I need a candor answer to this question:

I am in the process of buying a house.  I am not entirely sure whether
it is the time to buy now or not.  Very rarely do you loose buying a
house.  Here is my situation and question:

I have $19,500.00 car debt (620 dollar per month bill), a 1000 dollar
credit card debt, and 9500 (200 dollars per month bill) dollar Student
Loan debt.  I have about $10,000 in 3 different 401k’s.  The credit
card can easily be paid in less than a month.  My income is roughly
62,000 per year. I have perfect credit (with one inquiry which will
disappear in October).  I have been at my job for 9 months now (I have
two jobs, the other one is part time but I have been there for 2.5
years).  I feel very stable, and know I can get a job if I loose any
of my current jobs with ease.  I cannot afford a 20% down payment, I
have been looking at 100% financing and I am looking for a house in
the 215,000 dollar range.  My question is:

Should I buy now?  
If not, how much time should I wait?  And if I do wait, should I save
for a down payment or concentrate on paying off my debt.
If I should buy now which lender would get me the best deal (This is
the most important part of the answer.  Please no bias
advertisements).. and what do they mean by points or buying points?

I am looking for a 30 year, 100% financing.  What rate do I expect to
get?

Thank you all for your time.

Hello,
    I just purchased my 1st house a year ago, and here is what I think
about the "should I buy now, or wait" question: BUY NOW!
There are many reasons you should buy now, chief among them is the
extremely low rates! Another reason is: equity! Renting a home is
basically throwing money out the window, yes you do get a place to
live, BUT you can have so much more if you buy a home. Equity is VERY
nice to have, it is almost as good as having a savings account that
gets bigger with every mortagage payment. I wish I had bought my house
5 years ago! Not to mention that anything you do to improve the house
increases your equity. (Equity, by the way, is the amount of the
mortagage principle that is actually paid off, in other words it is
like money in your pocket)

About the down payment: when I purchased my home I only put down 10%
(40% of which was a "gift" from my parents). No one at the mortagage
company really seemed to mind, I had always heard that you should put
down at least 20% as well, but you can get away with much less. Keep
in mind however that it takes a lot longer to build equity with a
small down payment.

What are points? Basically you can "buy" points to reduce your
interest rate. Remember that the interest you pay is tax deductable,
and points MAY (or may not ) be tax deductable! Which is just another
benefit of buying a home, it will make tax time a lot more fun.
(Because you will probably get a big return :)
http://www.realestateabc.com/taxes/deductible1.htm
http://www.hsh.com/partners/nydob/critmr.htm
http://www.taxplanet.com/taxguide/realestate/points/points_homesale/points_homesale.html
http://www.taxplanet.com/taxguide/realestate/points/points_homebuy/points_homebuy.html

As far as which lender will give you the best deal, that is very hard
for me to answer, because the rate you get is based on your credit
history and other factors. However applying for a loan is actually
pretty easy, you can do it on the website for most banks (for free
with no obligation), and other online loan houses. Current interest
rates for mortgages are in the 5.3%-7.8% range. You can probably be
sure of getting something around 6.5%.
http://biz.yahoo.com/b/r/m.html

Here is a good starting point:
http://www.lendingtree.com

Lendingtree gathers all of your info (name, address, social security,
etc...) and find the best mortgage provider in their database for your
needs. You should  just apply for a loan here just to see what they
come up with, its free to apply, and there is no obligation.

Here is another website that takes very basic parameters, and gives
you a list of lenders that may give you a mortgage sorted by interest
rate.
http://www.interest.com/
http://www.interest.com/rateshopper/

I tried the rate shopper with for a North Carolina, 30 year fixed rate
mortgage of $215000 and 0 points, and I got a list of lenders with
rates ranging from 6.5% to 6.875%

Here is the lender that came up with the 6.5% rate on that page:
http://www.homeboundmortgage.com/

(Personally, just looking at their website, I would be a little
cautious, it reminds me of something that might say "as seem on TV")

Another lender is e-loan, 
http://www.eloan.com

I actually just got a small loan from e-loan, and it was very easy,
and fast.

Another place I would try is your bank, you can either goto an actual
branch, and talk to them and apply in person, or you can probably do
it online, by going to their website and looking for a mortgage or
loan page. At Bank of America you can apply right online in about 10
minutes, and according to their website they are offering loans in the
6.625% range.
http://www.bankofamerica.com

Hope this helps, good luck, I know it is kind of scary spending
hundreds of thousands of dollars, but it is really worth is in my
opinion.

Please let me know if you want any more information on this topic.
Thanks, and good luck.
--jld

---

Request for Answer Clarification by shedding-ga on 04 Jun 2002 12:53 PDT

I do want to buy now.. I have been reading a lot on the subject. 
However, I called a few places and they said that there is a 80% 20%
loan where the loan differs in interest rate for 100% financing, the
other thing was that your income to debt ration has to be below 35%
AND if I apply for loan information the lending officers will inquire
in your credit report (Which will overall reduce your chances of
getting a good loan if too many inquiries have been made).  So.. I am
trying to figure out if it is worth while to go ahead and have them
inquire into the report (Remeber, those reports can last up to two
years in your credit file and will reflect negatively on you).  The
other reason I said if to buy now or later is that because I don't
have the 35% debt to income ration (more like 50%), I might have a
higher interest rate (Because the bank might consider me a high risk).
 Also, I am not sure how much escrow fees will come out to and whether
the bank includes this with their 100% financing.  Not to mention
insurance cost, property assesement fees, state and city licenses
among other things.  So.. if I do apply now and they turn me down for
the money requested (or worse.. give me a super high interest rate),
it will carry a credit inquiry which makes it harder to get a loan. 
Am I being too overly cautious and just apply?

Thank you for helping me with this.

Hmmm That is interesting, I would probably still go for it, however
you may want to consider a more affordable house, just to be on the
safe side (say in the $130,000 range, I don't know where you are at,
but around here you can get a farily nice 3 bedroom for that if you
look hard enough). Here is an article that talks more about 100%
financing.
http://www.bankrate.com/brm/news/mtg/19990902.asp

You may also want to consider trying to muster up a small down
payment, again to be on the safe side. But if you feel you are in a
stable job, and can have a steady income of at least what you are
making now, I think you will probably be ok.

About the multiple loan applications staining your credit report, to
get the small loan I mentioned earlier, I applied at 3 places (my
bank, lending tree, and e-loan, in that order, and I finally took the
one at e-loan without hassle). I would probably keep it under 10
places, but I think doing a little shopping is smart, and should be
expected. Another thing to keep in mind is that places like lending
tree gives you access to multiple lenders with 1 application, so it is
a good way to shop and get a feel for what is out there.

Hope this helps, please let me know if you have any other concerns.
Good luck
--jld

Hi, I just went thru the process of buying my first home last month.
We just closed it a week ago. The following company offered the best
rates for me. When everyone offered 6.75-7.0, they are the only ones
offered 6.5 with no points and closing costs were about $1000 (you
need to confirm this again). It wouldn't hurt to try it.

www.instafi.com

One of the key points I've learned about mortgages is how little you
apply to the principal of the mortgage at the beginning of the term. 
Usually for the first few years over 80% of your payment goes to the
interest.  The solution is to pay more than you're required to (even
by $50 to $100 a month or so) for the first while, and ignore this
after about five years (when you may have kids/more kids to worry
about too).  For the first year you may be paying $1500 total, but
only $250 or less goes on the principle.  Add another $250 ($1750) for
the first month and you double the rate you're paying the mortgage
(for a month).  By doing this, you can probably trim a 25 year
mortgage to 20 or even 15 years, depending on how you crunch the
numbers.  By paying every 14 days (accelerated bi-weekly, two extra
payments per year in months with three paydays, and if you're paid
every 14 days you won't even feel it) instead of monthly or twice a
month, you could take 7 years off a 25 year mortgage!   (Sorry, on a
comment I'm to lazy to do an example of the maths. :)

I used this calculator:
http://www.ewmortgage.com/mortgage/

I think you should buy.  The prices on property are rising.  You
should let a mortgage broker help you with the Loan. What I usually do
for my client, I am able to shop for the best rate for them without
risking they credit to go low.  You have to remember that a broker
have the possibilities to shop for you, without having to pull your
credit several time.  You have to be very careful about that.  If you
want to know what can affect your credit score, let me know I can help
you with that.

There are many programs for first time home buyers that offer no down payment.
Housing and Urban development is one place to look , although the
price range you are looking at is probably to high for their programs,
it is still worth a look as they may be able to guide you towards
other programs. Now is definitly the time to buy as the interest rates
are low. I used my veterans benefits to to insure my loan which
offered no down payment and seller paid the points.
These loans are assumable, so that is another option if you are lucky
enough to find the house you want with such a guaranteed loan already
in place.

Good luck

When I read your write up, I thought it was me back 10 years ago.  I
agree with jeanluis-ga you need to consider a more affordable house
and here is why:

Your monthly after tax take home is probably $3800 /month(assuming 20%
tax and 6% 401K/IRA)  I did not include insurance costs.

Less
Principal on house $1220 (30yr @5.5% rate)
Car and Loan $820
Property Taxes on House $500 (depends on where you live)
Power/Gas/water $300

That leaves you with $1000 to eat, entertainment, gas for car, etc. Oh
yeah don't forget to furnish that house.

Here is my advice:
- Pay off the credit cards first
- Buy a house, but make it cheap.  Figure out what the payment with
taxes will be and put the money in savings.  See if you can survive
without it.
- Dump the car. $620 is alot of money. Buy a cash car.  Have friends
drive for lunch.
- Do not pay off the student loan unless you have free money.  

Remember, if you are a first time home buyer you can pull $10 K from
your 401K without getting hit with the 10% penalty, normal taxes apply
though.  Screw your 401K you may die before you use it anyway.

Good Luck

Paul