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Since there appear to be a few people here who deal with underwriting, I'm hoping you can asnwer some questions. I've done a fair amount of research already, as you'll see.

My wife and I are planning on buying a home and moving in before April 30 of next year. We're first time homebuyers looking for a single family detached home as a primary residence. We will likely get either a 30 year fixed or a 5/1 ARM (I'm leaning towards the ARM now), with a 5% down payment. We've done some preliminary work, and will start doing serious looking after mid-September (after "busy season" at work). In the meantime I've been creating a fairly elaborate Excel workbook to determine what we can afford and how much things will cost. I realize that all of these factors are interrelated to some extent, and everything is a "range", but any answers would be appreciated. Also, be aware that I'm basically plugging factors into that excel workbook (If X, then Y=.3, and so on), so that's the way I'm thinking.. Here goes.

A) "Expense ratios". In my spreadsheet, I've been using 28/36 front end/back end ratios. With the realization that lenders all have different requirements:

1) Assuming "good" credit (more on this later), is this about the norm for lenders, or do most lenders now go higher (or lower) in the ratios they use for how much of a loan one could "qualify" for?
2) Do these ratios change depending on how much of a down payment one makes? If so, about what is the range for different amounts down?
3) Are these ratios different for a 5/1 ARM than for a 30 year fixed mortgage.
4) For "back end" ratio, I'm assuming that any debts with less than one year's worth of payments (like a car loan) don't get included. Also, I'm assuming 5% of outstanding CC balances get factored in as "monthly payment" on the back end. Are these assumptions generally correct, or should I use slightly different assumptions.
5) (Less important) In general, do these ratios go down as one has "less than perfect" credit.

B) PMI. I've already downloaded rate cards for 3 PMI companies (Radian, PMI Group, and MGIC, as well as getting limited info from GM's website). However, some quick questions:

PMI rates for 15+% down generally assume 12% coverage, 10%+ down assume 25% coverage, 5%+ down assume 30% coverage, and less than 5% down appear to assume 35% coverage. What is the rational behind these amounts (always reducing exposure to X%?) What factors can change the amounts of coverage a lender will take (aside from credit issues, as I've already downloaded the "A minus" rate cards for these PMI companies). Can one get a slight "discount" on PMI (lender taking lower coverage and hence a lower rate) if one has "exceptional" credit, and what would generally constitute "exceptional" credit? Also, it appears from reading the rate cards that ARM's where the first 5+ years are at a fixed rate get charged PMI as if they were fixed rate mortgages. Am I reading that right?

PMI appears to be renewed annually on the outstanding loan balance, until cancelled. Is there a generally a minimum time one must have PMI (at least 3 years ownership before one can reappraise, for example)?

Also, note that I am solely looking at PMI charged monthly, rather than the "super single" or other like programs that are out there.

Last question: I notice that many PMI lenders limit coverage to LTV's of 100%, and some go to 103%. Do any go up to 107%, and do they charge higher rates for over 103.1-107% LTV's? (I figure somebody must go up to 107%, as some lenders offer 30 year fixed mortgages up to 107% LTV's).

Please note that we most likely will put 5% down, but I am just trying to get as much information as possible to factor into our decisions.

C) In lieu of PMI, one could get 80-10-10 or 80-15-5 (or, I guess, 80-5-15).

Assuming the "first" mortgage is a 30 year fixed, is the second mortgage usually a 15 year fixed, or is it usually for a different term. What is the general rate differential between the first and the second (if the first is a 30 year fixed at 6.5%, would the second be a 15 year fixed at 8.5%? 9.5%). I realize that rates will vary based on a number of factors and between lenders, but I'm looking for a general "rule of thumb" here. What other issues (other than tax deductibility of interest on the second mortgage) should I be aware of here?

D) "Good" credit.

This is probably nothing we need to worry about, as both my wife and I have FICO scores in the low to mid 700's, and no late payments in the last five plus years (all of our credit reports show up clean in the recorded history). Also, the PMI rate cards give some good information on what they consider to be good/not-so-good credit. But just to be sure: in general what is the FICO score cut-off (assuming no other extraordinary items) for "good" credit (680? 700?). How much could one expect interest rates to go up above the regular rate for below average FICO scores? (I've done some checking on E-Loan and IndyMac, and it looks like lower FICO scores can generally jack rates up real fast) Do many lenders offer a discount for "exceptional" credit, and if so, what would qualify as "exceptional"?

E) Down payment amounts

We'll be putting down under 20%, probably only about 5%. With that in mind

Do interest rates generally go up from the "regular" amount as down payments go below 20%? What about below 5%? What would be the rate differential on a 30 year fixed with 5% down, as opposed to one with 3% down, or 0% down, or even one with an LTV over 100%? (again, I've checked Eloan and IndyMac for some basic info on the topic, but anything more is appreciated).

What are the credit restrictions on loans with less than 5% down. Should one generally require good credit (700+ FICO's)? What about front-end/back end ratios, are they generally more stringent for loans with over 95% LTV? If so, what are the general ratios one should use.

Also, it appears that only 30 year fixed mortgages are available for 95%+ LTV's. Is this correct?

F) Closing costs

A good friend of mine is a real estate attorney, so I've obtained some detailed info from her on the topic. However:

What is the general "rule of thumb" for closing costs to be expected. Also, I live in Illinois. Does anyone know how much property tax (X many months) or other items are generally required to be prepaid at closing?

My spreadsheet currently has line items for down payment, any points (we're going for zero points), prepaid interest, taxes and homeowners insurance (how much homeowner's insurance does one have to prepay? One year's worth of premiums? Less? How much is homeowner's insurance annually as a % of house value? I'm using 0.3% as a rule of thumb, is this pretty good?) and then Processing fee, tax service, flood certification, Appraisal fee, credit report fee, Escrow fee, title insurance, recording fees, signing/settlement fee, courier/mail fee, wire transfer fee, Doc prep fee, and attorney's fees. I've been told that my closing cost estimates are too high and have obtained some info to adjust them down (but I prefer to make conservative estimates).

Last, I have a line for "liquid reserves", that is two months worth of PITI.

G) Property taxes.

I've visited the cook county assessors' website and a few others. Here close to Chicago it appears a good rule of thumb is property taxes equal between 1.5% to 2% of FMV of the property annually. Can anyone let me know if that looks about right?

Last, one thing I haven't asked about are tax issues. My job is "tax guy", albeit in a slightly different area of tax law, so that's an area I can handle on my own.

Thanks in advance to anyone who can supply answers to some or all of these questions. I realize that this is a little bit of overkill and real-life is not clean cut and predictable, but the more information I have, the better I can make general plans.

-synchronicity

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