Urgent question about LOAN for HOUSE

iVillage Member
Registered: 03-26-2003
Urgent question about LOAN for HOUSE
7
Mon, 06-23-2003 - 11:41pm
okay im buying a house. I can get 5% fixed conventional for 30 years. Im in the middle of a divorce and have two children, ages 16 and almost 18, who will live with. I make 24,000 a year right now, but am currently in school studying nuclear medicine, so hopefully if all goes well in about 5 years, my income will triple.

Heres the question: Do I go with the loan of 5% conventionally fixed for 30 years with a payment of 948.00 a month?

OR

Do I take the advice of a financial planner who advised me to go with a 5-7 ARM, which would lower my payment for the first 5-7 years by like 200 bucks or more, at a rate of 3.9%, and then go with the going rate at 5-7 years from now?

My uncle says I am crazy to to the ARM, but the financial adviser says I should do it. Please also note that my financial advisor is not affiliated with my Loan company.

Thanks, Pam

iVillage Member
Registered: 03-31-2003
Tue, 06-24-2003 - 8:45am
Congratulations on buying a house! I'm not sure about specifics of interest and such, maybe the Debt Question and Answer board can help you there.

Jerrold Mundis' book, "How to get out of debt, stay out of debt, and live prosperously" talks about the difference between secured and unsecured debt. A mortgage would be secured debt, as would a car loan, because there's collateral there that the bank can take back in the event you can't make your payments (God forbid). A credit card or personal loan is unsecured, and that's the debt that eats away at our lives. That's why *I* post here, to get emotional support while I work my way out of unsecured debt.

Best of luck in your new home!!

Lee Ann

Lee Ann

www.werenotafraid.com

iVillage Member
Registered: 07-11-2001
Tue, 06-24-2003 - 9:25am
I know how thrilling it feels to make that decision to buy a home. I just closed on my condo a week ago. The best board to help answer this question is the 'Real Life Real Estate' board, also found on the Money message boards. Best of luck.
iVillage Member
Registered: 04-02-2003
Tue, 06-24-2003 - 9:28am
This is probably a better message for the Real Life Real Estate Board. However, I agree with your father. Although and ARM would save you some money in the short term, it's likely that it would cost you more in the long term. I highly doubt that rates will be this low in a few years. If you think that you will be moving before the rates adjust, it may be a good move. I, however, do not like to take chances and would probably be very happy at 5%.
Avatar for mquin73
iVillage Member
Registered: 03-27-2003
Tue, 06-24-2003 - 10:38am
IMO I would go with the 5% fixed rate. It also would depend on how long you plan to be in the home. If you only plan on being there for the 5-7 yrs then maybe the ARM. But I like fixed rate loans, and 5% is a really good deal!

JM2cents

Michelle


signature 2008

Avatar for zaboz
iVillage Member
Registered: 03-26-2003
Tue, 06-24-2003 - 11:18am
I don't know a lot about it but I would consider the ARM.

Otherwise your mortgage is going to be 1/2 of your income!

The information I've read suggests that housing shouldn't be more

than 1/4 or 1/3 at the most, if you're in a really expensive market.

Unless of course you expect a settlement or a nice amount of child support.

iVillage Member
Registered: 06-13-2003
Tue, 06-24-2003 - 2:47pm


I would probably take the financial planners advice. Why? your kids are 16 and 18 and in 5 or 7 years they may not live with you anymore. The house you live in now may not suit your needs if you are living alone. What if you wanted to buy a smaller house then?

Also maybe your kids will not move out and keep living at home as they finish high school.

Is that what you want? Also maybe kids will be married and they will have kids and together you would need a bigger house. Hopefully the children or spouses could help pay for bigger house.

Personally I think it is ok for them to live at home for a while, as long as they work and contribute money. Around age 20 to 23 they should either be sharing a residence with a friend or roomate. They could either be working, going to college, or getting some vocational training of some kind.

There are some exceptions to this in my mind due to marriage of son or daughter and child being born; or an older than 20 to 23 year old living at home following a divorce, accident, following military deployment or another traumatic situation. In those cases ground rules need to be dicussed about money, privacy, work around the house, how long they will live with you etc.

Another idea is what if you meet a man in a couple of years and want to get remarried?

Then again you may want to sell your house and move in with him. Maybe both you and new husband would sell houses and buy another one together.

I think your life will change a lot in 5 5o 7 years plus your income will increase.

It is impossible to predict what will happen. Take my ideas in stride and think about them for a while.

good luck

Mctripat

iVillage Member
Registered: 04-22-2003
Thu, 06-26-2003 - 7:16pm
the thing about arm is it can go up at anytime, if you think it is going to lower your payments that maybe for a couple months when mortgage rate goes up so will it.

If they say it will lower it get it in writing.

If you can find a cheaper house with lower payment I would 948 amonth by 12 is over 11000.

our family takes in 35000 and have a house payment of 525 and we just make it and that is with taxes insurance and everything rolled in. Were VA at 5.5 % interest

So reconcider the house you are buying if you could make the payments you still on conventional have to make taxes and insurance payments depending on where you are that could be a few thousand more.

basic rule of thumbe when buying a house, 2 x your annual income if your income is 29000 go for a house around 58000

this willbe more affordable for the payments.