Let's use an example:
Home price of $120K with a 20K down payment:
Rule of thumb:
$100K loan @ 6% = $600/mo
$100K loan @ 7% = $666/mo
$100K loan @ 8% = $732/mo.
(see what a good rate will do for you?)
What if you don't have a large down payment? FHA is doing 100% loans, but you'd have a PMI payment to add to the mortgage.
If the house was $100K & you put 0% down, if you got 6% interest rate, you'd pay $600 for the mortgage, plus you'd have a "PMI" payment of another $100-150 per month, + taxes & insurance. (probably 150-200/mo) PMI is "private mortgage insurance." It's required if you finance more than 80% of the purchase price. So we're talking $600 + 150 + 150 = $900.
The only way around that is to get 2 loans. Let's use a $100K example (you can find some decent homes in "preforeclosure" in this price range.)
The 1st loan, at 80% would be for $80K & the 2nd would be for the balance, less your down payment. With 3% down payment, ($3K) that's about 17% of the purchase price, ($17K) & always @ a higher interest rate. (If it's structured as a home equity line, it could be prime + 1 point. (about 8-9%) So with a $100K home, and putting $3K down, your pymt would be $600 + 130 = $730. You must add insurance & taxes to this! Another $150-200 = $900, so even $100K price is too high for you now, too.
But this combination may be about $150 less than the FHA loan, which requires "PMI." That should be the first thing you ask your mortgage broker/banker. WILL I HAVE TO HAVE PMI WITH THIS LOAN? If so, it may be a LONG TIME before you can get rid of it. Not until 20% of the loan balance is paid off.
I'd wait it out another 2 yrs, if I were you. Get your income up, & buy at the bottom of the market. Prices are expected to fall another 25% (until 2010) before they stabilize. NO REALTOR WILL ADMIT THIS TO YOU.
DO NOT GET A CONDO!!!! High Homeowner Assoc Fees, & most will go sky-high within 5 yrs!!!)
· 1 decade ago