What is better for a 1st time home buyer, Mortgage or Owner Finance?
Renting & Real Estate
cocoa asked:
I found a home I really like but its $97000 and my income is $1600 per month. They can give me either option to finance myself or mortgage. I want a mortgage because I would like to have everything escrowed and then refinance after 2 years. My credit score is 561 and maybe I can get a better interest after 2 yrs. What would be my best option?
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I found a home I really like but its $97000 and my income is $1600 per month. They can give me either option to finance myself or mortgage. I want a mortgage because I would like to have everything escrowed and then refinance after 2 years. My credit score is 561 and maybe I can get a better interest after 2 yrs. What would be my best option?
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September 5th, 2008 at 7:00 pm
You are better off to get a mortgage that deal with owner financing, that can turn into a nightmare. Also remember that you should insist on a fixed interest rate for the entire term of your mortgage so that you don’t get trapped like lots of the people have been lately with the ARM rate that can raise your payments to absurd costs. You may not be able to refinance in a couple of years, due to the housing problems going on now that will take more than a few years to turn around, so make sure you can truly afford the loan you get incase you can’t refi as soon as you want. Good Luck!
September 8th, 2008 at 7:39 pm
If your gross salary is $1600 a month (before taxes are withheld) then you should not be trying to buy a house with a loan amount of $97000.
If that is your net you are still biting off a huge chunk..the least problem and you will be unable to make ends meet.
September 9th, 2008 at 2:33 am
Try to get a mortgage. If you finance with the owner, they can at any time demand the outstanding balance paid in full, or sell the house for the remaining balance to someone else, screwing you out of equity. Plus you might not be able to trust the owners with your money. Get a mortgage somehow!
September 11th, 2008 at 12:14 am
Go with a mortgage through a bank if possible…never through the home owner! That can lead to all kinds of trouble-either with the lender or if he goes and sells the mortgage to a broker to get out of it-you then are dealing with some big company that doesn’t care!
We did owner financing with our first home-he was a real estate broker, bought homes all over and fixed them up, then sold them to people (like us) with poor or new credit…
guess what-year or so later HE files bankruptcy and told me to just make payments direct to the bank that really held HIS mortgage-and they told me NOPE…I could not make payments to them-HE had never made the payments so it was going through foreclosure auction no matter what, and we had done lots of repairs!
So stay away from ‘owner’ financing. You might qualify for low income home mortgage through the FFmHA department-we did and got a much better house for almost no interest!
September 13th, 2008 at 7:46 am
Cocoa, because we do not know your whole financial picture, it’s best if a lender answers that question. Which I’m sure you will have half a dozen on yahoo answers, tell you they can help you. Just be careful when dealing with online lenders. My best advise is deal with a company that will pay for the appraisal and not tell you to pay for it at the door. If you do, and you do not close with that lender, you may be out the appraisal fee.
September 16th, 2008 at 2:17 am
If I were you I would consider holding off on a house. I don’t know if your take home pay is $1600 per month or if that’s your gross but that might be a little light to be getting into a home. If you amortize the $97K 30 yrs at 5.5% interest your payment will be $550. You must also take into consideration you will have about $250 a month in taxes and insurance costs. That leaves you with only $800 a month to pay other living expenses and there is always the chance that you could have some unexpected expense come up with the house.
If you’re going to buy the house I would do a contract for deed with the owner if he/she is willing to do so. They might give you a little lower interest rate and be willing to work with you a little more.