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Author: jakeburns100 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127684  
Subject: Getting ready to buy new... Date: 3/19/2002 11:52 PM
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We are considering buying a new house in a new development. We've owned the home we are currently in for 5 years having refinanced it 4 years ago (bought for 180K, now have a loan for 169K). I've been reading older posts trying to get a sense of where to start (since we've "found" a house, or a floor plan, safe to say that we've already started!) and I think we should start by looking at loans. So...

Vital Stats:

1) Married (me age 43, wife age 40, 2 kids, gross income of $11.5K/month.
2) Have owned current home 5 years, owned previous home 2 years (our first).
3) Good credit so far as I'm aware (but realize I need to check this out).
4) Have done a little checking and think that our current home should be very "sellable". Looked at county records for sales of houses in our subdivision and guestimate ours should fetch @$210K.
5) Guestimating that house we want (with extras) will cost @ $300K.
6) We've been maxing out retirement plans (401K, 403, ESOP, money pension plan) for @ 8 years. Also, have @ $6500 in mutual funds and @6K in savings.

Additional observations:

1) Clearly, we'll need to sell the current house to buy the new house.
2) While I think we could scrape together a 10% down payment...I know we could do the 5%.
3) Using current loan (which I believe is financed at 7.375%) as a rough guide, I calculate that we could be looking at a monthly payment of $2,445 (the upper limit, I hope) if we go with something along the lines of a straight 30-year, fixed rate, 5% down mortgage (assuming the 7.375% rate).
4) While I've worked with a mortgage broker in the past (same guy twice), I don't think I'll use him again. Got the feeling he was moving paper--once he had me, it was difficult to get to him for information. That being said, I hold out hope that I can find a better one...of course, I feel the same way about finding a good mechanic for the '88 Volvo 240 and that hasn't happened...yet! Bottom line here is that I think I need to be better educated so I can make the most of whate ever professionals I ask to the party.

My questions:

1) How can I learn more about "combo" loans? From what I read, it seems as though a 80-15-5 deal might help to avoid the PMI. As I understand it (and don't hang me if I get this wrong--pretty fair chance of that!), I take out 2 loans and each has a different interest rate. The overall rate is higher than a traditional 5% down, finance 95% loan, but the monthly payments are cheaper and or, there are better tax advantages because PMI is not deductable...

2) The sales person at the new development tells us that our house could be built in 6 months (from when we sign initial contract I think). Any advice on the timing? With both of us working, and withtwo elementary school kids, we'd like to avoid moving into an apartment, but...

3) While I think we will be able to sell, any thoughts on the contingency plan the developer offers? Essentially, they have selected two realtors to work with. We would choose one, have them come in and give us a bottom dollar figure on the house and then let them try to sell it for the best price we could get. If they don't sell it in time, they buy it for the low figure.

Thinking maybe I answered my own question on that last one...seems as though we must sell the house and at my projected sales price ($210K) to have enough to make the down payment...

As I suggested, we've done the easy part (the fantasy is working well), now we need to do the hard part...thanks.--Jake
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