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Author: Chaconne Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127262  
Subject: First time home buyer Date: 10/22/2001 4:22 PM
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Hi, I want to buy my first home but really feel like a babe in the woods about the whole process and need to get a better handle on what I'm doing. I think I'm like a lot of people who say that now's the time with interest rates being so low and all my friends are telling me to find a house already, first time homebuyers get all kinds of good perks! Well, I don't think I'm financially quite ready, but I rent in a 4-plex and recently got a new neighbor who lives below me and we have paper thin walls and he is very loud and his music (if you can call it that) is about to sever my last nerve and I want my own home so badly!!! I've been wanting to buy for awhile now but since this guy moved in I feel a tremendous pressure to MOVE NOW. My financial situation I know is not the best for home shopping but here it is - I have almost $7,000 in credit card debt (on one card at 3.99% until March 2002, then 9.9%) which is way down from what it used to be. And no down payment. I'm trying to pay down the credit card as fast as I can. My boss (who is trying to be helpful) told me to wait until the winter (he thinks rates might go down again and that winter is good housebuying time) try to get the credit card under $5,000 by then, then ask the credit card company to raise my limit to $15,000 (it's $10,000) now so that I can use $10,000 from the card as a down payment - he says he in no way encourages credit card debt, but with interest rates so low and my card at 9.9%, it could even out. What do you think of that? I'm looking at houses in the $90,000 range, maybe $100,000. And, while I'm asking, what are points? Thank you for any advice.

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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28951 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 4:31 PM
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And, while I'm asking, what are points?

pre-paid interest.

You pay 1% times your principal (1% = 1 point) when you get the loan in order to get a 6.5% interest rate instead of 6.75%

Or you can pay 2% times your principal (2 points) to get a 6.25% rate.

So on a $100k loan 2 points is $2000.

[Numbers made up for interest rates, but that's the principal.]



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Author: cathlee Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28952 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 4:33 PM
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Chaconne, I'm no expert, and I bet you'll hear from more knowledgable folks - BUT there's no reason to use your credit card for a down payment! You can definitely get home equity loans cheaper and the interest can be tax deductible. Now it might not hurt to get your limit raised to make your application look better, I don't know.
And points are money you pay upfront to reduce your interest rate. Probably not a good deal for you as you've got the CC debt.

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Author: sykeMOL Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28953 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 4:38 PM
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My boss (who is trying to be helpful) told me to wait until the winter (he thinks rates might go down again and that winter is good housebuying time) try to get the credit card under $5,000 by then, then ask the credit card company to raise my limit to $15,000 (it's $10,000) now so that I can use $10,000 from the card as a down payment - he says he in no way encourages credit card debt, but with interest rates so low and my card at 9.9%, it could even out. What do you think of that? I'm looking at houses in the $90,000 range, maybe $100,000. And, while I'm asking, what are points? Thank you for any advice.

I think your boss is nuts.

Two major things your mortgage company is going to look at your debt to income ratio and your FICO (credit) score. If you borrow cash from your credit card at a high rate, that simply leaves you less you can borrow for the mortgage company at a low, tax-deductable rate. Actually, it's a little worse because the interest payments on your credit card will be much higher than mortgage interest. BTW, I doubt you can borrow money from your credit card at 9.9%.

Plus, the mortgage company is going to want to know where the down payment came from. They like it to come from you personally. That shows that you have a personal investment in the house, hence a lower risk for forclosure for them. Borrowing the down payment doesn't provide the kind of warm fuzzy feeling the lender wants to have. In other words, it doesn't them any good so it doesn't do you any good.

Next, your FICO score is based in part on your available credit. If your credit card it maxed, your FICO score will actually go DOWN. In other words, you will be able to borrow less money or have to pay a higher rate for it.


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Author: millerpim Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28954 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 5:14 PM
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My boss (who is trying to be helpful) told me to . . . use $10,000 from the card as a down payment

Was your boss stoned when he told you that? Prone to early "happy hours?" Do you work at McDonald's?

If you want a house, go buy a house. There are plenty of first-time homebuyer programs out there where you don't need any money at all; hell, some of them will practically PAY YOU to buy a house. Work like crazy to pay down that credit card debt, but it probably won't stand in your way of buying a house in the meanwhile.

Have you two years on the job? Same occupation? Can you afford to make mortgage payments, including taxes & insurance? Is your credit report relatively clean?

Go find a real estate agent who can steer you toward lending institutions that provide first-time homebuyer money, probably through state-funded organizations. Find out if you can buy a house in any neighborhood or will the lender loan only in certain areas. Then get hopping.

Yes, prices generally do decline a bit in the winter, but remember, so does the inventory. I'd go looking now. Geez. What kind of music is your neighbor blasting anyway? Rap? Call the cops on him the next time he does that.

elizabeth (really cranky today.)

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Author: Chaconne Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28955 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 5:16 PM
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Sometimes I think my boss is nuts, too!!! Thanks for the laugh!!! So, a high FICO score is a good thing? And do you think I need to wait until I have no more credit card debt to buy a house?

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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28956 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 5:23 PM
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So, a high FICO score is a good thing?

Absolutely!

the higher the score the better the risk the lender sees you as, which means the lower the rate they'll think of offering you.


do you think I need to wait until I have no more credit card debt to buy a house?

Need to?
No. Probably not.
Try a lender for pre-approval and find out. :)

Want to?
Your personal preference; not our place to say what you should do.


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Author: Chaconne Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28957 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 5:26 PM
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Thanks, Elizabeth, for the laugh - my boss is a VERY WELL EDUCATED man, we are in the thoroughbred business, and well, most horse people that I know are nuts, but my boss is sometimes REALLY NUTS. And yes, my neighbor plays something akin to RAP, I think, mostly what I hear is the incessant, relentless downbeat. I'd like to get him to see things my way and not call the cops but my nerves are frayed.

Thanks for the pep talk.

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Author: Chaconne Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28958 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 5:31 PM
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I wonder about real estate agents - they're working for the seller, aren't they? How do you find one who will work for you, the buyer? And should I go to lenders that the real estate agent (who maybe is trying to sell the house you're looking at) suggest? Thanks for all your input.

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Author: millerpim Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28959 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 5:37 PM
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I wonder about real estate agents - they're working for the seller, aren't they?

Yes, unless you agree to pay them separately (and few people do), the agent is working primarily for the seller; if it's the agent's listing that you're looking at, the agent represents you in a dual agency. Well, it's a dual agency if it's not that agent's listing, too; just a different type of agency relationship.

Just find one you like and feel comfortable with who will show you the types of houses you can afford to buy and help direct you toward reasonable financing. That's about all you can ask for from an agent. Don't let anyone lock you into an agreement where you MUST buy a house through that agent because really good agents don't need to lock their buyers into anything but an actual purchase contract. And you can tell 'em I said that.

elizabeth

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Author: sykeMOL Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28960 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 5:46 PM
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So, a high FICO score is a good thing?

Yes.

And do you think I need to wait until I have no more credit card debt to buy a house?

Not necessarily. I think the thing to do is talk to a mortgage broker and find out exactly where you sit. That way you can figure out how much house you can buy, have time to start working on your credit if you need to do that, ect. Or maybe everything is hunky-dory right now and you can working on buying your own place right away.

I sympathize with the motivation of getting away from the hellish neighbors. No need to wait longer than you have to before you get out of there.

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Author: alsmidt One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28965 of 127262
Subject: Re: First time home buyer Date: 10/22/2001 9:32 PM
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I wonder about real estate agents - they're working for the seller, aren't they? How do you find one who will work for you, the buyer? And should I go to lenders that the real estate agent (who maybe is trying to sell the house you're looking at) suggest?

Most real estate agents work for the seller but not all of them. There are a few agents out there that are 'buyer' only agents meaning that they do not list any houses themselves and never represent sellers. I bought my house through a local firm like that. I don't know how common they are nationally though. As far as finding a buyer only real estate agent, ask around, call around, jump around, whatever till you find one or are convinced that there isn't one.

I would use an indepent mortgage broker. They often compare rates of several companies and try to get you the best one. It was my experience that I got a better rate this way -- I don't know if this is always true though.

Good luck!
Alec

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Author: Chaconne Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28974 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 8:57 AM
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Good Morning - no party at the neighbor's last nite, I think he's sleeping off the weekend and will fire up those speakers again very soon. Thanks for your replies. I was wondering how do I look for an independent mortgage broker? And is that the type of broker who could steer me in the direction of first time homebuyer info? Or will any mortgage company give me that information?

Thanks.

Chac

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Author: millerpim Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28976 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 9:04 AM
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Dave might have a better answer, but most of the city and county money in my area gets funded through local commercial banks, not through mortgage brokers. Surely you have government agencies in your area that you can call for more information, so I would start there. In my city, only certain banks fund a bunch of first-time homebuyer monies, and not every real estate agent knows which ones do (although they should).

Minneapolis has state, county AND city programs. Maybe your city does, too.

elizabeth

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28986 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 12:12 PM
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Hi Chac,

I was wondering how do I look for an independent mortgage broker?

The best way is to ask friends, community and family who've purchased a home or refinanced recently. Next best way after that is asking your professionals (tax guru, atty, realtors, etc.) Third best way is yellow pages. Stab in the dark way is noticing mortgage company signs while driving around (if your neighborhood is anything like mine or anyone else I talk with, there's a mortgage brokerage in every other stripmall.)

Once you've started to find possibilities, CHECK THEIR REFERENCES! Do your due diligence... last thing you want is to be the guinea pig for someone who has no experience, or worse; is plain lousy!

And is that the type of broker who could steer me in the direction of first time homebuyer info? Or will any mortgage company give me that information?

Anybody "SHOULD" be able to find appropriate programs for you. How willing they are to dig in is the question. This is part of what you will discover in your checking references.

Best luck!
Dave Donhoff
Foolish Mortgage Broker

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Author: meirasmith Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28988 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 1:02 PM
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Chac,

If you decide to go the credit card route, you need to be aware of some things.

1. You need to take the advance of the money now and put it in your bank account. When you apply for a mortgage you will need to show three months of bank statement to proof you "have" the down payment. Do it today!

2. You have to know that you will be paying out 10% in interest while only making 3% in the bank. You have to be OK with that in order to establish the funds. I imagine you could do a no doc loan, but I don't know too much about those.

3. Register now for an FHA home buying course (www.HUD.gov)in your area. If you decide to go the FHA route you need to register for their 8 week REQUIRED class now. The classes only run every few months depending on your area, so you don't want to miss out. Check into it today!!! My class starts tommorow night ($25 for 8 weeks) and I registered over 2 months ago!!! Check today!!!

4. Check out: http://www.nehemiahloan.com/ This is a way to get the seller to "pay" closing and or downpayment. This will bump up your buying price however and not every seller will want or be able to do this.

Another word on FHA...they have income to debt & mortgage ratios of 41% which is very liberal. You also only have to put down 2 1/4% as well. this is the route I am going. I will take it now and then try to refinance later on once I have 20% equity to get rid of the FHA PMI.

eastwestmortgage.com also has a 5% down with a 41% back end ratio.

Good luck!


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Author: Chaconne Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28998 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 3:41 PM
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Meirasmith,

Thanks for the info. A question on FHA - Isn't there a salary limit to qualify for these loans?

Chac

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Author: meirasmith Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28999 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 3:54 PM
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As far as I know there is no salary cap, but there is a regional mortgage cap.

Someone please correct me if I am wrong!

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Author: millerpim Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29000 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 4:06 PM
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I think you are correct. There is a maximum amount of mortgage you can get under FHA. It's been increased so many times, I can't remember what the upper limit is anymore, but that doesn't matter because she's looking at houses under $120K, I think.

The problem with FHA is (the last time I got an FHA loan) the lender rolled some of the costs into the loan so I ended up owing more than the principal balance. It had something to do with the MMI, I believe. I don't do a lot of FHA loans; but they're cost effective for first-time homebuyers. I think this buyer can do a lot better with state/county fund programs since there are so many low-interest and no-down payment programs available outside of FHA.

elizabeth

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Author: Yorkuga Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29001 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 5:16 PM
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I checked last week, and I believe they said the limit for an FHA loan is $176,000.

~Yorkuga

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Author: selkie1 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29004 of 127262
Subject: Re: First time home buyer Date: 10/23/2001 8:40 PM
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As others have said, pull out the phone book, and look up local government offices. Something that says 'Community Development Department' and the like is a good place to call. Many Community Development departments exist primarily to spend down HUD grants, and they're used to getting questions about home purchase and repair programs that are paid for out of those grants. And if they can't directly help you, they usually know who does what sorts of programs in the area.

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Author: Chaconne Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29015 of 127262
Subject: Re: First time home buyer Date: 10/24/2001 9:30 AM
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Thank you all for your replies and suggestions. I have another question. Please pardon my ignorance, but would Countrywide Mortgage be an example of an independent mortgage broker? And do any of you have any knowledge of them? Thanks.

Chac

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Author: millerpim Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29017 of 127262
Subject: Re: First time home buyer Date: 10/24/2001 9:58 AM
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Countrywide Mortgage

Yes. It is a mortgage brokerage. As to its reputation, something is nagging at me about it. I really shouldn't say anything because it could be a different company, but my memory says it was either investigated or reprimanded for something illegal or was in court over something. Well, I'll put it this way, if I were shopping for a loan and had a choice between Countrywide or someone else, I would go elsewhere, but I honestly can't tell you why, so don't put any credence into this unless somebody else can back me up.

elizabeth

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29019 of 127262
Subject: Re: First time home buyer Date: 10/24/2001 12:16 PM
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Hi Chac,

Please pardon my ignorance, but would Countrywide Mortgage be an example of an independent mortgage broker? And do any of you have any knowledge of them?

Got LOTS of knowledge of them...

Countrywide is not a brokerage, but rather a direct lender. They've built a structure of investor/backers that provide the initial funds for the mortgage loans they make. Once the loan is made and locked onto paper, they "sell" the paper to FannieMae or FreddieMac, but they continue to retain the "servicing" of the loans (meaning they continue to collect the monthly payments for a fee to Fannie or Freddie.)

Countrywide has a national wholesale division, and in some states a retail division. The retail division is medium-fair in competitiveness... right along the lines of what you'd get by walking in the door of any garden-variety neighborhood or antional bank.

The wholesale division is currently one of the top 2 or 3 600 pound gorrillas in the wholesale business. The wholesale side is usually significantly better priced in many programs over their competition. For this reason, many brokers direct their clients into Countrywide wholesale loans as they can be more competitive that way and provide rates and fees better than the direct lenders.

So... back to your question; No , CW is not a broker.

Cheers,
Dave Donhoff
Foolish Mortgage Broker

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Author: wongster888 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29023 of 127262
Subject: Re: First time home buyer Date: 10/24/2001 12:30 PM
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hi! i just decided that i'd like to buy a house today and know absolutely nothing. first, is it a good time to buy now? second, should i overbid, bid what they're asking, or even underbid? thinking of buying in monterey, california. thanks!!!

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Author: belgian99 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29062 of 127262
Subject: Re: First time home buyer Date: 10/24/2001 10:59 PM
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There absolutely is not Salary for a standar FHA Loan.

However, many state and country programs piggyback off of FHA loans and may have income limits to use their program, but this is not a HUD rule.

An example would be a county that provide downpayment assistance to people making less than 80% of the median income. The loan itself may be FHA but in order to get the grant you have to fit the income requirements.

FHA mortgage limits are set by each county in the US. Not the same everywhere.

To view or search for the imcome limit in your county go to:
https://entp.hud.gov/idapp/html/hicostlook.cfm

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