[mike25]

so with my 720+ credit score, would i be looking at a fairly decent interest rate? also when you say seasoned funds, are you meaning that i have to be able to prove that its money i earned?

[PETRA]

Originally Posted by Number 3

Didn't see it mentioned, but if you don't put 20% down, be prepared to pay PMI. Basically insurance that the bank won't lose if you default.

If you do put 20% down you can handle your own escrow. If you don't, be prepared to give the bank 13 months of your homeowners insurance and property taxes at closing and then also you will have to pay 1 months worth of taxes and homeowners insurance with your monthly mortgage payment AND PMI.

Not sure if this is nationwide, but has always been what they do in Michigan.

So 20% down, IMO, adds a lot of flexability.

The reason for this is that the bank wants an "insurance policy" in place in case you default on your loan. The PMI (or private mortgage insurance) is what the bank require be in place if your loan amount is more than 80% of the purchase price. The factor varies based on the money you put down but you could range anywhere from 6% of your monthly payment (which could be as little as $25 monthly) to as much as 81% monthly (closer to $100+ monthly.)

Yeah this figure sucks when you consider its just a fee you pay the bank for giving you the loan and you get zero return from it, however if you really want to buy a house and reap the rewards of home ownership but don't have the 20% to put down to avoid PMI its a small price to pay in the bigger picture. Plus the PMI factor can be removed once your loan balance reaches 78% of the property value so if you are in an area where property values are increasing, hypothetically you can get an appraisal is 3 or so years, and if your appraised value warrants the 78% you can submit the appraisal to your lender and request the PMI be dropped. It happens alot more than the average person thinks it does.

Escrows are required if your loan amount is more than 80% of the purchase price. The reason 13+ months are collected at closing is because most states require insurance and taxes be paid a year in advance so the lender needs to ensure the funds are in place to pay the bill when it is due (which the insurance is a year upfront at closing and taxes are a set month per each state.) There again, the reason for this is so you do not default on these bills, which can result in a county or state lien against your property which takes priority over the lender meaning the lender loses first place for their security for which they gave you a loan.

You may not care about any of this, but I find knowing why something is the way it is, helps me understand more in why things are the way they are.

Kapeesh?

[Number 3]

Originally Posted by TangerineDream

The reason for this is that the bank wants an "insurance policy" in place in case you default on your loan. The PMI (or private mortgage insurance) is what the bank require be in place if your loan amount is more than 80% of the purchase price. The factor varies based on the money you put down but you could range anywhere from 6% of your monthly payment (which could be as little as $25 monthly) to as much as 81% monthly (closer to $100+ monthly.)

Yeah this figure sucks when you consider its just a fee you pay the bank for giving you the loan and you get zero return from it, however if you really want to buy a house and reap the rewards of home ownership but don't have the 20% to put down to avoid PMI its a small price to pay in the bigger picture. Plus the PMI factor can be removed once your loan balance reaches 78% of the property value so if you are in an area where property values are increasing, hypothetically you can get an appraisal is 3 or so years, and if your appraised value warrants the 78% you can submit the appraisal to your lender and request the PMI be dropped. It happens alot more than the average person thinks it does.

Escrows are required if your loan amount is more than 80% of the purchase price. The reason 13+ months are collected at closing is because most states require insurance and taxes be paid a year in advance so the lender needs to ensure the funds are in place to pay the bill when it is due (which the insurance is a year upfront at closing and taxes are a set month per each state.) There again, the reason for this is so you do not default on these bills, which can result in a county or state lien against your property which takes priority over the lender meaning the lender loses first place for their security for which they gave you a loan.

You may not care about any of this, but I find knowing why something is the way it is, helps me understand more in why things are the way they are.

Kapeesh?

Thanks, I knew all that, just didn't know if the OP did, and it hadn't been mentioned. But you have added some great background and clarity on the details. Hopefully the OP finds it valuable. I did.

[mike25]

Originally Posted by Number 3

Thanks, I knew all that, just didn't know if the OP did, and it hadn't been mentioned. But you have added some great background and clarity on the details. Hopefully the OP finds it valuable. I did.

I understand that much better now. that info is a big help. so i basically can expect to pay this "security insurance" if i dont have the 20ish% of my loan. Understandable really- everyone has to cover themselves in this world.

[PETRA]

Originally Posted by mike25

so with my 720+ credit score, would i be looking at a fairly decent interest rate? also when you say seasoned funds, are you meaning that i have to be able to prove that its money i earned?

Yes - for the most part. One of the problems in the housing market blowout was due to people borrowing money but the funds they just happened to have in time for their loan were never "sourced" so when the person defaulted on their loan, it was discovered that their DTI ratios we much higher than the lender thought cuz the buyer borrowed money he/she did not disclose, and was not being reported on their credit report. The result is that buyers now have to document every penny that goes into their accounts to show its money they do not have to pay back, and that meets the asset requirements of the loan program they are using.

Basically it means expect to disclose and document everything under the sun. With fraud and due diligence checks that are now in place by lenders, we will find out everything about you for the last 20years and if any of it even hints at you owing money somewhere that is not disclosed, expect to prove you don't.

Mortgages USED to be fun....

[PETRA]

Originally Posted by Number 3

Thanks, I knew all that, just didn't know if the OP did, and it hadn't been mentioned. But you have added some great background and clarity on the details. Hopefully the OP finds it valuable. I did.

Thanks. Sadly I have gotten used to having to explain WHY we ask for what we do and why we check and double check the things we do, and why now this mortgage that someone is getting is so much harder to get then their first one or two or more....

I have owned 7 different homes in my life and even knowing what we need to get a mortgage now since I am on the "inside" I dread getting my next one because of the paper trail I will need to provide and the headstands I will be expected to do....

[RSokie]

I am a homebuilder and all the information above is dead-on. I know it is alot to soak in all at once but your homework will pay dividends in the end.

I hope you get a great home.

[gml1998]

All the above info is pretty much dead on.
But lets not forget the other aspects of home ownership.
I own my home and also own a home repair business.I have seen and repaired
many things over the years.
I'll pass along a few thoughts.
1. I've cursed myself hundreds of times For planting all those trees in my yard 25 years ago as I rake all the leaves,clean the plugged gutters and clean the sewer pipes of roots.
2. You can never have a big enough garage or make sure your property is big enough to add on to or build an additional garage/workshop.
3. Basements are nice till the sump pump fails. Always keep a spare pump of the same type on hand (it's easier to switch out identical pumps).And usually when your pump quits the local stores are out of replacements.
4. Steep roofs are a pain to work on.I've been on some roofs that a mountain goat wouldn't go on.A 4/12-6/12 pitch is ok .
5. Don't go the cheap way on repairs. Do it once with good quality materials.
I had a customer that bought 7.99 a gallon paint and paid me to paint her living room with it.It took 5 coats to get it nice.She ended up paying me double in labor costs to use that paint. Penny wise and dollar poor!!!
6. 2 story homes are usually cheaper per square foot to buy but stairs are a pain in the rear.A master bedroom and laundry on the main floor would be my suggestion in case you can't use the stairs due to injury or old age.

A home is a long term commitment .Think long and hard about what you want in a home . Also ask friends and family what they have liked and disliked about homes they have owned.Use that info to help you .

This should give you a little to think about.

[mike25]

Ok now let me ask this- I believe the answer might be no, but can a mortgage be used in conjunction with building a house to buy the land as well. Is there a way to get a rough estimate of monthly payment on a 120k dollar mortgage? When I rented my last place I was paying 750 a month for 800 square feet..I figure if I can keep payments at or under that range I may be fine.

[NavyDood]

The cost of my 1.25 acres was included in the the build cost.

IMO, estimate your interest rate at least .5% higher than what you hope to get. Then use a mortgage calculator to get the payment. Then take the estimated yearly taxes and yearly insurance costs for your place and divide that by 12 and add that figure to the mortgage payment. That will get you in the ball park.

If you play around with the mortgage calulator and different rates, you will be amazed at the difference in what the payment will be.

[el ess A]

Also, ask about 15 year mortgages. THAT is way preferred over 30 years. Unless you're interested in paying twice the price for it.

We started with a 30 year in 2004 with a 5.5%, had to get PMI because we only put 10% down, because we still kept our other home we paid off and now are renting out. 5 years later, we converted it to a 15 year with 4.35% and dropped PMI because our land/home value actually increased by 38.4% during that time frame. And it's only costing $61 per month extra than what we were paying with the 30 year, and effectively cut off 10 years to the original loan. So I guess you could say it was a 20 year loan. Cost a few hundred to do it, but we're going to save almost $100K doing it by the time the house is paid off, and likely sooner as that and the Camaro are the only credit things we got. 30 years is a LONG time to pay.

[el ess A]

Originally Posted by TangerineDream

Also keep in mind that the gov't is working on ridding us of these types of lenders (ie brokers / correspondant lenders) unless they are above board and backed by a traditional bank, so soon you won't have to worry about this.

To go on a tangent a bit, the thing about the gubment and banks wanting to cut out brokers and alternative lenders makes me a bit ill. I did a research paper on this in college. You'd be surprised, but probably not, at what they're up to. The banks are behind it all, wanting a monopoly on lending but won't, or can't, do it by offering better goods/services. They want it to be legislated in their favor. Getting rid of a broker who basically gets paid by "kickbacks" of sorts, means the banks get a bit less to get the business. So if they can get rid of that middleman...

Also, the banks want to act as if it's in YOUR best interest to get rid of alternative financing, aka payday loans, stuff like that, but it's really not. The need for alternative financing is there because banks won't lend to those who use other means. And this cuts out YOUR freedom of choices as a consumer. Big banks suck. Plain and simple. Whichever you choose, make sure you know the terms of the agreement before you sign. As long as you know the score, you have control.

If you can get something done through your Credit Union or other means, do so. If you can avoid dealing with the bank initially, you'll likely be further ahead. I've used a lending broker both of the last two times and they've got me a better deal than my own friggin' bank would do. Sure, some major bank usually buys your contract later as you have no control over that, but they have to do it at existing terms. So ours ended up with Chase, but when I asked Chase to begin with, their rates sucked. Unless you got someone working on the inside at a bank to help you out in getting the best the bank has to offer, that'd be the last place I would go for a loan.

But it pays to shop around. FICO knows if you're grouping inquiries to mortgage companies. So don't worry too much about the FICO score hit you take if you research loan rates for a couple of weeks, it won't be much of one as they count it as one.

[Superman09]

I just bought a house (in fact I will be closing on it tomorrow) everybody has offered really good advice so far. I put 20% down and with really good credit (high 700s) got 4.1% for 30 years. If you are just wanting number there are great calculators online that you can play with for hours. Figure .25-.5% higher rate that you hope to get that gives you some room to breath. Also when you get to the looking part know pretty much exactly what you want going in but just remember NO house will ever be exactly what you want unless you build it yourself (even then it may not be......just ask my parents). Also remember that there are things to take care of once you buy your house, you are now the landlord something breaks you get to fix it you get to do the up keep now it trust me it is not cheap. Always leave 15-20K in the bank (depending on the age and condition of the house) to do repairs and in case anything bad were to happen to you or your job. Besides that read what everybody else has said and you will be doing pretty good. Good luck

[ROBOSSRS]

Definitely get a mortgage you can afford, put some extra aside for those never ending home expenses. It sure is nice not to have a mortgage payment There will be no more mortgage payments for me. This is my last house before I take a dirt nap.