I am in the market for a home. I am also looking at buying a new car. I have great credit, and no debt (other than student loans, which are paid up until next January :punk ). My question is, is should I get the mortgage first then the car, or vice versa? I have the money for both, i just don't want too many dips into my credit right before I go for the big loans.

What is the best way of going about fixing my problem at hand?

thanks
:punk

mortgage first. I wouldnt risk losing your mortgage loan or getting a higher rate b/c of your debt/income ratios etc etc for a car. Once you have the mortgage done, it will help your credit for buying the car as long as your making the payments.

mortgage first. I wouldnt risk losing your mortgage loan or getting a higher rate b/c of your debt/income ratios etc etc for a car. Once you have the mortgage done, it will help your credit for buying the car as long as your making the payments.

+1 A lower rate on a mortgage will benefit you much more than a lower rate on a car.

You should pay off the student loan debt, then save up 3 to 6 months of expenses in an emergency fund, then you should save up a 20% down payment. Then you're ready to buy a house. Never borrow money to buy a car - that's what all your broke friends will tell you to do.

You should pay off the student loan debt, then save up 3 to 6 months of expenses in an emergency fund, then you should save up a 20% down payment. Then you're ready to buy a house. Never borrow money to buy a car - that's what all your broke friends will tell you to do.

:nono Why would you want to rush and pay of low interest student loans that are tax deductable? Secondly, why would you want to pay for a car with cash when you can borrow money from car companies for under 5%? You are better off taking advantage of the system and investing your excess cash which should yield around 8-10% annually if invested wisely.

You should pay off the student loan debt, then save up 3 to 6 months of expenses in an emergency fund, then you should save up a 20% down payment. Then you're ready to buy a house. Never borrow money to buy a car - that's what all your broke friends will tell you to do.
Why not just pay cash for the house and eliminate the mortgage all together? Some of us live in the real world where it's necessay to borrow money.

Why not just pay cash for the house and eliminate the mortgage all together? Some of us live in the real world where it's necessay to borrow money.

Nice. :cheers

well i decided against the car for now :( i guess i will have to wait for my millenium yellow Z06, but the house is a better investment.


and for saving cash, I have about 25k saved up between my car fund, and house fund. Also, what are your opinions on 80/20 loans? I don't want to pay PMI.

also, I heard there are Federal/state grants for First time home buyers, I can't seem to find anything on them. DO you guys know where/how they work?

thanks :cheers

:nono Why would you want to rush and pay of low interest student loans that are tax deductable? Secondly, why would you want to pay for a car with cash when you can borrow money from car companies for under 5%? You are better off taking advantage of the system and investing your excess cash which should yield around 8-10% annually if invested wisely.

This is a good example of repeating what banks tell you without ever doing the math for yourself. No one seems the least bit curious about why all the conventional wisdom about money handling comes from banks and always insists that it's really smart to pay banks lots of money.

If thinking like the above actually worked in the real world, we'd all be weathly, because that's what the vast majority of Americans does - borrow, borrow, borrow. Rationalize with tax deductability. Rationalize with the ficticious "spread" between your investments and your loan interest rate. Make banks rich. Money comes in, changes names, goes back out. Forever. If it worked, it would have started working by now. Instead, the wealthiest nation in the world produces people with a negative saving rate, $9,000 in credit card debt on average, a net worth in the area of only $50,000 in their freaking 50s, student loan debt that's been around so long you think it's a pet, rented furniture, a rented car, an upside motorcycle loan, and quiet desperation as we continue spending money we don't have to buy stuff we don't need, to impress people we don't like.

Do not take financial advise from your broke friends.
Before you buy a house:
1. Be out of debt. Totally.
2. Have an emergency fund of 3-6 months worth of expenses. If you move into a house with no money, you are inviting unrelenting trouble. Houses are expensive.
3. Have a down payment of 20% saved up. This avoids PMI; puts in instant equity in case you get short notice transferred and have to move you won't be trying to sell a house quickly for more than you owe on it. Wiggle room.
4. Take out a conventional (non FHA or VA), 15yr, fixed-rate mortgage, the payment for which is no more than 25% of your takehome pay. Do not build yourself a house-poor scenario by getting a mortgage as big as what you'll qualify for. No ARMs, no balloons, no interest-onlys.

Your broke friends who are 2 paychecks away from bankruptcy and foreclosure will laugh at you.

This is a good example of repeating what banks tell you without ever doing the math for yourself. No one seems the least bit curious about why all the conventional wisdom about money handling comes from banks and always insists that it's really smart to pay banks lots of money.

If thinking like the above actually worked in the real world, we'd all be weathly, because that's what the vast majority of Americans does - borrow, borrow, borrow. Rationalize with tax deductability. Rationalize with the ficticious "spread" between your investments and your loan interest rate. Make banks rich. Money comes in, changes names, goes back out. Forever. If it worked, it would have started working by now. Instead, the wealthiest nation in the world produces people with a negative saving rate, $9,000 in credit card debt on average, a net worth in the area of only $50,000 in their freaking 50s, student loan debt that's been around so long you think it's a pet, rented furniture, a rented car, an upside motorcycle loan, and quiet desperation as we continue spending money we don't have to buy stuff we don't need, to impress people we don't like.

Do not take financial advise from your broke friends.
Before you buy a house:
1. Be out of debt. Totally.
2. Have an emergency fund of 3-6 months worth of expenses. If you move into a house with no money, you are inviting unrelenting trouble. Houses are expensive.
3. Have a down payment of 20% saved up. This avoids PMI; puts in instant equity in case you get short notice transferred and have to move you won't be trying to sell a house quickly for more than you owe on it. Wiggle room.
4. Take out a conventional (non FHA or VA), 15yr, fixed-rate mortgage, the payment for which is no more than 25% of your takehome pay. Do not build yourself a house-poor scenario by getting a mortgage as big as what you'll qualify for. No ARMs, no balloons, no interest-onlys.

Your broke friends who are 2 paychecks away from bankruptcy and foreclosure will laugh at you.

Mmmm....I guess having an MBA from one of the top schools in the nation means I simply repeat what banks tell me :wacko .

I think you completly misunderstood what I was saying. I am not saying spend money you don't have. I am not saying buy cars you can't afford. I am saying if you have the money, there are times when you are better off borrowing money instead of pulling it out of investments. Why would you pull money out of an investment that yields 10% annually to pay for something that you could pay for using borrowed money at an interest rate of 5%? You just lost 5% interest on your money.

People should save all the money they can, and when I say don't rush to pay off certain debts, I am not saying you should spend the money on other things. Instead, I am saying you should invest the money.

I would have to side with DorkFish .... I mean would you borrow money on a paid off house to go invest it "wiseley" .... no you wouldn't. People who juggle loans against investment for a few percentage points in interest usually get burnt. Surely you can do it , but it isnt wise to play with fire either. Dorkfish's recommendations are the basis of Dave Ramsey's teaching and his books would make a good read for anyone.

As an aside , I dont have an MBA ...... but Dave does.

Would you borrow against a paid-for car in order to invest? Most people will immediately and instinctively say "No". When you have a 5% car loan and money in investments, you're making exactly the same decision - without ever making a decision.

Money invested at 10% carries risk. Paying off a loan of 5% is almost as good as earning 5%, and it's risk free. Two differing investments can be compared to each other only after correcting for risk. A sophisticated analysis like Aflick learned to do in MBA school will correct for risk using an el-bizzarro calculation for "Beta". Beta is a measure of risk relative to the larger market - like the S&P500 for example. A government bond will have a very low Beta; an emerging markets mutual fund a very high Beta. Once market risk and taxes are accounted for, your lead-pipe-cinch 5% spread looks a helluva lot like a wash. That's why you take money out of taxable investments to pay cash for cars and bikes.

The cool thing about Dave Ramsey's teaching is that it works. Every single time it is tried. It accounts for the fact that personal finance is personal. Human beings are fallible, life is complicated by many unforeseen events, priorities change, company's go out of business, illness arises. Sophisticated mathematics have a hard time leaping cleanly off the page in the face of all this.

Here's how to tell how you're doing relative to your peers.

http://www.nytimes.com/books/first/s/stanley-millionaire.html

just keep your eye out because dealerships offer deals with 0% interest rates, but they dont last long.

Dorkfish, to answer your question, no...I would never borrow against a paid off car, nor would I borrow against a paid off house. To me, that is a completely different scenario.

And you are right, it is all about risk and I am willing to take the risk. History has shown that well diversified investments yield around 10% in the long run. Anything I have invested I have absolutely no intention of pulling out anytime soon, and I contribute 25% of my annual income to increase my investments (not including my employer's matching funds). When my funds or invested, I will not touch them, no matter what. But as you suggested to others, I have roughtly 1 years worth of reserves ready for the unexpected.

I think on this one, we will have to agree to disagree. For every piece of evidence showing one standpoint, another can be shown to disprove it...it's not worth the time or effort on either of our parts.

I love debate...it allows us in the peanut gallery to learn lots of stuff.

wow, thanks for all the replies. I have about 25k saved now, but the house I am looking at would require a 50k down payment (20%).

So back to my second question, what do you feel about an 80/20 loan? Also, why would I not whant an mortgage with an adjustable rate? I mean If i got one for 3% over the next 5 years then re-finance to a fixed for the remainder?


Again, I am a first time buyer, and I haven't yet picked my agent. I want to get some info first before I go in an get overwelmed with all this, so thanks :cheers

Jimmy, I know what you're going through. Just signed on a house myself this past weekend. As far as the loan is concerned, 80/20 would be the way to go if you don't have enough of the equity to put down. Make sure there isn't a PMI involved. Also see if there's a 75/25 available through the lender you're going through which could be a better option. You'd probably be getting a 5/1 ARM on the loan, the going rate right now is about 5.5% roughly and the 20 portion is obviously credit score driven. I don't find anything wrong with a 80/20 loan as long as you get a decent rate, plus you don't pay much into the principal this early on with a 30 year mortgage anyhow. After 5 years you would have built some equity into the home in which you would turn around and like you said refinance the loan. Make sure there are no prepayment penalties for the 80/20 loan you're looking into from the lender.

wow, thanks for all the replies. I have about 25k saved now, but the house I am looking at would require a 50k down payment (20%).

So back to my second question, what do you feel about an 80/20 loan? Also, why would I not whant an mortgage with an adjustable rate? I mean If i got one for 3% over the next 5 years then re-finance to a fixed for the remainder?


Again, I am a first time buyer, and I haven't yet picked my agent. I want to get some info first before I go in an get overwelmed with all this, so thanks :cheers

I am i licensed mortgage broker in the state of illinois, and to answer your question about what type of loan you are going to get, you have to ask yourself a few questions such as how long do you plan on staying in the house, and how much of a payment are you willing to take on (are you trying to purchase a house for the max that you qualify for).

Im not sure what state you are from, as every state has different programs, but an 80/20 loan is great as it eliminates the need for PMI, but you must also remember that PMI is now tax deductable at least for awhile as the government will give this program a trial period to see if customers actually go back to using PMI(mortgage insurance companys have been loosing money lately because of 80/20 and such)

Im not sure how your credit is, but if you want to get in at a low rate in order to ease the blow from your PITI(principle, interest, taxes, and insurance) I would tell you to go with a 80/20 ARM. But i is a must that you refi after your adjustment period is up, because you dont know which way interest rates will go. Refing into a fix rate mortgage may raise your payment in some cases, but at least you know that you have the same payment every month. And hell, if you build enough equity in your house, do a cash out refi and buy your z06 with the cash because in many cases the interest rate you get on that loan will be lower than a car loan. Unless GM offers another 0% thing on corvettes and i dont see that happening to soon!

Do not join the thousands of families who are headed for panic sales and foreclosures because they used "creative financing" to buy a house they couldn't afford.

1. No balloons. That's pay, pay, pay, pay, then WHAM it's all due now.
2. No interest-onlys. That's even dumber than renting because home maintenance is expensive, renting is not and either way you end up with nothing.
3. No Adjustable Rates (ARMS). It's going to adjust UPWARD - possibly by 500 bucks a month. That's why they're trying to get you to buy it. Don't try to fool yourself into thinking you know what your professional or financial life is going to be 5 years from now. You don't.
4. The point of a mortgage is TO BUY THE HOUSE. Do this as quickly as you can, so you can get out of debt and build serious weath. No more than a 15 year, fixed-rate mortgage - ever.
5. $250k is a fair chunk of change to be plunking down on your first house. Unless you're in Cali or some other hyper-inflated real estate market, that's a bit steep. Don't become house poor by biting off more than 25% of your take home pay in house payment. You'll qualify for a ton more than that, but that doesn't mean it's a good idea from a personal finance stand point.

You're trying hard to do the right thing. Your inclination is in the right direction. You'll have many broke friends telling you what to do. You'll have many bankers and brokers telling you how sophisticated you'll be with one of their specialized products. Keep this in mind: the 35 year old guy driving the BMW, wearin the Breitling, living in the 4000 sq-ft house in the gated community, making well over 6-figures? He's got an interest-only loan. He's broke. He's a financial basket case. Big hat, no cattle. He's two paychecks away from foreclosure and bankruptcy. You don't want to do what he does, even if he looks freakin' good doing it.

Do not join the thousands of families who are headed for panic sales and foreclosures because they used "creative financing" to buy a house they couldn't afford.

1. No balloons. That's pay, pay, pay, pay, then WHAM it's all due now.
2. No interest-onlys. That's even dumber than renting because home maintenance is expensive, renting is not and either way you end up with nothing.
3. No Adjustable Rates (ARMS). It's going to adjust UPWARD - possibly by 500 bucks a month. That's why they're trying to get you to buy it. Don't try to fool yourself into thinking you know what your professional or financial life is going to be 5 years from now. You don't.
4. The point of a mortgage is TO BUY THE HOUSE. Do this as quickly as you can, so you can get out of debt and build serious weath. No more than a 15 year, fixed-rate mortgage - ever.
5. $250k is a fair chunk of change to be plunking down on your first house. Unless you're in Cali or some other hyper-inflated real estate market, that's a bit steep. Don't become house poor by biting off more than 25% of your take home pay in house payment. You'll qualify for a ton more than that, but that doesn't mean it's a good idea from a personal finance stand point.

You're trying hard to do the right thing. Your inclination is in the right direction. You'll have many broke friends telling you what to do. You'll have many bankers and brokers telling you how sophisticated you'll be with one of their specialized products. Keep this in mind: the 35 year old guy driving the BMW, wearin the Breitling, living in the 4000 sq-ft house in the gated community, making well over 6-figures? He's got an interest-only loan. He's broke. He's a financial basket case. Big hat, no cattle. He's two paychecks away from foreclosure and bankruptcy. You don't want to do what he does, even if he looks freakin' good doing it.

You make great points man - I enjoy reading your posts in here :cheers

Jonny

Dorkfish. I read some of the article you posted on the NY times. How do I determine my net worth? Do I just take what I own and subtract what I owe? I can calculate what is should be by using the equation.

Def try to stick to the 25% of your income rule. Foreclosures are at an all time high b/c so many people are buying property they cannot afford. Read any "make a million" book and the first thing they will tell you is to live well within your means, giving you the ability to save money, and pay less interest.

Jimmy, do all your homework really well on buying homes so in a few years you can help me :cheers

dorkfish,

you always have some kick ass info, and thank you :cheers


as an update, I have been approved :cheers

dorkfish,

you always have some kick ass info, and thank you :cheers


as an update, I have been approved :cheers

In most areas it is a buyers market. "In my opinion" try to lowball people do not give them what they want. If they want to sell in this market they will take a hit. Either they deal or they don't. You can piss people off this way you can also, get a great deal. "This is my opinion" Use this advice at your own risk. Do your research, don't expect an agent or a loan officer to work in your best interests. They are out to get paid.

I have a buyers agent. I told them I am not comfortable seeing the houses that the also represent the seller (dual agent) So hopefully this broad is actually working for me. :cheers


and, i plan on giving a few lowball offers :D

Sometimes agents charge the buyer a small fee. See if this is the case and try to negotiate no paying that fee. The money they will get from the sellers will be more than enough.

I love when I'm right. I like going back and re-reading posts from a few months ago. When you're telling people that certain financial products are absolute ticking time bombs - while those products are at their height of popularity - and you're right..... Well I feel good. And that's not just the Sam Adams talkin.

You people need to listen to me. I hope things are going well for Jimmy 2 Times. If he took my advice, he has comfortable equity in a modest home and isn't sweatin' the Sub Prime Mortgage Meltdown in the least. If he got a balloon, an ARM, an 80/20, he's probably bummin', since many of these loans are done by sub-prime lenders.

Always listen to Dorkfish. Dorkfish be knowin' bout munny yo. Maybe I'll do a thread on who should be worried about the Sub-Prime Mortgage Meltdown and, more importantly, who shouldn't.

My buddy bought his house, and then bought his new car, and then another new car… I make almost twice as much as him, and he’s always like why don’t you get that car you want, and that TV, and so on. I just don’t want to be strapped for cash and have my toys own me.. He is a mortgage broker, and should of known the shit was going to dump.. Now he is so freaking stressed out, eating top roman and PP&J every night…:hammer But the important thing is he looks COOL.. :cool If you have good credit don’t fuck it up going over your head, it has worked for me ..:cheers