First time home buyer Questions

[Anonymous Poster]

Hi everyone! I am a new member here at TBN and the information here is outstanding. I wanted to get some opinions from the good people here on TBN about buying a first home. We want to purchase a home with some property up to 10 to 15 acres I would say. Basically I wanted to know if anyone had some good advice about being a first time buyer and if there is anything I should know about that maybe people with buying experience know about that we don't. We were told in a brief meeting with a financial advisor that we should never use savings to put a down payment on a home...??? He said there were creative ways of doing this...Anyone know what those might be? We do bring in good money ....and right now I own a 1990 mobile home in excellent newly remodeled condition and own the 1/2 acre its sits on free and clear. We don't have alot of debt either (a car payment). And the Kubota I just purchased recently. Just curious if anyone knows about these creative ways of financing and the ins and outs of how it all works. I know this isn't a real direct question...But any help would really be appreciated!!!. I still think this is the kind of stuff they should be teaching in school along with investing. I think it would be so useful.....Cause here I am 29 and I don't really have a clue. Thanks for all the info in advance.
Jason /forums/images/graemlins/wink.gif

 

[beenthere]

Why would a financial advisor suggest that there are creative ways to fund the down payment, but not tell you what those creative ways would be??? Is he holding you up for more money before he will let you know?

My suggestion, go to your bank (I prefer an Independent Bank) and talk to them about what you might be able to do. Talk to those who will continue to be your friends and will be in your community, and will not give you advice that just feathers their own nest, but yours as well.

 

[rationalizer]

I'd be wary of the advice this person is giving you. While there are lots of "creative" financing schemes out there - I think having 20% down is a good sound approach - you'll avoid "mortgage insurance" and will have the peace of mind that you have some equity. With low interest rates and tax deductible interest - you might not want to have too much in equity, but I think 20% is a good starting point. If you have lots of cash left over - start paying down early...

Just my $0.02...

Bill

 

[Anonymous Poster]

I'm trying to figure out why he would tell you not to use your savings for a down payment. That one must be over my head. Creative financing issues are kind of lost on us poor people /forums/images/graemlins/smirk.gif

I couldn't finance a case of beer right about now. Good luck to you. What part of the country are you in?

 

[rancar]

Hi Jason...

First off, welcome here to TBN from one Cambridge resident to another... /forums/images/graemlins/wink.gif

<font color="blue">"...We were told in a brief meeting with a financial advisor that we should never use savings to put a down payment on a home...there were creative ways of doing this...Anyone know what those might be?...We don't have alot of debt either...Just curious if anyone knows about these creative ways of financing and the ins and outs of how it all works. I know this isn't a real direct question...But any help would really be appreciated!!!...I don't really have a clue. Thanks for all the info in advance..."</font>

As the others have suggested, find out what these creative financing methods are from the financial advisor. I and everyone I know has had to put at least something down as a down payment from their savings. Eventually you will have to pay of this entire purchase anyway, whether now or later. The more you are financing now....the greater your total interest payments will be over the term of the loan. I've always been led to believe one wants to put down as much as they can FROM THEIR SAVINGS and finance as little as they can at the lowest interest rate possible for the shortest term possible. The foremost objective is to minimize your debt load.

BTW, savings these days are not earning much in money market accounts, savings accounts, or CDs.....1-2 percent or so. And the stock market has been a disaster for the past three years for those seeking large rates of return there. You may likely realize a greater rate of return in the increased value of your home (on an annualized basis) by putting AS MUCH AS YOU CAN in the form of a down payment on the real estate purchase.

Let us know how things turn out.

...Bob

 

[Egon]

If you use your savings for the downpayment perhaps there are insuficient funds left for an investment adviser to make a creative commission on by moving those funds around in different creative ways that may or may not increase the capital.

I'd stick with the banks but be advised my financial accume would be consider minus by the standards of the investment community.

Egon

 

[rlk]

Jlbota, was this an independent financial advisor or one that works for a company like American Express, or one of the other large companies. My hunch is he works for a large company, and is wanting you to use your savings to invest with them instead of you investing in your house.

The last time I re-financed my house (1992) , I refinanced for 15 years, but asked them to set up the payments on a 5 year schedule. Financing for 15 years gets you a much better interest rate. If you can swing it, and can afford the 5 or 10 year payment schedule, you will save a bunch in interest.

If you decide you don't want to put any money down, I understand there are some programs available for first time homeowners where they can buy a house with nothing down. They have a higher interest rate, plus have to have mortgage insurance, plus some points, but they get into a house with nothing down. There are lots of young couples in this area doing this to avoid paying rent. I have not run the numbers, but I can see where someone could build some equity by buying a house like this instead of renting. Your realtor should know about these programs, if you are interested.

Something else for you to think about is to purchase the land, and move your mobile home to it for a few years. I did this during the early 70's and lived in the mobile home until I saved enough to build my house. Worked out great for me.

Good luck on whatever you decide.

 

[Anonymous Poster]

Well the meeting with the financial advisor was just a free consultation. And of course he was not going to offer any free information....From what I gather he claims that there were ways to avoid using your savings to purchase a home.....Like using Equity in property you already have????

 

[Anonymous Poster]

Thats what i always thought too....20% to avoid having to pay the mortgage insurance....I always figured the more you put down the better you would be in the long run....And I am planning on paying about $500 more than the mortgage payment actually is a month......I figured equity would build quicker with less interest??? I think your right Bill ....thanks

 

[Anonymous Poster]

I am in Cambridge Ohio....Ya know the place where they say if you don't like the weather here in Ohio...Wait a few minutes......Although it has been 70 here the past two days. /forums/images/graemlins/cool.gif