Buying a house in the US(9 Posts)
(posted in AIBU for traffic, but thought this thread would be good too!) I live in America, (I am British). I have been here for some time in a rental property. I would like to buy a house, I have the deposit saved, but here's the thing. If you do not put down 20% as a deposit, you have to take out an extra insurance which would mean our mortgage would be $500 more each month. However it would probably take us an extra 12 months to save a greater deposit and I can't stand where we are living now. Our landlord is impossible and never fixes anything, the house is shabby and very very cold. The rent is relatively cheap though and the mortgage would be a lot higher. What would be the best thing to do? Stay put in our miserable rental and save? Or move immediately even though it would be more expensive?
If you are on a month to month lease why not move to a more acceptable rental? Your choice if taking a bit longer to increase your deposit while living more comfortably is worth it.
There is also the option of lowering your purchase expectations to the point that what you have is 20%.
Having bought a house there (california), and here(scotland), I think you may find the mortgage application process much more intrusive, so you should research that to make sure those ducks are in their row, you probably have already, just saying it in case. The various fees and such due on the day of sale or more numerous and more expensive, enough to reduce our available deposit and throw us into that extra insurance situation for about a year.
Thanks for your response, we did think about moving but our rent is very cheap for our area. It is actually the closing costs that are eating into our deposit, we would have a much higher deposit, but we are in NY so closing is a huge expense. I think we would only have to pay the insurance for about a year until the mortgage was 78% of the value. If the insurance is for a finite period would that make a difference? Would it then become a better option to buy, or should we carry on saving?
Interest rates are low and so that is s big plus. Unlike the UK, you'll get a rate fixed for the term. We refinanced with quicken over the summer and they pay our mortgage insurance so talk to your mortgage broker about what's out there.
But think about property tax, any maintenance charges (are you buying an apartment/condo? I assume not a co-op) and upkeep costs in general.
We preferred to buy (with mortgage insurance) than wait (prices are rising where we are just outside nyc in north Jersey) as the low rates made it attractive. Our rent was comparable though, as property taxes where we are are v high.
Buy. You never get that rent money back either, you're just paying your landlord's mortgage!
Can you chose a cheaper property so you do have the 20%?
Once you have paid off that 20-21% you no longer pay the PMI. But keep in mind the property tax in your area and as an owner you will be in charge of your own maintenance. Ask around to different mortgage options - they all have different fees. Banks Vs Mortgage Brokers Vs Mortgage Lenders. Some closing costs won't change much (inspections, lawyer) and usually you can expect to pay 2-3% of the purchase price at closing.
We bought and used WF bank and it was a nightmare! We had to prove we had x amt above deposit and closing costs for some reason, thankfully we could take the DC savings for the proof. We had to pay into escrow a year worth of insurance payments to be held as well, so bear in mind your mortgage provider may ask for more than you expect.
If you are brining money from the UK you will have to prove where it came from so get all your funds in one account now. I had ours in several as I have savings buckets in different accounts and it was a headache showing where the source of the money was. All in the name of anti money laundering. Avoid WF at all costs!!!
They're still mucking us around a year later as our insurance company cancelled our home insurance for 3 weeks unbeknownst to us last December and WF are now going to charge us for that period of time, even though it's almost a year later and we certainly do have insurance! Grrrrr
We had PMI for six months on our old home. I refinanced on condition that we would be without PMI. We were able to do it because we bought our house for less and had done improvements. We sold earlier this year for less than the appraisal but nothing was said.
I would look around to get your closing costs down. If I were you I would go look at investors bank. I have a contact if you are interested and she is very knowledgeable about the whole process. We are looking at refinancing for 3.75% on a 30 year fixed. Closing costs are less than $5k.
Yikes HerRoyalNotness! A year's worth of escrow payments upfront sounds really steep.
PMI is not for a finite period. It depends entirely on the percentage of equity the mortgage lender and the buyer each owns iirc.
Maybe look at cheaper homes or condos for sale? That way you won't be skint.
You will have to factor in property taxes that are mostly paid into an escrow account and taken out of your mortgage check monthly, and utility fees (water, garbage) to your municipality that you will pay directly. Plus gas and electricity that can vary, and ordinary insurance (home/personal effects). I assume you have factored all of this into your calculations. Most real estate buyers' agents will give you a breakdown of monthly costs just to have a roof over your head. You should also be able to get a good idea of closing costs from a decent agent.
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