Find out the total loan numbers (principal + interest). Take a good luck at it and ask yourself if you have that money for sure, just not at the moment. As in, you contractually have that much money owed to you (or saved) to pay back within the time that the loan will expire regardless of whether you lose your job or fluctuations in the loan market. If you don't, then you simply can't afford it. The "loaner" is willing to suck people into such a situation because ultimately they have ways to get their money if you don't pay it back, and have already made arrangements assuming certain people will not be able to pay back. For example, they will take the asset or give you an option to extend the loan for even more interest payments than originally agreed. They have had an experienced lawyer of their own look at this and determine that they have sufficient protection. They have had a financial expert look at this and determine that this arrangement is profitable for them in virtually all circumstances. They have made a decision that they will only care if you can pay back the total amount minus whatever they can acquire from you as collateral. Beyond that, you need to watch your own a$$. You are at their mercy if you can not afford it - you choose from the options they wish to give you based purely on their own circumstances. Also, most of the time, if there are different institutions which give you flexibility, doesn't mean that the flexibility is necessarily good for you. It's probably the case that they are willing to offer you the flexibility on terms that are ridiculously in their favor. Other times, people are offering good deals and it's good value for money. I know that's a very cynical way to see it, but always better safe than sorry when dealing with these matters. I'm fairly sure you have taken these things into consideration, but who knows maybe you haven't and this will remind you to take certain precautions. Good luck and wish you the best. Obviously I made a bad home loan decision early in my life and it took a lot to get rid of the problem, lost a lot of money in the process.
You will be paying for that baby for much longer than 8 months. The baby will be costing you for 20 of the next 30 years on that mortgage. I don't think it's such a hot idea to buy a house, if you can't get more than 3.5% down. You are underwater on the 1st day of your mortgage,. It takes at least 6% for commission and 2% in closing costs to get out. I would say 10% down is good. 20% is nuts, unless you inherited a home or buying in the ghetto. If you do a 80/10, the 2nd lien could be paid off within 15 years. If you get in trouble, you can get out of the property. Your payments will not be fixed. Yes, we are in a depressed market. It just means the property tax assessor can increase your taxes even faster, every year. As the property value increases, you also need to increase property insurance. Then, there is the maintenance. First time homeowners are always surprised by the sticker shock, when their is an escrow shortage and the payment jumps $200-300/month. Default rates are rising pretty quickly on FHA loans. FHA delinquency rates are up more than 25% in 1Q2012 vs 1Q2011. http://money.cnn.com/2012/07/09/real_estate/housing-delinquencies/index.htm?iid=HP_LN Take it from somebody that worked in bankruptcy for a few years.
Trust the mortgage broker. LOL. He is looking for his own best interests not yours. I used to have a friend that was a former underwriter. 5 years ago, the brokers were paying appraisers under the table to raise the appraisal, if the property was selling for above the appraisal. Borrowers were underwater on day 1 and couldn't sell. If your child does have health issues, how would you handle an medical emergency that cost $10k. Would you skip the mortgage payments? With rent, you have flexibility to break the lease and move in with friends and family or take a job that pays $25k more in another city.
That may have been the case 5 years ago, but it certainly isn't today. It is illegal for brokers to influence an appraisal now-a-days.
Now-a-days? It was illegal back then, too. Brokers are still looking for their best interests now. Delinquency rates on FHA loans are increasing faster than ever. One in 6 FHA borrowers are currently in default. That's pretty sad numbers. The brokers don't talk much about the default rates and rising foreclosures among their previous clients.
