You are now searching for a place to call home. There is so much to think about as you are looking.
You already know how many bedrooms and baths you want, eat-in-kitchen, finished basement or family room, one-two car attached garage and at least 50 X 100 lot size.
You are flexible about the condition of the home, since, if necessary you will fix it up and hopefully build in some appreciation after it is all completed.
The question arises should I apply for a regular fixed or variable mortgage or would I benefit more from a 203(k) rehab mortgage (for a home that you need to renovate) that can be converted to a fixed loan after all the work is completed.
You can go online to learn what and who would qualify for a 203K rehab loan.
If you believe you will not be in your home for more than seven years, because you will be relocating out of state or the immediate area; you might want to consider an A.R.M. (adjustable rate mortgage) for the time, that you will be there.
It just might save you some dollars.
But you should apply for one that has the longest fixed rate, until the due date, when the rate would adjust, to whatever it might be at that time or a balloon payment, where you would refinance and pay off the balance due on your existing A.R.M. mortgage.
Some will use this vehicle to get the lowest rate for now, to be able to get into their home, to save as much as possible per month. Just be careful of “teaser rates.”
Then again, if you don’t want to worry about refinancing, or playing the mortgage game, then a 15, 20 or 30 year fixed rate mortgage will suit you best.
You can also make additional principle payments each year to save tens of thousands of dollars on interest as well as paying off your mortgage five-10 years earlier.
You can figure this out online or ask your lender to provide you a spreadsheet showing you the impact of those extra principle payments that you may want to make periodically.
It would be prudent to shop three lenders, even if you have one you have done business with before, just to make sure of the total cost of your loan, and not just the interest rate that would be in affect at the time of your lock in or closing.
Another type of mortgage for current homeowners is a reverse mortgage, which I have mentioned in a previous column a while back in June 2016. (go to: www.islandnow.net and click tab “opinions” and then search for reverse mortgage).
If you are an owner and over 62, and have sufficient equity in your home, you can usually apply and get a reverse mortgage, as long as you still pay your real estate taxes and insurance.
You may make payments on the mortgage, but are not required to, unless you pass, whereby your estate has six months to pay it back or when you sell. Making no payments will erode your equity over time.
However, if the selling price is less than the amount still due on the mortgage (non-recourse loan) at the time of closing, you or your estate will not owe any additional money and the bank will just collect the net proceeds at closing.
Reverse mortgages are extremely helpful with paying your daily expenses, especially if Social Security and lack of savings isn’t enough, again, as long as there is equity in your home.
This will allow you to stay in place and not have to move, minimizing the stress that might come about due to lack of income.
There are mortgages for as little as 3 percent down (97 percent mortgage), assuming you qualify.
You will need to ask your lender and in this market many sellers will not accept that low of a down payment, since most buyers are putting 10-30 percent down.
Nassau and Suffolk are providing grant money up to $25,000 to first-time purchasers, assuming there is any money available.
As long as you stay in your home for 10 years, you do not have to pay the grant money back!
Lastly, just make sure you line up your commitment letter in advance and have it in your possession, from whomever you are going to borrow from, to minimize losing out to another buyer who is more prepared than you!
Phil Raices is the owner/broker of Turn Key Real Estate at 7 Bond St. in Great Neck. He has earned designations as a Graduate Realtor Institute and Certified International Property Specialist.
He can be reached by email: Phil@TurnkeyRealEstate.Com or by cell (516) 647-4289 to answer any of your questions or article suggestions.
