Buying a House - Where to start?

[bbrontosaurus]

This is a great thread! A couple of quick questions that I have:

1) How much is homeowners insurance typically?
2) Does your credit score lower each time you run a credit report?

 

[dullard]

Originally posted by: bbrontosaurus
This is a great thread! A couple of quick questions that I have:

1) How much is homeowners insurance typically?
2) Does your credit score lower each time you run a credit report?

1) My house: $175,000 homeowners insurance was $600 a year ($50 a month). I saw cheaper insurance policies, but this one has low deductibles and covers a lot of interior items that some of the cheaper policies exclude. The price will vary significantly depending on what you have covered, deductables, and the house value.

2) The credit score shouldn't be harmed by YOU checking it. If you have banks (or equivalent) checking, it is best to get it done in a short time frame (I've heard a month quite frequently as the time frame) - otherwise it may harm your credit score.

 

[Kelemvor]

Originally posted by: Jzero

Originally posted by: Vic
The Listing agent (what you called the "Sellers" agent) works exclusively for the seller.
The Selling agent (what you erroneously called the "Buyers" agent) works for the buyer only insofar as finding a home that meets the buyers' wants and qualifications. Once that home is found, the selling agent then works for the sellers in making sure that the buyers work with the process and submit an offer that the seller is likely to accept, etc.
Say "Buyers" and "Sellers" agents in a government underwriter's office and you're likely to be kicked out permanently. Those are marketing names, not approved legal terms.

Maybe it's different in your state, but semantics aside, as a buyer in PA, my agent is under contract to seek out not only a home that suits our needs, but also to be our advocate in getting the lowest price possible. My agent has told us flat out more than once, "I don't care what the asking price is, that house is not worth more than $X, and if they turn down such an offer because it's too low, they are doing you a favor."
She does not work for the seller at all, and often times she is actually fighting the seller who is doing things under the table that are less than ethical.

Naturally such a contract is hard to enforce, so you have to find an agent that you trust to uphold the ideals in the contract, but nonetheless, here in PA the "buyer's agent" regardless of the correct terminology, has a contractual duty to NOT work for the seller's benefit.

Exactly.

It's all about finding a GOOD agent. Not one that only cares about his commission. That's why you should always get referrals from friends when looking for a Realtor. If the one you use only cares about getting his paycheck, then you chose the wrong one and deserve what you get.

Do a little research instead of just picking somethign from the phone book or a mass mailing. BUYERS AGENTS (yes that's what they are called) do comparrisions to determine if a house is priced fairly or not, they inspect the house with you to look for anything that might mean it deserves a lower price, and will help you word the offer to possibly get some things thrown in or state why the house isn't worth the asking price.

Don't generalize that all Realtors just care about getting paid because that is far from the truth.

 

[DT4K]

Cliff's Notes if you have a short attention span: You can buy a house with almost no money saved.

First piece of advice: Listen to what Vic says. He is in the business, knows what he is talking about, and has been by far the most helpful member of AT over the past few years when it comes to questions on financing a house.

As far as how much you NEED to have saved to buy a house, the answer is very little. Now whether or not you want to make a bigger downpayment and start with more equity is up to you.

A year after getting my first real job out of college, I still didn't think there was any way I would be able to buy a house. From years of being a poor college student supporting a wife and kids, I had screwed my credit up pretty badly. I also didn't have ANY money saved up at all. I also had only been a permanent employee at my job for about 6 months(I was a contract employee through a temp agency prior to that). But my wife and I had gone to some open houses and met a realtor who told us that we might be surprised at how many flexible options there are. She recommended a loan officer at the bank that we already used for our checking and savings accounts. We were still pessimistic, but figured it wouldn't hurt to talk to her. We were surprised to find out that we could buy.

What we ended up doing is getting an FHA loan. By taking a slightly higher interest rate(6.5%) we actually got a 3% rebate back to go towards closing costs. FHA typically requires a 3% downpayment, but we used a gifting program (Nehemia) to avoid having to put that money down. FHA does not allow the downpayment to be rolled into the loan, but they do allow you to use money that is gifted to you. The way it works is that the program gives you the money for the downpayment, the seller agrees to "donate" slightly more than that amount back to the program, then you basically add that amount to the offer you would have made. Essentially it is a completely legal and accepted way of getting around the FHA's requirement of a 3% downpayment.

The other advantage of an FHA loan is that they are more lenient when it comes to credit issues. They place much more emphasis on the last 2 years of your credit history than they do on the rest of it. My FICO score at the time we bought the house was around 575. But they could see that I had made a great effort to improve my credit. I basically had kept my credit completely spotless for the past 18 months. We were told that we were approved because it was clear to them that we had made a big improvement and were now much more financially stable than we had been at the time we had the credit problems.

The bottom line is that we bought a brand new 3 bdrm house in a nice neighborhood with a mortgage of 146k and a grand total of $800 out of our pocket. Our payment including insurance, taxes, and PMI is around $1180. I dont' remember the amount, but I thought our PMI was substantially less expensive than what I've seen other people paying. And yes Vic, my mortgage statement actually says "PMI", not just MI. I thought PMI stood for Private Mortgage Insurance.

We've only been in our house now for about a year and a half and it would quickly and easily sell for at least 200k now. So I am certainly glad I didn't wait until I had more money saved up simply to avoid PMI. If I had waited, I would have missed out on a roughly 40k profit (after selling commissions) in a year and a half. Not to mention the amount of money I've saved in taxes now that I'm paying mortgage interest instead of rent. Although with the likelihood of interest rates going up, it's probably unlikely that you will see such dramatic increases in property values. Of course the likelihood of interest rates going up is probably a good reason to buy now rather than waiting.

 

[Vic]

PMI = Private Mortgage Insurance Group, Inc. Text

That's who your MIP (mortgage insurance premium) goes to. If it says PMI on your monthly statement, it's because that's who you're paying. PMI Group is like the Intel of mortgage insurance, the largest by far.

In the mortgage insurance world, there is also:

Radian

Republic Mortgage Insurance Company, RMIC

and Mortgage Guaranty Insurance Corporation, MGIC, aka "Magic".


For first-time homebuyers looking for a small-down loan on smaller homes (FHA has a loan size limit that varies by county nationwide, but is typical below median value), FHA is the way to go. Especially if there are some minor credit issues. Also FHA only requires a 2 year employment history, not 2 years on the same job.
Also, the mortgage insurance premium on FHA loans is a reasonable flat rate, unlike conventional programs where the MI rate is based on underwriting criteria.

 

[DT4K]

Thanks for clearing those things up Vic.

It might actually say MIP rather than PMI on my statement.

FHA raised their loan limits recently.
For instance, in my area the limit was 150k when we bought our house 1.5 years ago. The limit in my county is now 183k. Which is probably below median, but can still buy you a decent house in a decent neighborhood.

In some high cost areas, the FHA limits go up to 290k.

 

[Vic]

FHA Loan Limits, just select your state and click "Send" and you will get a table of every county and metro area in your state.

The current FHA loan limit in the Portland-Vancouver metro area (Clackamas, Clark, Columbia, Multnomah, Washington, and Yamhil counties) is $202,350.

edit: doh, link fixed

 

[Svnla]

Very good thread. I have a few questions for the experts:

My credit is not so great (no bankrupt or bad stuffs). Can I still get a decent loan rate? If so, how much would it be?

I am not sure I want to live in this area for long. Shall I buy or continue to rent? I have a good deal on the rent at the moment (about 12% of my take home pay).

I am single, no kid, just want a bigger house in a better neighborhood. The houses I am looking at are about 130 to 160K (houses are much cheaper down here). I have no problem with 20% down (or more if need be for a better interest rate and no extra fees such as private mortage insurance).

Edit: One more thing. For example: I want to buy a house for about 150K. I have 30K for 20% down and I want 15 years mortage. How much will my monthly mortage?

Thanks guys/gals.

 

[MojoJojo]

Originally posted by: Vic
PMI = Private Mortgage Insurance Group, Inc. Text

That's who your MIP (mortgage insurance premium) goes to. If it says PMI on your monthly statement, it's because that's who you're paying. PMI Group is like the Intel of mortgage insurance, the largest by far.

In the mortgage insurance world, there is also:

Radian

Republic Mortgage Insurance Company, RMIC

and Mortgage Guaranty Insurance Corporation, MGIC, aka "Magic".


For first-time homebuyers looking for a small-down loan on smaller homes (FHA has a loan size limit that varies by county nationwide, but is typical below median value), FHA is the way to go. Especially if there are some minor credit issues. Also FHA only requires a 2 year employment history, not 2 years on the same job.
Also, the mortgage insurance premium on FHA loans is a reasonable flat rate, unlike conventional programs where the MI rate is based on underwriting criteria.

Although that is 99.9% correct PMI is just an abbreviation for Private Mortgage Insurance.
Private Mortgage Insurance Group, Inc. Text is nothing more than a company that capitolized on the initials to make people associate Private Mortgage Insurance with their company.

My wife was a contract Underwriter for PMI up until last week and up until a coulpe of months ago I was an Account Executive for a wholesale lender for anyone who wonders how I know.

Really good info in this thread.

All I can really add is to check out American Home Shield or a similar Home Warranty Company.
The warranty will pay for itself the first or second time you use it.
If you're buying a used house you WILL have unexpected repairs pop up in the first few months.
Trust me. i just bought a new (used) house last year and the $45 deductable is nothing compared to the money I would have paid had it been out of pocket.

Good luck!
The Fed is meeting next week so expect the Rates to do funny things in the immediate future.

 

[MojoJojo]

Originally posted by: Svnla
Very good thread. I have a few questions for the experts:

My credit is not so great (no bankrupt or bad stuffs). Can I still get a decent loan rate? If so, how much would it be?

That information is a bit vague. It's all about numbers in this game. Do you know your FICO score?

I am not sure I want to live in this area for long. Shall I buy or continue to rent? I have a good deal on the rent at the moment (about 12% of my take home pay).

I am single, no kid, just want a bigger house in a better neighborhood. The houses I am looking at are about 130 to 160K (houses are much cheaper down here). I have no problem with 20% down (or more if need be for a better interest rate and no extra fees such as private mortage insurance).

Edit: One more thing. For example: I want to buy a house for about 150K. I have 30K for 20% down and I want 15 years mortage. How much will my monthly mortage?

Check out: Realtor.com. Great site!

This should take you to a payment calculator

Thanks guys/gals.

Hope that helps a little.

 

[bbrontosaurus]

Another question for the home gurus:

I'm in the option period now (have 10 days before I can back out)=)

1) What do I need to look for in a home inspector? Any certifications/qualifications that a home inspector must possess?
2) What other things do I need to consider?

Thanks!

 

[Kelemvor]

CHeck with your local Realtors Association. Most of the people that work with realtors (Inspectors, Mortgages people, etc) join the Realtors association as well to get more publicity and business. Check with them and see if they have a list of members or something you can get because you are looking for a reputable inspector.

Or if you are using a Realtor, he/she should be able to refer you to one. I don't nkow if there are certifications or not but you should definitely ask how long they've been on the job because if you get someone with 1 years experience vs someone with 20 years experience.... You'd obviously be better off with the 20.

 

[bbrontosaurus]

Another question:

What is mortgage servicing? Is it bad to have your mortgage loan assigned, sold, or transfered to someone else? What are the pros/cons?

Thanks!

 

[Vic]

Originally posted by: bbrontosaurus
Another question:

What is mortgage servicing? Is it bad to have your mortgage loan assigned, sold, or transfered to someone else? What are the pros/cons?

Thanks!

Mortgage servicing is the collection and administration of your mortgage account. The mortgage servicer is the company that sends out your payment coupons, who you make your monthly payments to, the customer service department that you call with questions, etc. Just because you make your payments to a particular mortgage servicer does not mean that they actually lent you the money, or hold your mortgage note.

Absolutely not. A mortgage is a binding contract securitized by real property, and protected by a gazillion government laws and regulations. It cannot be altered except by the consent of both mortgagor (borrower) and mortgagee (lender).

Pros would be complex to describe. The nationwide system of mortgage lending that has developed in the US in the last 20 or so years has made interest rates roughly uniform across the country, where once rates could be dramatically different even among banks in the same town. The same thing for approval qualifications. And all this uniformity and pooling of mortgage risks has increased the availability of mortgage funds available for borrowing to all-time highs.

Cons are that you might end up with a servicer you've never heard of across the country where a human being never picks up a phone. Pretty unlikely though. The largest servicers in the country are Wells Fargo, Washington Mutual, Chase Manhattan, Countrywide, Bank of America, Principal, and Citi. All more or less good companies.

 

[WannaFly]

I recently bought the books "home buying for dummies" and "mortgages for dummies" the first was great, lots of information in it if you dont know anything about the process (like me), havent gotten to the second yet - I'd recommend getting them.

 

[bbrontosaurus]

Ok, another question!! (hopefully the last one, I close pretty soon! )

What the hell is Title Insurance and who pays for it? I'm in TX, does title insurance vary greatly from different companies? (ie, can I shop around for cheaper title insurance?)

Thanks!

 

[Haps]

I'm curious about closing costs everyone mentions. What are closing costs. What is included.

 

[woowoo]

Title insurance protects you and the bank.
It insures the title from false claims
If a bum walks up and says....
Hey thats MY house.
Get the picture?