Actually, I'm buying one. It'll be the first time I've bought a home,
and I'm trying to learn the ropes. I plan to resell in a few years.
How do I do that? I mean, do I have to pay off the entire mortgage
with money from the buyer, or can I let him take over the mortgage, or
what? I was thinking of getting a 5-year ARM anyhow. Can anybody
explain to me the ins and outs of this? Thanks.
In article <>,
wrote:
> Actually, I'm buying one. It'll be the first time I've bought a home,
> and I'm trying to learn the ropes. I plan to resell in a few years.
> How do I do that? I mean, do I have to pay off the entire mortgage
> with money from the buyer, or can I let him take over the mortgage, or
> what? I was thinking of getting a 5-year ARM anyhow. Can anybody
> explain to me the ins and outs of this? Thanks.
Find a real estate company or lender that offers "first time
home buyer" classes. First time home buyers normally get
screwed pretty badly, and going into knowing less than nothing
sets you up to get taken pretty badly. You may also want to
check into "buyers agents", or retain a real estate attorney
to represent you. You might bawk at spending a little money
for this help, but they can help prevent you from making a
multiple-hundred thousand dollar error.
Mortgages are not transferrable. Before you can sell a
property that has a mortgage, that mortgage must be satisfied
in full. That is normally done during closing. The buyer
puts his/her money into escrow, then the closing company
pays off all the lien holders and closing costs. If there
is anything left over, you get the funds.
The biggest issue is that you are not planning to stay long.
I don't know if you have run any numbers yet, but in the first
5 years of ownership, you make a lot of interest payments, but
very few principal payments. That means that the cost to pay
off the mortgage plus your closing costs is likely to be more
than what you get from the buyer. That means you may have
to write a big check in order to be allowed to sell.
The defense against this is to put down a large down payment,
at least 20%, and stick with a conventional 15 year mortgage.
Avoid the ARM mortgage at all costs. The Fed is raising
interest rates at every opportunity, and most likely it
will continue to go up. You may find that raising rates
will boost your payment by 30% or 50%. If you don't have
the excess income to make those kinds of payment, you could
end up in foreclosure and bankruptcy within 2 years.
Even worse is the pending real estate bubble collapse. You
might get into this condo, then see the resale value drop
by 50% in 5 years. In that case, you may have to hold on
10 or 15 years, or be willing to write a check for half the
value of the unit to cover your sales shortage.
The biggest issue here is your time frame. You buy a house
as a long term financial and lifestyle decision. You don't
buy and sell as often as some people change underware. The
closing costs will eat you alive. 7 years should be the shortest
time that you consider being in a home. If your time frame is
less than 7 years, you are far better off renting. In fact,
the way real estate prices have balooned and the rental market
is depressed, renting is big bargain anyway right now. Don't
buy until you are ready to stay at least 7 years.
-john-
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John A. Weeks III 952-432-2708
Newave Communications
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