1st time buyer, need guidance on financing and buying...

Maraisondetre · Joined: 17 Oct 2008 Posts: 9

I am currently looking at properties and have found the one I believeI can call home. It's a condo/townhome type (sometimes this matters for lending scenarios) and with annual income of approx 50K sans bonus, and the intention to put some money down , I'd like to know the following:

1. why would 1 lender say stay away from FHA vs another reccommending it? my info is the same, income as above, fico of 674, nothing but a car payment (cc's no balances, old and barely used).

2. Whats the lowest rate I could get on a 200K property with 3%, 5%, 10% down?

3. any specific things I need to do to help reduce my liability, I have heard of sellers assist but am not sure how this impacts my bottom line exactly, or if it helps bring the monthly payment significantly lower.

4. PMI is required for anything under 20% financing, right? Or is this subject to change?

5. Can one have loan approval issues despite having a preapproval letter? Iam merely asking because someone at work mentioned they couldnt settle because the potential buyer who had a preapproval letter now was not getting the mortgage...not sure why, and it seemed arbitrary. If so, I need to know if this applies to me?

liverichly · Joined: 10 Feb 2005 Posts: 199 Location: Orange County, CA

1. One lender might not do FHA? That's a good reason not to recommend it, because you can't do it. With your FICO score and 10% or less down FHA is probably a better route for you in terms of overall payment.

2. Rates change .125% per day these days, very volatile. I'd say 6.25% to 6.5%.

3. Seller assistance is where the seller agrees to credit you money for all/some of your closing costs. FHA permits the seller to pay up to 6% of the sales price towards your closing costs, and conventional financing only allows 3% of the sales price until you put 10% down, then it's OK with a seller credit of 6%.

4. When you have less than 20% down (not under 20% financing), you either need to have PMI or you used to be able to take out a 2nd mortgage for anything over 80% LTV but now you need excellent credit for 2nd mortgages.

5. Sure you can have approval issues even though you've been pre-approved. The home might not appraise for the purchase price, there could be 1001 different issues with the title of the home you are buying, etc. Nothing that you could control, because once your credit, income & assets are reviewed the only thing that could make or break the deal would be if the property doesn't check out.

Jenie0109 · Joined: 27 Jan 2009 Posts: 307 Location: chicago IL

Nice post. thanks for the very informative reply.

m2c · Joined: 03 Aug 2005 Posts: 937

.Beware of our government bearing gifts! $8K sounds great but it may sucker you into something that may turn into a disaster.

General warning aside, you need to sit down with a LO with whom you are comfortable. There is a way to cut through the foliage but make sure you will comfortable with the result.

My quick observations:
• Your wife’s FICO is an albatross. If you need her income to qualify, no way to “ditch” her and her score. Raise her score beforehand? Look at the “reason codes” for her low score. Yes, these actually used to be numeric codes but even LOs grew tired of using the secret decoder ring to translate. Now they’re in English and appear under the numeric FICO number in the order of the most important reason score was not higher. Think FHA.
• $3,500 saved for downpayment? Sorry, I’m not impressed. 5% down is basically the minimum for conventional even if you can find (you won’t) to insure the loan with a 648. Again, think FHA. This would fly but remember downpayment on FHA is now 3.5%
• Exactly how are you going to put $3,500 and “after a couple months” get a $15,000 HELOC? No way … even in the rah rah days of a couple years ago. With 648, not even sure someone will call you back.

Sorry for the “tough love” but you really need to start working with someone to structure yourself for a FUTURE purchase and you need to be convinced you’re ready to make the jump without the lure of $8,000 “free” money. You’re much more attractive on the FHA side and I’d look for “extra” money under state FTHB programs or a lender who has access to flub grant programs. Latter is somewhat suspect this year; they’re been delayed with somewhat vague reasons but it would be an extra “free” $5,000 in the pot.

Must say, I'm confused by Shane's FHA rate. Direction towards FHA is sound but he may be talking APRs (mortage insurance is HEAVY with FHA).

m2c · Joined: 03 Aug 2005 Posts: 937

Ops .. replied to wrong thread. Red face!