Quote:
Originally posted by Steve Carlton
Jeff- if you get an 80% loan-to-value (LTV) 1st loan, hopefully it can be as good as is available. Sounds like the second loan is the one that will suffer. Instead of saving up $10,000 per year, just use that to pay down the 2nd and get it out of the way. It's my feeling that long term rates are only going up, and refinancing your 1st later will probably be with less favorable pricing.
In addition to a 0-5% down payment, you'll have your closing costs to come up with in addition to pro-rated interest, taxes, and one year's worth of homeowner's insurance. You can structure the deal so the seller pays your non-recurring closing costs in full, saving you thousands to close the deal. You might also be able to be creative and get some down payment back after close of escrow.
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Whoa, you lost me there. . . How would I get an 80% loan-to-value first loan? The problem is coming up with a 20% down payment - that's a helluva lot of money and it would take a LONG time for us to come up with that - 10-15 years maybe. By that time, what's the point?
Anyway all I'm propopsing is a way of getting around the 20% barrier-to-entry, which is prohibitive. I'd also like to do it without taking an interest-only or ARM "sucker loan". That's why I'm thinking come up with what is reasonable to sock away in the next couple years (maybe 5%-ish plus costs as you mention) so at least there's something to put down on it. Pay on that for a few years and then when the time is right use the equity or sale to move into a more favorable (80%) loan by refinancing.
Or is there a better way? Simply saying "come up with 20%" is easy to say but damn near impossible to do in practicality, even with aggressive saving. Like I said, we MIGHT be able to save $10k a year give-or-take, but that's still 8-10 years to get into an entry-level place at $400k to $500k now (maybe a little less if the market corrects, but it would still take a long time).
I tend to believe that the "when" is more important than the "how" of getting in. I'd rather get in at the most advantageous time (bottom of the crash) than wait and buy well into an upswing with a little more down. I could of course be talked out of that belief with examples, but I tend to think one could (if they timed it right and bought at the proper time) easily offset any disadvantage of being in a slightly less favorable loan because of not having a full 20% to put down initially.
If this sounds like speculation, it sort of is, but with the caveat that I'm certainly waiting until the market deflates - nothing short-term whatsoever. I think the market is still extremely overvalued and volitile right now. I also would be planning on staying there as long as it took, not trying to "flip" and make a quick buck. I view it as a long-term investment.