financing for a newbie

5 Replies

hi all..this fourm is great!!!anyway here is my story...i am just starting out, i really want to be an investor.i have good credit and my friend is my mortgage lender.this would be my first real estate purchace.my question is since i really don't have the cash to purchace my first home does it make sense to use my status as a "first time home buyer"?i really want to get into this and i figure that getting the first deal done is the hardest.i want to get in on the flipping end of real estate.i can basically build a house myself so i am kinda looking for "fixer uppers".any help would be appreciated....
mike

As a first time home-buyer you can get FHA loans. You can use an FHA loan to buy a property so long as it is 4 units or less. FHA loans let you get into your first building with no money down (a very good thing for your first building!!!). I would suggest you consider FHA even if you have the money for a conventional loan. Reason? Becuase you will need to save cash for mortgage payments, repairs, etc. that come up while you get your feet on the ground.

hey, thanks for thr reply.i am already approved for a no money down loan, so i have that going for me.are there any penalties for paying off a loan in say 3-4 months(outside of tax penalties)?in other words does the mortgage company not like you to pay off the mortgage too quickly?
mike

That varies from company to company; check out what your mortgage contract says about prepayment penalties. If it isn't in the contract, then who the heck cares what they think about it; they can't stop you from prepaying! The first mortgage that I signed had no prepayment penalty so I was happy about that.

On another note: since you're a first time buyer I would like to point out the concept of "escrow". In some mortgage contracts the bank says that they will pay off your insurance, taxes, possibly water/sewage every year for you. However, they ask you to make payments into an escrow account whereby they will store your money until it is time to make payments. If you're the type of person that isn't good at managing money then this is a blessing, but aren't all investors good at managing money? In any case this means that your monthly cash flow will be consistent, but you will have to fork out more cash in the beginning than you otheriwse would. Plus you're losing interest on the money!!! Plus, if the bank forgets to pay your bills on time then guess who gets to pay the penalties? You do!!! If I had it to do over again then I would want a mortgage that didn't require escrow payments, but that might be hard to do with an FHA loan.