New homeowner

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

I just purchased a home for $169000 @ 5.75 fha fixed for 30 years. Mortgage is $1382.41 a month. I've been kicking in $100 extra towards the mortgage each month to eat at the pricipal and plan to slap another $2000 a year to the principal from income tax. Do you think im on the right track to save on interest?

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

In the long run you'll be doing alright. You're looking at 5 years of PMI either way though, regardless of how soon you get to 80%. Other than that, it never hurts to put extra money towards principle to save money on your interest. You'll pay your home off a great deal faster going the route you are now.

I would recommend however that you sit down and speak with a financial planner. They will help you to determine what the best use of your money is.

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

Thanks for the advise. Im really just estatic being a homeowner. We had almost got a CHFA loan at 4.75%, but my girlfriend had claimed taxes on the house her father put her name under so that was out the door.[/img]

dsickler · Posted: Sat Aug 13, 2005 5:53 am Post subject:

I hope the mods don't mind that I posted this same post in two threads, I thought it was important enough to post her too.

Regarding fixed rate mortgages. Check out the link listed below.

http://www.mortgageforum.net/viewtopic.php?t=978

It has lot of tips on better ways to handle your mortgage and money. As you may notice, I am very against fixed rate mortgages because they are very costly, and really are a waste of money. But some like the idea of paying more to insure an interest rate. In my opinion, it is the payment each month that really matters.

Besides, if you plan to refinance in a couple of years, then why did you get a fixed rate mortgage that is based on you keeping it for 30 years?

to Justin333
another example; I understand that you are adding an extra $100 dollars to the principle each month, but I would suggest that you take that $100 dollars and save it so that you can earn interest off of it. If you send it to the bank, then they will invest it for themselves instead. Either way, someone is going to invest that money, either the bank or you. So which would you prefer that it be? Most importantly, you will still have access to the money in case of an emergency. the car breaks down, medical issues. If you add it to the principle, then it just get's trapped in the equity of your home. And then if you need it again, you will need to qualify to get it back. I recommend that you keep making the smallest payment you can on the house, that will keep it current. and SAVE the difference. The last thing you want to end up is house rich and cash poor.

Some of the other members on this board might not like that idea, but the worst thing that could happen is that you could struggle trying to pay off the loan as quickly as possible, then all of a sudden something could happend that could put you in a situation where you can not make the payment, and you could lose the house if you don't have any money saved up to make the mortgage payment during rough times. Pay yourself more, not the bank. Sending the bank less and saving more for yourself is truly the best way to end up financially secure.

David
Financial Planner :wink:

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

I don't have a problem with it, per se, (due to the fact that my comments and views on it are in that thread ;)) I would like however for you to expand upon it and list more education and ways that people can use those scenarios. Obviously speaking to a financial planner is one, as well as perhaps certain seminars and books that would be helpful, rather than simply 'here do this' ;)

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

The $100 a month extra is $50 from me, $50 from my girlfriend and $1000 from me and $1000 from her in taxes. IM not stretching to make these payments i just want to get at the principal early in the loan.

dsickler · Posted: Sat Aug 13, 2005 3:51 pm Post subject:

I was unsure of doing that at first cause I thought it might look like I was advertising for those books or companies, but if it's ok with you guys, then I will start posting more info on each tip/scenario so that way it's more than just a laundry list of tips.

David

chow · Posted: Sat Aug 13, 2005 9:37 pm Post subject:

That would explain more, and give people a reference point.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Well we'd rather you bring education in than advertising. So don't just say 'read this book' try 'Here's blah blah blah topic, and i read about it in this book' kind of citing your research type thing.

David · Joined: 19 May 2004 Posts: 703

Congrats on your new home justin333! :)
When you bought your home, did you think of it more as an investment? Or as the place you want to stay for a long time?

If the first (especially), I agree with Haplo that you should speak with a financial planner to make sure you are getting the most "bang" for your buck, as you might benefit by putting the money elsewhere.

If the second, I think sometimes it is worth your while to get some equity going sooner so that you have a little more security in the investment itself (your house).

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

when i first got my mortgage my company was mcque mortgage. About a month later it got switched to Countrywide home loan. Why do they do this?

dsickler · Posted: Sun Aug 14, 2005 6:52 pm Post subject:

mcque mortgage probably does not service thier own loans, which means they sell them as soon as they get them. Regardless if they do or don't, most residential lenders will buy your note on the secondary market. So don't be surprised if it continues to happen. THere are very few portfolio lenders that don't sell their first mortgages. But World and 1st Federal are two that i know of.

Justin333. If I were to ask you what you're plans where for this up coming weekend, I bet you could tell me when and where you were planning to go. Not only that, but you could also tell me how you plan to do that. The truth is, we spend more time planning our weekend, then we do our finances.

If I were to ask you how you plan to retire, you could give me some idea of what you want, but if I were to ask you how much it would take, and how to get there, you would probably not know. Worse, If I were to ask you what do you currently have in place to acheive that goal, What would your answer be? probably not much. you might be better off than I am assuming, but the truth is the majority of Americans are not.

This is why it is so important that you speak to a financial planner. I don't care who it is, but you need to talk to one so that you know, how much you will need and what it will take to get there.

secondly, adding more equity to your house does not add any security because the value of the house could rise or fall regardless of how much equity you currently have in it. Also if you can't make your mortgage payment for any reason, then you can lose all of the equity in your home due to foreclosure if you don't have money saved up to make the payment.

David

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

Thanks for the advise. I love this forum.

chow · Posted: Sun Aug 14, 2005 9:30 pm Post subject:

I just read all of this other stuff and thought I would shut up. 8)

m2c · Joined: 03 Aug 2005 Posts: 764

My bet is that Countrywide will do securitization. Many times you’ll have rapid-fire transfers of mortgages in the first month as it passes through the hands of temporary holders on route to whomever will securitizes.

Good news is that the transfer of your mortgage is done for at least for a while – probably until the pool is paid down quite a bit. Bad news is that CW is big and, at least on the wholesale level, …… well, hopefully you won’t have any questions that you want answered by a real person with knowledge. Doubt that you realize any tax benefit this year (i.e. interest plus other schedule A won’t exceed standard deduction; taxes were probably paid be seller) but if your close, run an amortization schedule to see if the interim interest you paid at closing is included. Handled differently by various wholesalers. If not included by CW, you should get a separate 1098 from broker but not all brokers follow though.

Love that weekend bit. Slicker has lots of good leads into selling his product. One of his maxims you should head is to build some liquidity now rather than make curtailments. You mentioned this purchase put you on the edge of your comfort level on payments. With principal payments “earning” 5.75% it’s not a bad “investment” but first things first.

No, you won’t be foreclosed if you miss one payment. In fact, with a FHA loan you’ve entered one of the most paternalistic collection systems around. If you do fall behind, there are all sorts of MANDATORY repayment plans, assignments, etc. You own a house now and, believe me, there will be periodic, unexpected cash needs – hot water tank breaks, cold winter heating bill, lawn mower, etc. Better to pay for these from liquid assets than resort to credit cards (assuming there not 0.00%) but you are very far from the black hole of Calcutta in credit card debt so far.

I know you have a PMI phobia but that’s not going to be cured overnight – 80% LTV with minimum of 5 years. The PMI will go down slightly each year but it’s based on the SCHEDULED average annual outstanding balance, not the actual. FHA PMI is “sort of” benign. The monthly is only 0.50% but then there’s always the upfront PMI. Upfront is really water over the dam, but still FHA PMI is still reasonably OK. For example, a conventional flex 100 would have been subject to a 1.00 discount point hit by our friends at the GSEs and another 1.75 discount hit by the MI company to avoid monthly mortgage insurance. You paid 1.50 in “discount” to FHA so you’re ahead of the game at closing by 1.25% in discount but you do have monthly PMI. “You’se pays your money and you take your choices”. Not the end of the world.