Hi all, Here goes my effort to contribute to the penta-monthly Home Buying threads with one of my own Sorry about the length but the home buying process is fairly complicated based on the early research I've been doing on the subject, hence the length of the post... So the fiance and I are in the market as first time home buyers looking in the Pearland area. I guess the first thing I'd like to clarify is what's going on wtih the current housing crisis. With mortgage interest rates as low as they currently are, it definitely appears to be a buyer's market. Does this then go hand-in-hand to make it easier for first-time buyers who cannot place the 20% down payment? In other words, how realistic would it be for first-time home buyers to obtain a conventional 30 year fixed loan with a low-interest rate and a low APR and not place any down payment? I realize this is what lead to the current housing crisis in the first...I guess I'm trying to see if things have gotten so desperate for sellers that it will make it easier to obtain a loan like this. Secondly, I've been scrounging around the interwebs and read up on the mortgage loan process and the steps involved at closing. From what I understand, as a buyer it's best to have a mortgage broker who works in your interest in trying to get the lowest rates from lenders and also one who doesn't stick it to you with the whole "points" system that goes down at closing. Granted there are fees that are naturally part of the closing process. From what I understand they contain the following: loan origination fee - i think this is an administrative fee to cover the creation of the legal documents commission for the mortgage broker - based off a point system where 1 point is equal to 1% of the loan amount buyer's agent fee - usually paid for by the seller listing agent fee - this has to be paid for by the seller, i believe title insurance fee - to transfer the title of the house from the seller to the buyer. the new home owner's personal title insurance policy - from what i understand this is so no one in the future comes knocking at the door claiming there's a lien on the house based on the previous owner's shenanigans attorney's fee - i'm not too sure about Texas law requiring attorneys to be present notary fee home inspection fee - usually paid for by buyer appraisers fee - usually paid for by seller surveyor fee - to have some measure the boundaries of the property i think assumption fee - this is in case i sell the house and someone else assumes the mortgage from the lender private mortgage insurance - in instances where the buyer cannot place 20% down the lender will be covered in case i'm unable to pay the mortgage fee to create an escrow account - i think into this account money will be paid by the buyer each month from which, at the end of the year, the bank will take out funds to cover that year's property taxes and insurance I'm sure there are others I'm forgetting . Feel free to add on. Now, to close up with some final statements. We'd like to begin the process by working with any recommended mortgage brokers in the area. From here the plan is to get pre-qualified for a loan, then speak with a real estate agent to see about houses in the market (Pearland) we're looking for that fall into the limits we have for ourselves that meet the pre-qualifying amount. Any recommendations on mortgage brokers or real estate agents who specialize in Pearland homes? Thanks a lot, just for even reading.
You can negotiate many of those fees with the sellers. For example, you may want them to fix a busted door and they may counter by not fixing anything but offering to pay your closing costs. The other thing to keep in mind this year is that you get $8,000 or 10% of the selling price of the house (whichever is less) as a one time tax credit for first time home buyers. This is not a loan (as it was in 2008) nor is it a deduction. It is cold, hard cash.
Regarding the 8K credit, any thoughts as to whether I can use that as "down payment" by offering to pay this to the lender once it rolls in after the home is purchased? Perhaps with a promise like this the lender will assist in lowering the loan interest rate...
I seriously doubt that any reputable lending agency will allow you to do that. You should go to lendingtree.com and fill in your information and just see what types of offers come back. You are not tied to anything by simply filling out the form and it should give you some idea of what to expect. Also, you won't get the $8,000 credit until you file your taxes after the house is closed on, so if you file by 04/15, you won't get the credit until next year's tax filing unless you buy and close on a house in the next 2 1/2 weeks. That being said, you MAY be able to file an amended return and get the money this year, but I don't know if that is doable. Know your credit score and if there are "issues" with any aspect of your credit report, work to get those cleared up. The better your credit score, the better your interest rate. Know how long the house you are thinking of buying as been on the market. Generally, the longer it has, the better deal you can make.
In many cases the loan origination fee and the mortgage agent fee are roled into one. I wouldn't ever pay more than 1% total. Also the escrow "fee" is a prorated escrow amount that goes into the actual escrow account. You don't actually "lose" this money, its just sitting in escrow to pay your taxes/insurance. Everything else looks correct. There wil probably be a doc fee and some kind of fee from the state to file the title as well. Don't forget that any upfront "points" you pay for your mortgage can also be a deduction for taxes.
If you're worried about a down payment there is a program through the USDA office that allows 100% financing of home loans for first time buyers. There are income limits though.
Do some research on the fees (for example, go to INGdirect.com). For example purposes they show some "typical" fees and the fees they charge. When applying for a loan, don't be afraid to ask for a list of fees and CHALLENGE any that you think are out of whack. I am sure that if you post the fees, some of us can tell you if they seem reasonable or not.
1) Don't buy unless you can put at LEAST 10% down. 20% is better. 2) Only take a 30 year fixed mortgage out. 3) If you meet the standards for 1) and 2), make the seller pay all closing costs. 4) The mortgage payment should be less than 28% of your combined NET income. Try to get it closer to 25%. Don't let a mortgage company tell you that you can get a better deal on an ARM or that you can afford a bigger house. YOU CAN'T!
Thanks for the responses. I've looked into the state's website and for the most part we don't meet the minimum net income to qualify for their assistance on zero down mortgages. So far I'm early in the buying process. Once I speak with a few mortgage lenders (as I get an idea of who is recommended by the Hangout gang) I can start to post how the fees are shaping up. I plan to get a copy of the documents before we have to go in for "closing" so that I can review them the night before and have questions ready for them on any that look too high. Thanks for the INGdirect link. I'll give this a whirl.
Sorry to steal this thread for a bit but I can't create post anymore ( I have no idea why ) but wanted to ask if anybody knows a good tax guy/gal in the Stafford/Sugarland area. There was a thread on this many months ago but I'm unable to find it. Sorry again for the thread steal.
At some point in the process, you should receive a "truth-in-lending" document. This SHOULD jibe with the documents you see at closing. The fees, interest rate, terms, etc. should match up. Years ago (early 80s) when we were closing on a house, our truth-in lending had verbiage indicating our loan "may" be assumable. When we got to closing, the verbiage had been changed to our loan is "not" assumable. We walked out and did not close until they changed it. As time went on, it wasn't an issue at all, but it could have been.
Um that shouldn't be because I've been a member here for many many years and have posted 100's of Reply's and started Dozens of threads on Clutchfans.
Best advise here. Home prices have come down, but they are still over priced and you will lose money in the long run if you buy now.
True but if everyone would base their home buying decision off this chart no homes would have been sold in the US over the past several decades and everyone would be renting. I understand how the value of the house, the same house that was 100K in 1890, is now costing 200K in today's world. At the same time, the resale value of that house is still in the general ballpark of its original purchase (probably less true these days), aside from which are general advantages to purchasing rather than renting.
My wife and I are actually first time buyers and we're going through the closing process on a home right now. I did some research prior to starting the approval process. Home Buying For Dummies and 100 Questions Every Home Buyer Should Ask (I think that's the title) are two really good books to read. I would say check your credit score first...know whats there; if your credit is bad you won't get approved. After that get pre-approved. DO NOT get pre-qualified....pre-qualified doesn't really mean anything and they only tell you what they think you can afford. You may get pre-qualified for a 200,000 dollar loan, but realistically you can only afford 150. So don't be fooled by what they say you can afford. Plus, getting pre-approved gives you more buying power, because the lender has made a commitment to give you the loan, provided you meet all the contingencies once you sign a contract. We had already been looking at houses in the area before we even got pre-approved so we had an idea of what type of house we wanted and in what neighborhood. And then when we applied for pre-approval we had a firm dollar amount in mind of what we could afford. Then get an agent..make sure it's a buyer's agent, so they represent you exclusively. Once you start looking, keep in mind that Houston is doing better than other areas of the country. You might not get a whole lot of concessions from the seller, though you probably will have better luck the further you go out...that's based on what our agent told us. We put an offer down on a house and we only got 1K in closing costs paid for by the seller (asked for 4k). Granted the house was only on the market a few days. We pretty much fell in love, and after seeing a few other houses we knew that was the one. Which brings up another good point. Even if you fall in love with the first house you see, make sure you at least see several more. And if you still like that house, go back for a second viewing, perhaps at night. As far as the loan, be prepared to be frustrated. DEBT TO INCOME RATIO. Know that what is, because if your lender is reputable, they'll will use it and if you don't fall at 41% or under when they assess your principal, interest, insurance, pmi and hoa fees to your monthly income, you're screwed. And that brings up another point. I'm guessing it's the climate that we're in, but you might be hard pressed to afford a loan if you don't put 20% down. I guess it depends on how much of a loan you're asking for though. In any case, after our debt to income ratio was adjusted once the numbers came in for our insurance and taxes, we had no choice but to put down a full 20% (we were going to put down 10 initially). But again it's gonna depend on how much you're looking to borrow and what your monthly income is as well as any other debts you have. Also keep in mind that if you don't put 20 down, you'll have to pay Private Mortgage Insurance...you'll have to pay until your equity hits 20%. Expect to pay an extra 50 or more a month. And that's just money down the drain. Now as far as the tax credit...you're not gonna be able to use that as a down payment because your lender will more than likely require you to prove your assets with updated bank statements. They want to know you have enough in your account (plus reserves) for the down payment you plan on making. Outside of that, just keep in mind, that there is no such thing as the perfect house. So don't fret it if you find one you like and you don't get it for whatever reason.
