First-Time Home Buyers
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First time home buyer
As I’m on the brink of buying my first house, I’ve come across two enticing loan options for first time buyers that both offer 0 down payment. I’d only need to cover closing costs. However I’m torn between the two. Loan A offers a 7/1 ARM with a 3.5% interest rate, and the closing costs are estimated at $6k, with a maximum loan amount of $350k. On the other hand, Loan B is a 30-year fixed-rate mortgage at 5% interest, with closing costs between $11k to $12k, but it provides a higher borrowing limit of over $400k. Initially, I was inclined towards Loan A, but after house hunting in San Diego with a realtor, it’s clear that a $350k budget doesn’t go far in this competitive market, where cash buyers often outbid others quickly. Loan B would allow me to make more competitive offers by offering more money, though I’m hesitant to borrow that much. I’m seeking advice on which option would be more prudent.
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4 Replies
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The closing costs do seem a bit steep. I guess that’s the trade-off for NOT having to put any money down upfront – is that something they commonly offer now? Personally, I’d advise against taking on too much debt. Pick a loan amount that feels manageable for you!!
perhaps consider waiting until youve saved up a bit more money for a down payment, especially for an FHA loan instead of paying all those extra fees. Keep in mind buying a house means you’ll have additional expenses to cover afterward…
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I agree that the closing costs for Loan B seem steep, but since this is my first time buying a home, I wanted to get some advice. Loan B includes a 1% origination fee and a 0.05% fee per point, which essentially makes its closing costs twice as high as those for Loan A, which doesn’t include these fees at all…..
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ARM refers to an Adjustable Rate Mortgage, which means your interest rate could likely increase after the initial 7-year period and might continue to rise annually thereafter.
$350k doesn’t stretch far in San Diego. Are you set on staying there, or are you open to exploring other cities? Perhaps you could begin to save for a down payment, which would enable you to afford a more expensive home or submit more competitive offers.
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I’m thinking about buying a property in Texas (or Louisiana), but since it’s my first time, I want to start with something closer to home. This way, I can keep an eye on things and do some of the work myself. I understand how a mortgage with a changing interest rate works. My plan is to buy a place that needs fixing, live in it while I fix it up, and then try to get a new loan with a better interest rate before 7 years are up. It’s hard to guess what interest rates will be like in 2 or 3 years, and I’m a bit worried. If I choose a loan with a set interest rate and the rates don’t go up past 5% in a few years, I could end up paying too much in interest, right? On the other hand, if I go with a changing rate like you mentioned, @jeffereycliffoutlook-com I might end up with a higher interest rate later, which also worries me.
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