Want Advice on Home Mortgage

[Still_Small_Voice]

I am looking at getting a $107,000 thirty year mortgage for a first time buyer. Been reading a lot of material since $100,000 is a lot of money and I do not want to get ripped off.

I am expecting to need to pay around $12,000 with out of pocket costs for this if I cannot get any grants. That is closing costs 5 percent down payment and all the fees included. Is that a reasonable price range in fees and down payment for the mortgage cost I am looking at?

[Guest]

I am looking at getting a $107,000 thirty year mortgage for a first time buyer. Been reading a lot of material since $100,000 is a lot of money and I do not want to get ripped off.

I am expecting to need to pay around $12,000 with out of pocket costs for this if I cannot get any grants. That is closing costs 5 percent down payment and all the fees included. Is that a reasonable price range in fees and down payment for the mortgage cost I am looking at?

What State are you in?

$12,000 out of pocket for a 5% downpayment is a tad bit high. Closing costs (that's including all fees and taxes) is usually around the 1% range, maybe a little higher in high-tax States.

So, for a $107,000 mortgage, your closing costs usually falls around $1,000. 5% downpayment is around $5,350... So yeah, $12,000 is a little high. If you have that much money, go for a higher downpayment... like 10% even. Of course, this doesn't include things like appraisals, inspection fees, attorney, if you want to shoulder those fees. Those can be negotiable on the sales table.

Edited February 1, 2012 by anatess

[Still_Small_Voice]

I live in Utah. I know closing costs average around $2,500 in this state. But I do not know what other fees to expect. Application fees are scaring me. Around $250 just for putting an application in from what I have read.

Edit: My credit score was over 800 last time I had it checked in March of 2011.

Edited February 1, 2012 by Still_Small_Voice

[RMGuy]

I'm with Anatess,

That seems a bit high.

-RM

[Guest]

I live in Utah. I know closing costs average around $2,500 in this state. But I do not know what other fees to expect. Application fees are scaring me. Around $250 just for putting an application in from what I have read.

Edit: My credit score was over 800 last time I had it checked in March of 2011.

Closing costs are dependent on the purchase price of the home. An average of $2,500 does not make sense unless all the homes in Utah are within a small lee-way of price ranges. A $500,000 home would have a much higher closing cost than a $100,000 home - you can't really "average them out" by dollars. You can average them out by percentage of purchase price though.

Fees are pretty standard within a State. Here is a sample of Utah's fees:

Utah Closing Costs | UT

Note that the amount of each item changes depending on the amount of the loan - e.g. Origination fee is a percentage of the mortgage, Title insurance is the same, etc.

So, in the attached example (sample of closing fees in 2008), the mortgage is $200,000. For your case, expect it to be lesser than that.

Any other costs of purchasing a house not in the sample can be house inspection, any repairs needed, etc. These can be negotiated with the seller. It's a buyer's market these days - you have the bargaining chip over the seller.

In any case, you can get a good faith estimate from your mortgage broker/lender on what you can expect to pay in closing costs before you sign the dotted line to buy a house. You can even get this done before you find a house to buy - just have them base it on what you are pre-approved for.

Edited February 1, 2012 by anatess

[Blocky]

My sister recently bought a house in Washington. With down payment, closing costs, inspections, she paid about 12,000 out of pocket to get everything rolling on a house that cost $203,000. I'd say that $7000 does sounds like a lot for closing costs other than the down. I've been looking at houses in that price range in California and it looks like it would be more around 3 thousand for closing costs other than the down.

[lizzy16]

I am looking at getting a $107,000 thirty year mortgage for a first time buyer. Been reading a lot of material since $100,000 is a lot of money and I do not want to get ripped off.

I am expecting to need to pay around $12,000 with out of pocket costs for this if I cannot get any grants. That is closing costs 5 percent down payment and all the fees included. Is that a reasonable price range in fees and down payment for the mortgage cost I am looking at?

I studied ALL about this in math last semester. I have an entire excel sheet for home morgages, how much you have to pay based on APR ect. I hope you realize you'll be paying like DOUBLE in interest alone.

If you tell me the APR I'll put it into my excel sheet and figure it all out for you:) Or, send you a file of it if you want. Excel is AMAZING.

[Guest]

I studied ALL about this in math last semester. I have an entire excel sheet for home morgages, how much you have to pay based on APR ect. I hope you realize you'll be paying like DOUBLE in interest alone.

If you tell me the APR I'll put it into my excel sheet and figure it all out for you:) Or, send you a file of it if you want. Excel is AMAZING.

Lizzy, the Excel thing you're talking about is only the mortgage ammortization. This does not have anything to do with Closing Costs - which is the amount of money you shell out to legally transfer ownership of the Title of the house - Title research (to make sure the title is legally transferrable), state filing fees, property taxes, etc.

[Daybreak79]

Still Small Voice: Your numbers seem off to me as well. Have you met with a mortage loan officer at the bank / credit union you use for your bancking needs? If you haven't I would start there and see what they can tell you.

[lizzy16]

well. Theres a closing cost thing in it...i think.

But seriously. Excel is from God.

[Blocky]

I remember when I learned Excel. I was like 'IT MAKES SO MUCH SENSE!!!' Then I went to work at a hotel that kept track of all rooms and rates by hand. As in, on paper... it was so frustrating! I too love Excel.

[Guest]

I remember when I learned Excel. I was like 'IT MAKES SO MUCH SENSE!!!' Then I went to work at a hotel that kept track of all rooms and rates by hand. As in, on paper... it was so frustrating! I too love Excel.

... and then I became a programmer and I keep on getting requests to put a million rows of data in Excel... it is so frustrating. But, yes, I still love Excel. :)

[pam]

Let's keep this topic on advice for home mortgage and not change it to an excel thread.

[HiJolly]

Steve Wozniak!!

HiJolly

[Still_Small_Voice]

I talked with one loan officer today. He said I was pre-approved for $105,000 with my income. With taxes and everything the payment should be very close to $700 per month. He also said on whatever house I buy I should look into having the seller pay closing costs. A lot of times in this economy the seller will pay a portion or all of them. I would just need to come up with close to $5,500.

I have about $5,500 in a 401K fund that I have. Would I incur a tax penalty on it if I took it out and did not repay? I also have about another $2,000 in a Roth Individual Retirement Arrangement.

Also how much do these bills usually run monthly?

Water/Sewer Bill

Garbage

Natural gas

Electric (I would like to get a solar panel to help with this)

Homeowners insurance

Anything else?

[Guest]

I talked with one loan officer today. He said I was pre-approved for $105,000 with my income. With taxes and everything the payment should be very close to $700 per month. He also said on whatever house I buy I should look into having the seller pay closing costs. A lot of times in this economy the seller will pay a portion or all of them. I would just need to come up with close to $5,500.

I have about $5,500 in a 401K fund that I have. Would I incur a tax penalty on it if I took it out and did not repay? I also have about another $2,000 in a Roth Individual Retirement Arrangement.

Also how much do these bills usually run monthly?

Water/Sewer Bill

Garbage

Natural gas

Electric (I would like to get a solar panel to help with this)

Homeowners insurance

Anything else?

Yes, the seller can cover some of the closing costs, but he can't legally cover all. There are items that you have to pay for by law.

It is not a good idea to take out 401K money to put down on a house unless you are in a "hardship" situation. Taking out 401K before retirement age incurs stiff penalties. There is a provision under a new law (TARP) where you can withdraw 401K penalty-free to purchase a primary residence but you have to be in one of those "hardship" situation (old house foreclosed on, having very small income, etc.). In any case, it is not wise to sacrifice your retirement plan for a downpayment. This only signifies that you are not ready to buy a house and should wait until you can save up more downpayment money.

Also, not all 401K plans have a provision where you can take a loan against it. But, in any case, you can't take out a loan to put as a downpayment on a house or to pay for closing costs - no banks will give you a mortgage if you have to loan out your closing money.

Roths are different. You can withdraw your direct contribution (the money you put into it, not the interest it gained) free and clear. But, the same as 401K, it is not wise to sacrifice your retirement plan for a downpayment on a house.

The rule of thumb is - if you don't have money on hand to put a downpayment on a house and cover closing costs, then you can't afford the house. I am even going to go farther and state that if you can't make it so that you have 20% equity in your house the day you move in, then you can't afford the house - buy a cheaper one, or buy one with built-in equity, or save up more money before buying a house.

House bills such as electricity, water, etc. is not the same everywhere. It is very much dependent on the rates in your area, the size of the house, and your consumption habits. The best person to ask about those is the seller. You can ask him to show you his electric/water/gas/garbage/etc. bill from different seasons of the year. Homeowners insurance in Utah averages less than $500/year.

Edited February 3, 2012 by anatess

[Still_Small_Voice]

Thanks for the advice on the utilities Anatess. I am probably going to empty out my Roth retirement fund but not the 401K fund because of tax penalties.

I have other assets I could sell but I would prefer to empty my official retirement account because of my belief of safety in my other assets against inflation. I have over $16,000 in assets presently that are fairly liquid. But I consider those my retirement funds as well even though they aren't officially labeled such.

I do not want to wait a few years to get into a house. I feel like I should get in to a house while the interest rates are low because they won't be in 30 months very likely. Rent will probably go up with inflation in the future as well. I will probably only put down a 5 percent down payment.

I haven't even found a house I want yet. It is not something I going to jump into. I want a decent neighborhood, a house with no toxins in it and under $105,000 with many other factors as well.

I want all the realities on the table. It is going to be a lot of planning then fasting and prayer on that plan. I would rather not buy than make a decision I would regret.

[Blocky]

401k early withdraw is allowed for a down payment. You will be taxed on it but you won't pay the early withdraw penelty of I think 10%. I believe it's taxed as regular income, so what ever braket you're in. Loaning against it isn't usually advisable for a small down payment because the lender treats it as new debt and it can change how much you're qualified for.

I'm nervous about seeing what we qualify for. Our rent is almost 900 right now and we meet that no problem, but Im not sure if we'd qualify for much more than 100k. How much would you say a yearly salary needs to be to qualify for that?

[BenRaines]

Personally I think that a person should do direct to a lender. Mortagage brokers, I bet there are a few here, make a fee for collecting your financial information and sharing it with a bunch of lenders. If you have an 800 score you should be able to go to just about any lender and get a home loan as long as value of purchase, appraisal, is inline with hope price.

Not wanting to put mortgage brokers out of business but they are intermediaries to the lender.

During the boom time there were many Mortgage Brokers who were part-time workers.

Lots of money to be made on uninformed borrowers.

My two cents.

Ben Raines

[BenRaines]

Do everything you can first to avoid using retirement funds, 401K, Roth IRA. The growth on these accounts is sheltered. On Roth no tax if held long enough.

Ben Raines

[Guest]

401k early withdraw is allowed for a down payment. You will be taxed on it but you won't pay the early withdraw penelty of I think 10%. I believe it's taxed as regular income, so what ever braket you're in. Loaning against it isn't usually advisable for a small down payment because the lender treats it as new debt and it can change how much you're qualified for.

I'm nervous about seeing what we qualify for. Our rent is almost 900 right now and we meet that no problem, but Im not sure if we'd qualify for much more than 100k. How much would you say a yearly salary needs to be to qualify for that?

Blocky, not all 401K Plans can be withdrawn for down payment on a house. Some can, some can't - and it all depends on how the 401K is set up.

And another piece of advice from somebody who has owned 3 houses in 20 years - just because a bank tells you that you qualify for xx amount of house, that doesn't necessarily mean that you can afford that house.

To qualify for a house you need a debt-to-income ratio of no more than 40%. That is - your debts (credit cards, cars loans, personal loans, etc.) monthly payment cannot be more than 40% of your monthly net income. And then, your monthly mortgage related expense (mortgage, property taxes, home insurance) cannot be more than 28% of your monthly net income (this is where Lizzy's Excel thingee comes into play). That leaves you with 32% of your income to buy groceries, pay utilities, pay for healthcare, raise kids, pay tithing, save money, etc. So yeah, I don't let that guide me - because, my expenses, tithing, and savings is way more than 32%... but then, my debt-to-income ratio is way less than 40%. So, in the end, only you can decide how much house you can afford. All you really need to do is take a hard look at your financial standing and decide how much money you can put into mortgage related expenses then put that into an amortization table to determine how much house you can afford. A $100,000 loan is about $632 per month on a 6.5% 30-year fixed rate mortgage. Add property taxes and insurance to that and that would probably come up close to $800 per month. At the end of 30 years, you would have paid $100,000 to the principal and $127,000 worth of interest... that means you have shelled out $227,000 to pay for that house, not counting taxes and insurance.

Edited February 3, 2012 by anatess

[dahlia]

I think you have more research to do before your purchase. Utilities, taxes, etc are all different for different parts of the country, shoot, for different parts of the state. You shouldn't be asking us about them. If you have a house in mind, you can call the utility and they will usually give you the costs for that location - though obviously they would be based on the former occupants' usage. I've done this around the country, on houses and apartments, with no problem.

If you aren't working with a credit union, you should do so. You might save yourself some money, and you will probably get better service with a bit more hand holding for the first time buyer.