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Hi,

So I finally found a condo and have signed a contract. I now have 3 weeks to get my finances set up. Here's some info:

-Purchase price is $140k, I pay closing costs.
-I will be putting 10% down (I'm told that's the minimum for a conventional loan on a condo). I don't want to do FHA because the PMI on FHA lasts for at least 5 years. I should be able to hit 20% LTV within 1 year of purchase.
-I got quoted a total of $1,856 closing costs ($500 more if you count my earnest money), based on this breakdown: $2,415 closing (1.1% origination fee) + $1,086 prepaid items - $500 earnest money - $1,144 property tax credit.
-I got quoted a rate of 5.625%, no points. Also need $300 appraisal check to lock this in.

I want to do some shopping around and find out what I can negotiate and what kind of rates I can get. I have a couple questions:

1) What are "prepaid items"?
2) What's this "property tax credit"?

I will be talking to this loan officer again on Monday to maybe get a better idea of what all this is, but I'd like to know if you think this is decent, and where I should shop around for competitive rates.

Seems like interest rates skyrocketed. Wasn't it like 4.5% or so just a few months back?

EDIT: I am browsing through the mortgage thread.

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To me, mikhail, that would not be worth it, but it's a subjective risk assessment. I went the other way, taking .625 neg... (more)

SlimTim (Jun. 22, 2009 @ 10:06p) |

Yea the more I think about it the less points make sense right now. My current situation is like this:

I have 10k saved u... (more)

mikhailtech (Jun. 23, 2009 @ 5:03p) |

So it looks like I'll have to go with the 10% HELOC/80% conventional. I checked my bank and they wouldn't give me even a... (more)

mikhailtech (Jun. 24, 2009 @ 7:06a) |

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Not to rain on the parade, and red me if you'd like. But aren't these questions you should have been asking before you signed a contract?

prepaid items are things that need to be paid in advance, like insurance or hoa fees
not sure about the property tax credit thing...are the property taxes due later in the year? They are due around September here, so they are paying their "portion" of the taxes for the year.

Property tax credit...either a portion or all of the current property taxes

bauzer71487 said: Not to rain on the parade, and red me if you'd like. But aren't these questions you should have been asking before you signed a contract?

No way! Just sign the dotted line. Everything will be fine.

I'm going through the process of buying a condo myself. I locked in at 4.875 15 year.
Conventional loan min. is 5%, not 10%
your closing costs seem to be pretty equal to mine. They gave me an estimate of about that same number, however, I'm adding condo insurance and inspection to closing costs.

I would say shop around, but remember that whatever rate you see for a 30 year, add .375 to it. New regulations have made it to where if you are going to buy a condo, the add on applies compared to a single family home, where there is no add on. 15 year does not apply. In my area, the difference between a 15 and 30 is a full percentage point and I shopped around.

Make sure you get a copy of the homeowners association's legal documents: CC&Rs, Bylaws, as well as copy of their annual budget and balance sheet, rules & regulations that the Homeowner's Association has adopted, if applicable. Also request the last six months of minutes of homeowner's association meetings (or 12 months if the HOA Board only meets a few times a year). A few of the things you should be looking for in the minutes is discussion about special assessments, increase in homeowner's dues, delinquency among homeowners.

mikhailtech said:
I pay closing costs.

If this is by their design, you have probably left money on the table.
mikhailtech said:
-I will be putting 10% down (I'm told that's the minimum for a conventional loan on a condo). I don't want to do FHA because the PMI on FHA lasts for at least 5 years. I should be able to hit 20% LTV within 1 year of purchase.

Good call on avoiding FHA in this instance. If you don't need the high LTV, and you have otherwise prime credit, there is no need to be locked into their MI. You are better off with a conventional loan and PMI. You can always pay down your loan ahead of schedule, which with a re-appraisal, can eliminate the PMI ahead of scheduled amortization.

I don't know what your monthly income is, but if you can handle it over the next 12 months, you might want to consider using a 0% balance transfer after closing to knock out the PMI immediately.

mikhailtech said:
-I got quoted a total of $1,856 closing costs ($500 more if you count my earnest money), based on this breakdown: $2,415 closing (1.1% origination fee) + $1,086 prepaid items - $500 earnest money - $1,144 property tax credit.

I don't have the full specifics of your loan, but those costs are not inherently unreasonable.

mikhailtech said:
-I got quoted a rate of 5.625%, no points. Also need $300 appraisal check to lock this in.

That rate is not inherently unreasonable.

What is your median FICO, and what state are you in?

mikhailtech said:
I want to do some shopping around and find out what I can negotiate and what kind of rates I can get. I have a couple questions:

Excellent choice. You need to apply to another lender, and let each lender know you are shopping. This helps to keep them honest, if they know you can immediately go elsewhere without delaying your purchase or letting your contract expire.

Unscrupulous lenders can take advantage of borrowers when the closing is time sensitive and the borrower has not begun the application process elsewhere.

Remember, once the loan is clear to close, 95% of the lender's work is already done. They are not going to risk letting all that time go to waste to try and squeeze more money out of you.

mikhailtech said:
1) What are "prepaid items"?

Your prepaids will include the first year of your insurance policy and per diem (partial month) interest. There is nothing there to negotiate with the lender.

mikhailtech said:
2) What's this "property tax credit"?

That refers, most likely, to a proration of periodic property taxes between the buyer and seller when the current period is split.

(It could also be some local homeowner incentive, but that is not common practice.)

mikhailtech said:
I will be talking to this loan officer again on Monday to maybe get a better idea of what all this is, but I'd like to know if you think this is decent, and where I should shop around for competitive rates.

I can give more specific answers if I know your median FICO score and the state the property is located in.

mikhailtech said:
Seems like interest rates skyrocketed. Wasn't it like 4.5% or so just a few months back?

Yes, they did, but the 30-year loans increased much more than the 15s.

Have you considered a 15 year loan side-by-side against a 30 year loan? If the lender defaulted you to the 30, you really should have the numbers run for the 15. You will get a better rate (especially if your FICO is below 720), and the monthly MI will be less.


Edit: What is the property expected to appraise for? We might be able to restructure the closing cost credit in your favor with a zero net change to the seller's take.

Staci, thanks for the heads up. Here are my scores: 720 transunion/empirica, 723 Equifax/beacon and
724 fair isaac/experian

Based on the feedback here though, I'm confused about a couple things:

1) Why would I need a re-appraisal to get rid of PMI? I was told it drops off immediately once you hit 20% LTV of the original purchase price.
2) I can't find a legit answer to the minimum down payment for a conventional loan. I was told it was 5% for houses, 10% for condos. Does anyone have a clear link or other info that would state otherwise? I would definitely like to have this information around as a bargaining tool.

Also, is there typically any kind of negotiating leeway to knock off some of the fees related to closing costs?

EDIT: here's a (blog, but still) that confirms 10% minimum downpayment on condo/townhome for conventional loan: http://loansbyireneblog.com/2009/01/26/5-down-payment-conventional-loan-available/

"The property must be a single-family home or a detached PUD. It cannot be a condo or attached townhome; otherwise, you must put 10% down minimum."

Would like some verification on this.

Also, I would be struggling with a 15 year. I could probably do it, but it would be riding on thin ice.

And what's a 0% balance transfer?

bargainhunter3 said: I'm going through the process of buying a condo myself. I locked in at 4.875 15 year.

I would say shop around, but remember that whatever rate you see for a 30 year, add .375 to it. New regulations have made it to where if you are going to buy a condo, the add on applies compared to a single family home, where there is no add on. 15 year does not apply. In my area, the difference between a 15 and 30 is a full percentage point and I shopped around.


Where are you getting your financing, the best I can do is 5.75 on a 30yr?


I too am under contract to buy a condo in Southern California. Luckily it is a shortsale and there is no earnest money involved and I can walk away at any time with no penalty. When I made the original offer rates were 4.7%, by the time my offer was accepted rates had climbed to 5.7% making me rethink the purchase ($1200 a year difference just because the bank worked so slowly on the short sale). My feeling is its there problem rates went up, I can continue to wait and they need to accept a lower price if they want me to buy this unit. If they won't do that I can wait all day long (live at home with parents, already have 20% down cash saved up, and have a stable job making decent money). I expect after the latest CA foreclosure morotorium passes tons of new inventory will hit the streets just like last time, and rates should be higher, meaning prices will be less. My new offer was given to the bank Friday.

mikhailtech said: Staci, thanks for the heads up. Here are my scores: 720 transunion/empirica, 723 Equifax/beacon and
724 fair isaac/experian

Based on the feedback here though, I'm confused about a couple things:

1) Why would I need a re-appraisal to get rid of PMI? I was told it drops off immediately once you hit 20% LTV of the original purchase price.
2) I can't find a legit answer to the minimum down payment for a conventional loan. I was told it was 5% for houses, 10% for condos. Does anyone have a clear link or other info that would state otherwise? I would definitely like to have this information around as a bargaining tool.

Also, is there typically any kind of negotiating leeway to knock off some of the fees related to closing costs?

EDIT: here's a (blog, but still) that confirms 10% minimum downpayment on condo/townhome for conventional loan: http://loansbyireneblog.com/2009/01/26/5-down-payment-conventional-loan-available/

"The property must be a single-family home or a detached PUD. It cannot be a condo or attached townhome; otherwise, you must put 10% down minimum."

Would like some verification on this.

Also, I would be struggling with a 15 year. I could probably do it, but it would be riding on thin ice.

And what's a 0% balance transfer?


1. it doesn't automatically drop off. You need to call them and go through the process of having it removed. I am not sure about having it re-appraised.

2. I was told by my lender that the min. is 5% down payment, I live in OH. So rules may vary by state. I would talk to the loan officer about it as they would be more knowledge than I in your current state. I am only telling you my personal experience.

toy4two said: bargainhunter3 said: I'm going through the process of buying a condo myself. I locked in at 4.875 15 year.

I would say shop around, but remember that whatever rate you see for a 30 year, add .375 to it. New regulations have made it to where if you are going to buy a condo, the add on applies compared to a single family home, where there is no add on. 15 year does not apply. In my area, the difference between a 15 and 30 is a full percentage point and I shopped around.


Where are you getting your financing, the best I can do is 5.75 on a 30yr?


I too am under contract to buy a condo in Southern California. Luckily it is a shortsale and there is no earnest money involved and I can walk away at any time with no penalty. When I made the original offer rates were 4.7%, by the time my offer was accepted rates had climbed to 5.7% making me rethink the purchase ($1200 a year difference just because the bank worked so slowly on the short sale). My feeling is its there problem rates went up, I can continue to wait and they need to accept a lower price if they want me to buy this unit. If they won't do that I can wait all day long (live at home with parents, already have 20% down cash saved up, and have a stable job making decent money). I expect after the latest CA foreclosure morotorium passes tons of new inventory will hit the streets just like last time, and rates should be higher, meaning prices will be less. My new offer was given to the bank Friday.


5.75 is good right now b/c the rates for condos in my area have gone up to 6.25 (add on included).I locked in early this week before rates skyrocketed. I could've locked last month at 4.5% 15 yr, but I was still debating on whether or not I wanted to go 15 or 30.
I live in OH, and am going through a credit union.

People are having an extremely hard time finding loans for condos without 20% down. You need to find the association's owner occupancy rate and report that to your lender immediately to see if it will affect your loan. Used to be anything over 50% owner occupied was fine, but now they're looking for an insane 75%. It sounds like you've got your lender lined up but it's not a sure thing until they have all the details. Around here people are needing to find portfolio lenders (local banks that will keep the loans rather than selling them), but even that is starting to dry up now.

mikhailtech said: Staci, thanks for the heads up. Here are my scores: 720 transunion/empirica, 723 Equifax/beacon and
724 fair isaac/experian

Your median score is a 723, which is good. 720 is an important tier as far as rates and MI pricing is concerned.

Between now and closing, take very good care of your credit score. If it drops by four points, it will add between 0.125% and 0.250% to your rate, and may jeopardize your approval (or ability to get PMI), depending on your lender.

Your rate looks reasonable based on the information I have, but you can probably do a bit better.

What state are you in? (that affects pricing and loan availability)

mikhailtech said:
1) Why would I need a re-appraisal to get rid of PMI? I was told it drops off immediately once you hit 20% LTV of the original purchase price.

You don't need a re-appraisal, but it may help if your property is re-appraised for higher than the purchase price.

At closing, your LTV is based on the amount of the loan divided by the lesser of the purchase price or the appraised value. If you are buying below appraised value, the re-appraisal will allow you to use the higher appraised value (instead of the purchase price) for the LTV calculation.

If you do not re-appraise the property, the PMI can be canceled when your loan balance decreases to 80% LTV through normal repayment of the loan (it will be automatically canceled at 78% LTV).

mikhailtech said:
2) I can't find a legit answer to the minimum down payment for a conventional loan. I was told it was 5% for houses, 10% for condos. Does anyone have a clear link or other info that would state otherwise? I would definitely like to have this information around as a bargaining tool.

This depends on your state and your lender. 10% down on a condo is within agency guidelines, and not unreasonable, in and of itself. Some combination of lender, MI company, and state may reduce the maximum LTV. The guidelines I am looking at come directly from secondary market investors, and I can't exactly link to them, as they are non-public.

If you want to satisfy your curiousity, you might check out PMI guidelines from MGIC, the largest underwriter of PMI. PMI availability is going to be more restrictive than the underlying loan itself, due to current market conditions.

mikhailtech said:
Also, is there typically any kind of negotiating leeway to knock off some of the fees related to closing costs?

Yes, you can negotiate some of these closing costs, however the seller's title company is more in control of this deal than you would be in a refinance.

If you want to save money, focus on negotiating a better rate, negotiating for some seller credits to closing costs, or buying the rate down. I can't speak for your lender, but if I were the lender, I could reduce your interest rate from 5.625% to 5.25% in exchange for one discount point, which would make sense if you plan to stay in the house for an extended period of time.

mikhailtech said:
Also, I would be struggling with a 15 year. I could probably do it, but it would be riding on thin ice.

I ran some quick numbers, for a 30 vs. 15 (assuming roughly equal SRP to the lender), and the PI + PMI on a 30 comes to $790.43 per month, whereas the 15 comes to $1022.86 (rate of 4.875%) per month. For an extra $232.43 per month, you can own your condo in half the time, and drop the PMI on an accelerated schedule. I'm not here to suggest that one is better than the other. That choice depends on your personal budget, your future outlook, your tax situation, as well as your desire (or lack thereof) to stay leveraged. There is no one right answer. I just wanted to throw the numbers out, since many lenders will not. Lenders like to sell the 30 by default to make their payments look easy and competitive.

Do not take a 15 if it will put you on thin ice. You can always take a 30 and make extra payments as extra money becomes available.

mikhailtech said:
And what's a 0% balance transfer?

A 0% balance transfer is a deposit to your checking account from a credit card company. It is a promotional rate that typically lasts for only 12 months.

If your budget allows, using a 0% balance transfer (which must be paid off in less than 12 months) to accelerate the drop-off point of the PMI can save you significant amounts of money. The way to do this is to take a transfer which immediately eliminates MI, and can be paid off in 12 months. You will save the cost of the PMI in that interim period, and pay less interest on your mortgage.

0% money can save you substantial amounts on your mortgages or HELOCs, but you have to be absolutely certain you can pay them off before the promotional rate ends. For every $10k of mortgage debt you can eliminate on your loan, you will save $562.50 per year in interest charges.

A more aggressive cost reduction strategy uses multiple 0% transfers to pay down principal enough to secure a HELOC which can cover the transfers in 12 months. If you do this right, you can avoid paying mortgage interest on tens of thousands in mortgage debt for 12 months, then use the HELOC to pay the cards right before the promotional rate expires. You would then get new 0% cards to pay down the HELOC in another cycle.

0% cards are becoming scarce, and HELOCs are no longer easy to obtain, so if you are even considering this, you need to spend hours reading FWF to see how others are doing it, and be absolutely certain you can execute it properly.

bargainhunter3 said:
1. it doesn't automatically drop off. You need to call them and go through the process of having it removed. I am not sure about having it re-appraised.

It will drop off at 78% LTV. You can request removal at 80% LTV.

bargainhunter3 said:
2. I was told by my lender that the min. is 5% down payment, I live in OH. So rules may vary by state. I would talk to the loan officer about it as they would be more knowledge than I in your current state. I am only telling you my personal experience.

Rules vary state by state, county by county, lender by lender, and PMI underwriter by PMI underwriter.

OH is a much better place to be than say, Miami-Dade County, FL, as far as mortgage criteria.

Staci, thanks again for all your help, this info is golden. Here's some more info in my situation:

1) I live in OH.
2) I make about $2900/month after taxes and 401k deduction.
3) With the quote that I got, I would be paying almost $1200/month on a 30 year fixed, with taxes + mortgage + PMI = $955 + HOA ($229, although it does include water).

I'm currently paying $850/month + $200 or so in utilities & cable/internet, so that's $1050/month. After all my typical monthly expenses are taken care of (including some fun money spent on purchases every now and then), I can put away ~$500/month. Depending on circumstances I can sometimes put away $1000/month, but that's unreliable. I don't have any debt. I could try for a 15 year, but it might be cutting it close. I still want to be able to put away some money each month. I have ~10K saved up. My parents said they would short term lend me ~10k for the initial down payment, closing costs, etc. With the 8k credit and ~3 months I should be able to pay that back to them.

I have some more questions:

1) How is the mortgage percentage calculated on a yearly basis? In other words, let's say you have 5% mortgage interest on $100k, which is 5k. To clarify, the interest rate is the % on the remaining loan, correct? So it would be 5% of 90k, 80k, 70k, etc?

2) I can do principal buydown at any point, correct?

3) For the 0% balance transfer, is that some sort of introductory offer or is it something you can request from your CC company? I have an 11k CL on one of my cards.

4) 1 point = one time payment of $1000 up front, yes? My plan for this condo is to stay there for 5 years max, then get a house and rent it out (sell if there are problems renting). Is there a linear comparison of interest rate difference to points? In other words, is 1 point up front worth 0.25% interest rate drop or something like that?

5) It would be cool if I could get some indicator of laws regarding 5% vs. 10% minimum down payment for a conventional loan on a condo/townhouse.

Thanks again for all the help

1) Correct
2) Principle buydown - this will depend on your loan. Some will penalize you for early payoff / too much payment to principle in a year. Double/triple check your paperwork for this.

4) Prepaid points vs reduction in mortgage rate depends on the deal you can get. Should be a calculator where you can run the numbers and see what you can do. Google for it.

mikhailtech said: 1) I live in OH.
OH lending guidelines are not as restrictive as many other states, and OH loans aren't subject to some of the rate hits present in other states. A loan of $124k in OH remains close to the base rate for loans.

mikhailtech said:
I'm currently paying $850/month + $200 or so in utilities & cable/internet, so that's $1050/month. After all my typical monthly expenses are taken care of (including some fun money spent on purchases every now and then), I can put away ~$500/month. Depending on circumstances I can sometimes put away $1000/month, but that's unreliable. I don't have any debt. I could try for a 15 year, but it might be cutting it close. I still want to be able to put away some money each month. I have ~10K saved up. My parents said they would short term lend me ~10k for the initial down payment, closing costs, etc. With the 8k credit and ~3 months I should be able to pay that back to them.

Any discussion of budgeting is not complete without including an analysis of job security, career advancement, and side opportunities.

Do you feel reasonably secure in your job? Are you on track for any advancement or raises above and beyond cost-of-living adjustments? Can you put in extra hours? Do you possess a skill that can be marketed via referral, Craigslist, or a similar method to earn cash on the side?

Have you looked into miscellaneous cost-saving methods, such as replacing a landline with VOIP, downgrading cable TV to a package which meets your viewing patterns, switching to a lower-cost Internet provider, raising the deductible on your auto insurance (or re-shopping it), replacing DVD purchases with Netflix, buying in bulk, carefully controlling energy usage by turning off appliances when not in use and using CFL bulbs exclusively, changing your AC/heat, eliminating unnecessary driving, etc.? (See saving thread 1 and thread 2 for more ideas)

You mentioned that you have approximately $10k in savings, and will have it after closing. Have you checked the high APY liquid accounts thread to make sure you are earning the best rate available? Do you direct deposit your paycheck to a savings account, transfer money out to pay bills as they come due, and pocket the interest on the float in between?

I noticed in another thread that you spend hardly anything on your credit card. Look into getting Schwab's 2% cash back card, put all your spending on it, and pay it in full every month. That is more found money.

If you can save $20 on communications/entertainment, $30 on auto insurance, $25 on utilities, and $50 on everyday purchasing, that amounts to $125 per month, which is slightly more than half of the cost difference between the 30 and the 15. If you can earn another $107 per month on the side, or reduce your savings contributions by roughly 20%, you have made up the cost difference, and will own your condo free and clear in half the time.

If you do a rate buydown (as discussed below), you will have even less money going toward mortgage interest each month, and the 15 suddenly becomes even more affordable.

mikhailtech said:
1) How is the mortgage percentage calculated on a yearly basis? In other words, let's say you have 5% mortgage interest on $100k, which is 5k. To clarify, the interest rate is the % on the remaining loan, correct? So it would be 5% of 90k, 80k, 70k, etc?

The interest is calculated on the outstanding balance on a monthly basis. As the balance is reduced, the portion of your payment which goes to interest is reduced. If you pay extra each month, future payments will include less interest.

mikhailtech said:
2) I can do principal buydown at any point, correct?

Your loan has no prepayment penalty, so you can pay extra at any time.

A buydown typically refers to paying, at closing, for a lower rate. If you want to buy down the loan, that has to be done at closing.

mikhailtech said:
3) For the 0% balance transfer, is that some sort of introductory offer or is it something you can request from your CC company? I have an 11k CL on one of my cards.

Some CC companies will offer them from time to time, but it is rare. Most 0% offers are introductory.

mikhailtech said:
4) 1 point = one time payment of $1000 up front, yes?

One point is one percent of the loan.

mikhailtech said: My plan for this condo is to stay there for 5 years max, then get a house and rent it out (sell if there are problems renting).
Staying for five years would already make you a good candidate for a buydown, but if you plan to retain ownership for investment purposes once you get a house, the buydown will help you even more.

Right now, you could buy your 30 year loan down to 5.375% for about one point. That would pay for itself in about 2.5 years.

Your lender can tell you what your buydown options are. They are heavily dependent on her rate sheet.

mikhailtech said:
Is there a linear comparison of interest rate difference to points? In other words, is 1 point up front worth 0.25% interest rate drop or something like that?

No, there is no simple way to calculate it. The costs and savings fluctuate hourly with the bond market.

mikhailtech said:
5) It would be cool if I could get some indicator of laws regarding 5% vs. 10% minimum down payment for a conventional loan on a condo/townhouse.

The only law at work here is one which requires Fannie and Freddie to require PMI on loans above 80% LTV. Everything else is driven by agency and lender guidelines, not the law.

bighitter said: Make sure you get a copy of the homeowners association's legal documents: CC&Rs, Bylaws, as well as copy of their annual budget and balance sheet, rules & regulations that the Homeowner's Association has adopted, if applicable. Also request the last six months of minutes of homeowner's association meetings (or 12 months if the HOA Board only meets a few times a year). A few of the things you should be looking for in the minutes is discussion about special assessments, increase in homeowner's dues, delinquency among homeowners.

I cannot agree with this enough. Do everything you possibly can to figure out what kind of financial shape the association is in. I did not do this when buying my condo and am regretting it big time. We didn't realize until we got here that the association had practically nothing in reserves. If there's a major maintenance emergency that comes up, there will definitely be an assessment coming our way. Not only do I want to move, I don't ever want to own a condo again. I don't like having my financial future potentially tied to the fiscal/management skills (or lack of skills) of the association. And, before anyone calls me a moron for not thinking about this before buying, I know. I feel like an idiot for not researching more.

"Staying for five years would already make you a good candidate for a buydown, but if you plan to retain ownership for investment purposes once you get a house, the buydown will help you even more. Right now, you could buy your 30 year loan down to 5.375% for about one point. That would pay for itself in about 2.5 years. Your lender can tell you what your buydown options are. They are heavily dependent on her rate sheet."

So if I'm going to be staying there most point buydowns are worth it? Doesn't that also depend on how quickly you pay off the mortgage as well, i.e. if I'm putting an extra $500 in principal down each month, wouldn't that make the buydown less effective because I'm getting charged interest on less and less of the outstanding loan?

I have all the documents you suggested. I read over all the bylaws and they're ok. Regarding the rate sheet, it's a huge document but the main outstanding points are:

For May 2009:

total cash for operations: 60,000
total cash for reserves: 160,000
total current assets: 220,000
total liability and owners equity: 220,000

Next few pages have more info, saying "period ending May 31, 2009":

Total Income: 380,000
Total Operating Expenses: 380,000
Net Result: ($1.00)

I'm not sure what that last part means. Does it mean they use their entire budget for expenses and what not? I'll talk more with my realtor, but she told me it was a healthy budget and a good amount of reserves.

-------------------------

Regarding saving money on stuff, I already do a lot of what you mentioned. I have CF lights exclusively, I minimize AC usage, I have energy efficient appliances (the ones that are mine anyway), I shop at costco for everything but produce, I use netflix, I got rid of my landline (never used it anyway, just use my cell), I make a little over 2% APY interest on my money in my bank, and I juggle a couple 2/3% Cash Back CCS. I'm sure I could optimize further, but I feel I've already done all the major things.

mikhailtech, I think you're on track about buying down the rate. The key really isn't how long you'll live in that property, it's how long you'll hold that loan. That is often shorter but can also be longer than you live in the property.

I prefer minimizing my investment in any mortgage, and have refinanced many times, gradually getting better and better rates. There are a lot of good reasons that mortgages get paid off well ahead of their full term, and most of them are difficult to anticipate.

Ok so I'm almost completely settled on a rate. I got quoted 4.875% on a 15 year fixed 80% mortgage and 5.25% on a 15 year fixed 10% mortgage (HELOC), with 10% down. I plan on paying off the 10% (14k) mortgage within a year. Total closing costs ~$2200. My last dilemma though is whether or not I should pay for a point or two up front. The amount may change daily, but with today's rate I was told 1 point = 0.25%. Do you think it's worthwhile to buy down a couple points or no?

To me, mikhail, that would not be worth it, but it's a subjective risk assessment. I went the other way, taking .625 negative points in exchange for a .25 higher rate.

But what I did was calculate exactly what the points would cost in my case, as well as what the rate difference would affect per month. That will tell you roughly how long the payback period is. Are you comfortable being "in the red" for a year or two? And keep in mind that your benefit of the buydown has a hard limit at 15 years, and it diminishes each year as the balance decreases.

Paying points could be better for you, or heck, it might have been better for me. But I prefer having nothing invested in my mortgage, if rates dip or I need to pull out cash, I won't have any regrets if I refinance. And even if I do keep this loan a lot longer than I expect, the cash I saved NOW is worth a lot more than cash I might save in the future. And I trust Future Me will still understand that.

Yea the more I think about it the less points make sense right now. My current situation is like this:

I have 10k saved up. 12k easy by closing date (end of July). My parents will lend me 10k. I will get 8k back eventually after closing.

So, I can put down 10% no problem and still have some in reserves. Alternately, I can see if I can get a 0% balance transfer from my bank for a period of time (I have a 10k CL, am going to bank later today to find out) and squeeze my way to 20% down payment, which leaves me with 2 possible scenarios:

1) 20% down, 15 year fixed conventional, no MI.
2) 10% down, 10% HELOC 2nd mortgage, 15 year fixed conventional, no MI but HELOC interest payments will = MI payments. Still, I can pay off the HELOC in under a year, whereas with conventional I would be stuck with MI for at least 2 years, 5 years with FHA.

Any last minute suggestions?

So it looks like I'll have to go with the 10% HELOC/80% conventional. I checked my bank and they wouldn't give me even a low % balance transfer ... they quotes me 10.99% o_0. I'll stick with the HELOC thank you. Any other tips/anything else I can save on between now and then?



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