLME
I agree with you Ken, one has to do the math for himself first and then look at all those calculations that the lender can show him. Low payments are good but one needs to see the other side of the story.
You are absolutely right ken. Generally ARM's are very attractive, but it is necessary for borrowers to see the other side of it as well. ARM's are a good option for them who are planning to move out of that property in the coming years.
Zeal_Deal
Zeal_Deal
Hi,
I also agree that a person should only look for what he can afford over a period of time.
It is better to plan beforehand instead of falling behind on payments and then thinking about changing the payment plan so that he can save the house from getting into the hands of the lender.
I also agree that a person should only look for what he can afford over a period of time.
It is better to plan beforehand instead of falling behind on payments and then thinking about changing the payment plan so that he can save the house from getting into the hands of the lender.