1st Time Home Buyers.....Questions Questions

just123me · Joined: 26 Aug 2005 Posts: 12

Hi,

Thanks in advance for any advice or info.

I'm living in an apt. right now and lease is not up until end of Dec/05. Is it too early to look for house/get realtor? What's about the usual time between finding a house and moving in? 2 months?

What I have done so far: A friend of the family who is a mortgage lender with big bank has pulled my credit report and given me a detailed analysis of what I can afford and they type payments I'd be looking at for right now. So now I know about what price range to look for that I can afford. I know what I feel comfortable with monthly paying so won't overextend myself. BTW, she stated my credit was excellent. 802 Fico with Equifax, 850 with Transunion and about 780 with Experian.

Being that I have better credit and 1st time home buyer, what should I look for for specials? This person that gave me detailed analysis is wonderful, but I do want to still shop around and see what others have to offer. Is it true that sometimes if you go to smaller banks, they can offer more because they handle their own loans and don't sell to outside companies? I've heard that.

Also, I will get recommendation on a Realtor. Is it too early to get one now? Should I just look on my own conservatively?

Why is it necessary to be prequalified for mortgage? Is it necessary? Is this just so realtor knows you are serious and know what in fact you can afford? If so, I am getting a referral for Realtor and this will be friend of family also so she will believe my analysis from Bank.

Also I want to comparison shop for mortgage. When do I do this? ...after I find home? Will it cost me anything? or should banks/mortage companies give me free estimates? Will they pull my credit report each time? Is this going to hurt my credit so much that I should be concerned? Don't you usually get prequalified with people you expect to get your mortgage with? How much does this usually cost? Does that mean I need to find mortgage lender now?

Thanks again in advance and being patient in reading all my questions!

:D

chow · Posted: Fri Aug 26, 2005 3:06 pm Post subject:

It takes me 6 months to figure out what set of wheels I want for a FEW years-and you're thinking this is too early to land a Loan officer and a Realtor?

Oh-my....Homes. I hate shopping for those things. It takes forever! :wink:

with your score, I would not shop to you drop with every LO. If it's a bank-a real bank, then they have Fannie and Freddie and some other players in the mix for lenders.

Never go above 30% of you gross income on a fixed loan, and don't go into an Intrest Only or Veriable less than 5 years-unless the market value is going up, and you don't plan to stay.

I know-I'm conservative on my max mortgage amount.

Dang it-I'm tired of watching people buy a home and move out the very next year back to an apartment because they bought all of the stuff to furnish it, new cars, and then decided that they wanted real landscaping.

I walk into at least 1 refi a week that has no furniture in most of the "living" areas. Hello-can we call this "mortgage poor?"

These are the people who cant even afford to buy a garden hose, or a rake, because 50% of the real income goes to pay for a house-they can't afford to even keep up-or furnish!

just123me · Joined: 26 Aug 2005 Posts: 12

Thanks for all your info. Chow. Here's one of the scenarios that I would feel comfortable with. This sound like a good loan and about what I'm looking at finding out there for 1st time home buyer?

Also, I am being very careful not to buy too much house. I want to be able to buy new furniture, fix things, afford to eat out, go to movies. I don't want to be married to my house. I'm thinking I don't want to go over 800.00 house payment. That's my limit. If I can get better deal or buy cheaper home, I will.

My income is approx 40,000 a year. Right now I owe nothing and have no debt. I like it like that! I imagine one of these years I will need to buy another car, so I'm keeping that in back of my mind when buying. Does 800.00 a month sound like I'm overextending?

Sounds like you say I can go ahead and start looking. That mean I should go ahead and comparison shop for mortgages?

What does this mean?

Actual/Allowable Housing Ratio 23.95
Actual/Allowable Debt Ratio 23.95

Loan Scenario

Product 80% 1st/15% 2nd 10-Yr Balloon (30-Yr Loan)
Purchase Price $115,000
Loan To Value 80.000 %
Loan Amount $92,000
Term Of Loan 360 Months
Initial Interest Rate 5.875 %
Index N/A
Margin N/A
Actual Market Rate Today 5.875 %
Qualifying Interest Rate
Maximum 1st Rate Increase/Frequency N/A
Lifetime Maximum Cap
Annual Percentage Rate 6.029 %
Origination Points 0.000 %
Discount Points 0.125 %
Total Points 0.125 %

Principal & Interest $544.21
Other Financing $134.17
Property Tax $70.00
Hazard Insurance $50.00
Mortgage Insurance $0.00
Homeowners Association Dues $0.00
Flood Insurance $0.00
Assessment $0.00
Other Impounds/Escrows $0.00
Borrowers Protection Plan $0.00
Total Housing Payment $798.38

Origination Fee $0.00
Discount Fee $115.00
Appraisal Fee $0.00
Credit Report Fee $0.00
Tax Service Fee $75.00
Application Fee $200.00
Processing/Commitment Fee $0.00
Flood Certification $11.00
Buydown Subsidy $0.00
Other Lender’s Fees $619.00
Total Lender’s Fees $1,020.00

Escrow Settlement Fee $450.00
Attorney Fee $0.00
Lender’s Title Insurance * $345.00
Owner’s Title Insurance * $0.00
Other Title/Settlement Charges $240.00
Recording Fee $30.00
Tax Stamps $0.00
Survey $0.00
Pest Inspection $0.00
Other Costs $0.00
Total Title/Settlement/Other Charges $1,065.00

Number Days Interest/Per Diem 30/$14.81
Interest $444.25
Hazard Insurance (1st Year Premium) $600.00
Hazard Insurance Reserves ** $100.00
Property Tax Reserves ** $140.00
Mortgage Insurance Reserves ** $0.00
Other Prepaids/Reserves ** $0.00
Total Prepaids/Reserves $1,284.25

Downpayment $5,750.00
Lender Fees $1,020.00
Title/Settlement Charges $1,065.00
Prepaids/Reserves $1,284.25
Total Borrower Costs at Closing $9,119.25

Income Qualification Estimates Based On Qualifying Interest Rate (Other Factors Are Considered in Qualifying)
Required Monthly Income $
Maximum Other Debt $
Residual Payments (//ResidualMos// Months) $1,596.76
Actual/Allowable Housing Ratio 23.95
Actual/Allowable Debt Ratio 23.95

chow · Posted: Fri Aug 26, 2005 4:29 pm Post subject:

wait a "minute" I have to switch computers, and deal with an ad issue....If I don't get back-anyone else can give an opinion...so far- I see. Based on my never go into BK and eat hambuger and hot dogs every night-thought process is:

$40,000 divided by 12= $3333.33

30% of that is: $1,000.00-1,111.00

How does $40,000 a year come out to

That's your total housing target. Taxes, Insurance, Home owners association fee's and any mortgages-The whole whopping payment to pay your house...And please put back a little each month incase the Real Estate tax goes up-because it will.....and please plan on the water heater, or some other majour even blowing up-which it will.

Now do you see why I lower the floor? Would you rather sleep well at night, or just live paycheck to paycheck?

How does $40,000 a year come to Actual/Allowable Housing Ratio 23.95% :?:

If you are hourly, then we can figure that on 36 pay checks or 52, and we look at OT and average it. This is one paragraph I want to read-and think through. I want you to buy a house, but I want you to have fun with your home, and take care of it. I never want anyone feeling like a slave to a home. That's how we lose homeowners.

work the simple man's math, as I showed you above.

You will end up a much richer homeowner. You will not max out your ability to own a home, and you will be able to buy a garden hose, or an appliance or two every once in a while. (and you can save a few bucks here and there if you follow a 10% rule) Buy a home for 100,000 and any thing ater that payment less than $1000.00------ Go stick it in savings for that rainy day-when the hail or tornado or hurricane or fire hits. If none of that ever happens.

I know a few people who like to invest money...."Phil" :wink: will be waiting with baited breath....

That's just MHO. I've been downsized out of more jobs than I can shake a stick at. I got so tired of it-I decided I would remain self employed for the rest of my life. Having rolled a few 401K's, and having had to find a way to make both sides meet in the middle-I just went to a age old formula, that hasn't put anyone in a tight spot yet. I don't care what "investor's or Fannie and Freddie say is okay- Use common sense. :wink:

just123me · Joined: 26 Aug 2005 Posts: 12

I don't know what this means or how it is calculated? Actual/Allowable Housing Ratio 23.95%.

So are you saying 800.00 per month mortgage is too high for me? I'm in SC if that matter with anything.

Mortgage lady actually calculated some scenarios for 135,000. I didn't want to do that though.

All these numbers are greek to me but if others agree that I shouldn't move or buy a house or else I'll be married to a house and not be able to buy a hose, then I'd feel better staying in my apt.

Thanks for any honest opinions. I do have about 20,000 (presently in Emigrantdirect acct making 3.5% interest) saved. but don't want to use too much of that except 5%. I like keeping my safety net should I lose job or become disabled or whatever.

My base pay is about 35,000, yet I get bonuses and travel and tons of OT each year. It can pretty much be reliable that I at least get 5,000 extra...that is lowest. I usually get more.

chow · Posted: Fri Aug 26, 2005 5:17 pm Post subject:

$40,000 a year-divided by 12 months is a gross of $3333.33 a month.
30% of 3333.33 is? $1111.11 Total for all mortgages and taxes and insurance-if you want a SAFE SIDE.

Simple? I'm not doing a lender way of the figures on how to get you in a home-I'm doing the Devil's Advocate way of keeping you in it.

(hell, I'd throw you in a home with her same figures too and write the loan if I wanted too-but you wanted another opinion, and I'm giving you that.)

I would hope and pray that SC is a rising market as half of my family has some raw land there! I told you to look at the apprieaction of the market, and your income. Don't sink yourself into too much of new stuff too quick.

I didn't think you had a bad deal, but don't go overboard the first two years in it. IE: Buy a ton of stuff. Pay down the second because the first sounds like a good deal-I've seen better but-what's .25 on less than 100k? Not much on a 30 yr note if turth be known. You'll refi or move before that is much of a factor.

My only other question: are you sure those local taxes on the escrows and closing costs are correct? I know the East coast areas have some godawful local tax stamp fee's. And the Carolina's are two of them that make me cringe on local fee's.

m2c · Joined: 03 Aug 2005 Posts: 762

23.95% works for me. PITI on the first of $664 and change plus #134.17 on the second makes my calculator come out the same – 23.95%

LO is being awfully fair on the rate and junk of $619 is a bit high but not obnoxious. Of course, no lock period is given. If your happy with the LO so far, I’d stick with him/her. Finding an independent indicator to make sure you’re not shafting when you lock is the tricky part. Hope he/she is not a bait and switcher.

$70/month RE taxes on $115,000 value. You must be in a low tax state!

Amazing how people will jump through hoops to avoid MI. Somehow MI has gone from savior to devil in a couple decades. MI is not always bad. Have LO look at LPMI. With decent credit the cost should be 1.15% discount upfront. Mix and match with rate and points. 1.15% is "wholesale"; many lenders mark that up.

just123me · Joined: 26 Aug 2005 Posts: 12

Thanks y'all for response. it's all overwhelming and I feel like I'll never understand all this. lol

I'm still not sure what 23.95 symbolizes or means to me. Is that the percent of gross thaT mortgage puts me at and that's a good rate to be for me and that 800 is a good mortgage for me?

Are y'all saying I should stick with this mortgage person and not shop around? She can be trusted. She's a friend of my sister and very big in the bank industry.

Y'all use jargon I have no idea what it means. I don't know a point from anything or what they mean. Looks like I have a lot to learn.

Sometimes it overwhelmes me to the point I just probably need to stay in apt. where I can budget and buy tons of garden hoses....even if I don't need them.

Thanks again for help.

chow · Posted: Fri Aug 26, 2005 6:12 pm Post subject:

Well, Most of us refuse/hate to refer- to do friends and family loans, because we would rather you remain friends and family- OR We could have our molars and eye teeth pulled- without Novicane or any other drug-all at the same time.

(never a more honest statement will be said on this board from a lender a LO or a agent-than this one!)

You can't understand it all. That's why we have a charge, and you place Good Faith in the LO's to do the best for you, and your family.

I hate to say this, but selling money is the second oldest Profession on the earth. We sell money in the mortgage business-we sell a service- Prostitution was the first recorded profession.

Haplo is gonna roll over and die.......He said I was too Cryptic....Okay...how about some real honest answers? :wink: :wink: :wink:

pamortgageman · Joined: 21 Jul 2005 Posts: 31 Location: Pennsylvania

I agree 100% with chow's statement.

just123me · Joined: 26 Aug 2005 Posts: 12

Here's the deal. My sister is a realtor in Charleston and I'm in G'ville. She works with a lender in Charleston. They became good friends and this girl helped my sister get a very good loan. They've been friends maybe 10 years. My sister suggested I talk to her and I did. She works for BOA in Charleston and has a pretty high position.

My sister also referred me to a realtor in my town to talk to. This person is head of some realtor association. I called her and told her my sister gave me her name and that she would tell me who would be good for me to work with. My sister can get referral this way.

Is something wrong with this setup? I'm ok with it and trust everyone. I'm the type to always have my guard up.....probably too much sometimes.

Should I trust strangers to look out after my best interest instead?

Thanks

m2c · Joined: 03 Aug 2005 Posts: 762

Calm down you’ve done nothing “wrong”; on the other hand you haven’t done anything particularly right other than potentially providing your sister with some future money to basically doing nothing. Good lesson in understanding the mindset of real estate agents. Do mortgage brokers refer people? Yes. Do mortgage brokers get or expect any money for the referral? No and probably illegal if money changes hands for basically “no work”. Realtors just have a different way of thinking and you should be prepared for it. Read Freakonomics on chapters that deal with how Realtor incentives stack the deck against you.

Other than that you’re much to paranoid about the size of the home you might buy. Only you can project future income and comfort level of month debt payments. Just remember it costs a lot to under buy and buy a larger home in a year or two – estimate 10% to sell a home (if using a Realtor) plus moving expenses. Not cheap! On the other hand renting provides a lot of flexibility and worry free maintenance. OK, “paying the landlord’s mortgage” , American Dream, and all that. If you do decide to buy, consider a higher price higher than you stated for the reasons above. It still is a very personal decision.

I previously said I thought the LO was being very fair. On a $92,000 mortgage with $619 junk, I’d charge you 0.375 points for a 35 day quote. You may be getting a brother-in-law deal. Just to make sure you’re not entering bait and switch land, write down 5.65133% and this web site -- http://www.efanniemae.com/syndicated/documents/mbs/apeprices/archives/cur30.html

This number should bear that same relationship, more and less, with the APR in the final lock and it does not to the APR quoted. There can be weird things that happen between mandatory widow pricing and MBS pricing but it should be close. She may be giving you a good deal but it doesn’t hurt to check.

Start looking and have fun. After looking, if you decide it's not for you right now, bail out.

just123me · Joined: 26 Aug 2005 Posts: 12

Thanks M2c.

I don't think I'm so paranoid as much as just trying to learn as much as I can. I've never bought before so just trying to get as much info as possible. I don't want to get screwed.

I'm going to get realtor and look around and see what I can afford and if nothing rings my bell, I'll just settle to live in apt for another year. It's a big commitment to buy, and I'm a commitment phobic.

All I can think about is now I'd have to pay garbage/water/bigger electric/property taxes/buy a lawn mower/....all those extra things I don't have to pay for now. I'm just afraid I'm going to get in house and not realize how much more expensive it is....ya know what I be saying?? Yep, I'm scared to death.

What does that mean if my sister gets referral? How much does she get from just giving me a name? How would she getting paid referral fee effect me? Will she just have to split with my realtor?

Again...just trying to suck up some of y'alls knowledge so I can be smart too. :lol: :lol:

m2c · Joined: 03 Aug 2005 Posts: 762

Nothing wrong with your sister getting a referral fee – it’s standard practice … for the Realtor industry. The referral can be a help IF your sister is REALLY familiar with the other Realtor’s work. All too often what we see from our side of the fence is something like this.

Realtor: “Remember the deal “we” did with so and so. They’re moving to Phoenix and asked me if I knew an agent there. I got them an agent!”

Me: “Oh, you know an agent in Phoenix?”

Realtor: “Heavens no. I just called our relo dept and then forwarded so and so’s name to the franchise in Phoenix. I get a fee! (last said with much pride). Follows the Realtor’s motto: “If there’s a fee in the transaction, I deserve part of it.”

I view this as a set up. As I said I refer folks out all the time (I really prefer not to do subprime) but not unless I very familiar with the party I referring and know he won’t take the client to the cleaners. There’s never a referral fee and I’d be insulted if one was offered (illegal too).

Just illustrates basic difference in the thinking of the two industries. Keep it in mind.

Nothing wrong with continuing to rent – many advantages. Some downsides too. Just consider “buying up” IF you’re confident about future income streams and can emotionally take the debt load. It costs A LOT OF MONEY to “under buy” now and “buy up” in 2 or 3 years.

m2c · Joined: 03 Aug 2005 Posts: 762

A couple more stops on your quest for knowledge.

Some title agencies have free FSBO booklets in an attempt to court FSBO business. Around here, the booklets are great but the title agencies are pricey and inefficient. So read the material and use someone else for closing. Unbiased information (except where the title agency inserts their name as closing agent in the sample contract) and copies of legal documents you’ll see down the line in the transaction. The Realtor will likely pitch how buying a home is so sooooo complicated. It’s not and the more you know independently the better.

Second item is from an experience that just took place this week. Third time I’ve financed this couple but this time they were buying in a county where I knew title agencies were “somehow” all maintaining very high prices for items not regulated. This was a FSBO and I suggested they and the sellers get closing prices beforehand and gave them names of two title agencies that would travel into the county and close for what I considered reasonable prices. You guessed it! When we received the HUD 1 for review prior to signing even we were aghast at the charges. Basically between them they left over $1,500 on the table needlessly. These folks are wealthy so they can overspend as they like. I least I warned them.

Point is that you would check around on closing agent (in some states an attorney; in others a title agency) costs BEFORE you’re ready to make an offer. LO can fill you in on the what the unregulated costs are in your state and give you some recommendations. Usually the LO’s interests are aligned with yours – reasonable cost and good service – UNLESS the LO is in an affiliated business arrangement (afba) with the title agency. Even then costs are likely to be in line. Normally the closing agent name is thrown in as an after thought as the offer is prepared with a statement of “oh, they’re all the same”. If the title agency suggest is an afba of the Realtor you can almost count on VERY high prices and mediocre service so the Realtor can get yet another commission. Scratch that – not a commission; an expense reduction by the real estate broker so that it passes RESPA. Same thing though.