No. of Recommendations: 1
Hi Laokai,

My wife and I just completed a purchase agreement for our first home.


For both us and the sellers, it is more convenient to move this summer, so we agreed to a closing date of July 1. Unfortunately, this means that it is still too early to apply for a mortgage and take advantage of the recent drop in rates. Or is it?

Not at all... all you need to do is close now (with great financing) and rent the home back to the sellers until you're ready to move in.

Search back on these board's archives for how to do this & what to watch out for (do NOT want to accidentally have the renters staying past their welcome, so you set increasing rents after a certain date.)

We are looking for a 30 year fixed loan and I have been shopping around a little bit.
Basically, we are not gamblers,

Conflicting statements!

Statistics show that LESS THAN 20% of 30 year mortgage holders (under age 45) stay in their LOAN (not their home, their LOAN... the hidden factor is refis to access capital) longer than 5 years.

LESS THAN 10% stay in longer than 8 years.

So... this means that if you choose to pay the extra money required for a 30 year fixed, you are indeed gambling significantly against the odds.

The safer loan (which takes real thought to realize) is either the 5/1 ARM or the 7/1 ARM. With these you maximize your odds of success, and minimize the "house's odds" (the lenders) of taking more of your money than they should.

The difference on a loan of your size can be over $8,500 thrown away if a 30 year fixed is taken rather than a 5/1 ARM. That's a lot of money to gamble!

The great mistake made most often is the thought "We don't expect to MOVE for years and years." While this may be accurate, the reality is that many many people (the huge statistical majority) also REFINANCE to re-access their capital for reasons of life (business, health, family, etc. etc.)

Again, congrats on your purchase!

Dave Donhoff
Foolish Mortgage Broker
Print the post  


Useful Resources
Our Home Center has all you need to make buying and owning a home a great experience. Get or refinance a mortgage and much more!
Buying/Selling a Home FAQ

Mortgage Professor
Offsite resource for mortgage questions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.