First time homebuyer... how much to plan for in out-of-pocket costs needing to be paid upfront?

[glenn1]

Going to go out there and start looking for a house. Never been in the buyer position before, so need to get a handle on all the costs which will be involved. Down payment shouldn't be a problem but it would make a big difference in whether I'd wind up eating only mac-n-cheese for the first sixth months after moving in should I underestimate....

 

[farmercal]

Unless you buy a piece of crap place that needs a lot of work, down payment should be all you need. You do have furniture don't you? Make sure you can afford the mortgage payment and don't get a ARM unless you plan on moving within 5 years.

 

[y2kc]

10% (at least).

 

[Squisher]

Originally posted by: y2kc
10% (at least).

Up front out of pocket costs?

We're looking in the $350K area, so I gotta come up with $35K for what?

 

[EagleKeeper]

A realestate agent should be able to give you a good idea.

Figure a years worth of insurance + property taxes and $500-$1K fees

 

[theGlove]

Originally posted by: Squisher

Originally posted by: y2kc
10% (at least).

Up front out of pocket costs?

We're looking in the $350K area, so I gotta come up with $35K for what?

closing costs usually around $2k-5k depending on type of loan you get.

 

[EagleKeeper]

You can always alternate between mac&cheeese and tuna.

 

[imported_Pablo]

I walked out of my closing with $710 in my pocket. Seller paid all closing costs, and I paid for inspection but got reimbursed... And somehow I still got more than I had in...

I think the closing costs for my house (109k) were about $3500.

 

[Squisher]

For my refi's I just rolled closing costs into the mortgage.

Can't you normally do this?

 

[dullard]

You can often get most of the closing costs just taked on to your mortgage. Of course that means you'll be paying interest on these things for as long as you have a mortage. It will likely be a couple thousand dollars - but there are many variables.

You don't need any money up front to buy a house. But you can certainly reduce your interest rates if you do have 20% of the loan amount (home value + whatever closing costs you include).

 

[wedi42]

rule of thumb is closing costs = 3%
you can finance 100% of the house price if you want.
you can even roll the closing costs into the purchase price.
say house is $100,000. offer them $103,000 and say they have to pay closing costs.

talk to your mortgage broker about doing a 80% first mortgage and the rest with a Home Equity line of credit.
this will save you a bunch of money by not paying mortgage insurance.

 

[everman]

Make sure you do research on the different types of loans. Do not get suckered into something that sounds good and you end up loosing the house in 5 years.

As for the house itself, try to have the sellers give you a 1 year home warrenty contract and make sure you understand what items it covers. Good luck!

 

[DT4K]

We ended up paying less than a thousand dollars out of pocket for closing costs and down payment.
We took an FHA loan at a slightly higher rate to get a rebate back that covered most of the closing costs.

 

[b0mbrman]

Originally posted by: Squisher
For my refi's I just rolled closing costs into the mortgage.

Can't you normally do this?

If your place appraises for higher than the price you and the seller agree on, then yes you can.

Sometimes, the two parties do what's called a "6% solution" where they report a selling price 6% higher than what you agreed upon which helps you cover your closing costs...

Since 6% is a pretty common term, I would guess about 6%

Of course, you can get the seller to pay some of your closing costs...

 

[daveshel]

One important consideration: if you have a down of less than 20%, you will have to pay additional fees each month. They call it 'mortgage insurance' and if I remember correctly, I would have had to pay $160/month additional on a loan of 70k if I had had to pay this fee.

 

[xgsound]

When the seller accepts your offer you can immediately insure the home, and probably should.

Your best interest rates come with a 15 year or less loan for no more than 80% of appraised value(a fresh appraisal will be required ... ).

After you buy a house , everybody and their mother will want to give you credit; so be careful not to overextend. (Very common trap, but good for emergencies)

Extra $ never hurts, so keep as much avaliable as possible.

Jim

 

[rpl318]

Some things to keep in mind:
Do NOT use a mortgage broker...do your own research about the loan program out there and you'll save yourself a considerable amount of cost. DO use a real estate agent. As a buyer, you do not (normally) have to pay their commision, it is covered by the seller. Yes, 100% financing is available but there are credit score requirements that need to be met to get it. As mentioned earlier, 3% is the general rule of thumb when it comes to closing costs. You will have a difficult time trying to find a lender that will roll these fees into the loan as a 103% loan is a large risk in the eyes of a lender. If you do find it, expect a HIGH rate. Countrywide and World Savings are a couple of good lenders to start with. Countrywide has some great 100% financing programs (I got one myself on my home). World Savings has some excellent ARM programs (these are not short term programs despite what was mentioned earlier). World Savings does not have any 100% financing programs though. Both are portfolio lenders which means that your loan will not be sold again and again in the secondary mortgage market. That might not sound like much but it can be a pain to continually have your mortgage transferred from lender to lender. Hope this helps.

 

[Kelemvor]

Go talk to someone that's been writing mortgages for years. You can get by with little to no down payment.

We got a mini mortgage to cover the down payment and then the full mortgage to buy the house. We put a few grand down I'm sure but it was no where near 10%. Lots of times, good mortgage people will put the closing costs and everything righ tinto the mortgage so you don't have to worry about it.

Talk to friends in the area who have bought houses before and get the name of a good mortgage person that has been around forever and knows ALL the options on how to get you your house...

 

[axnff]

Originally posted by: rpl318
...
Do NOT use a mortgage broker...do your own research about the loan program out there and you'll save yourself a considerable amount of cost...

Maybe, maybe not. A good mortgage broker knows all about a variety of creative financing options that you may never be able to find out about (many special programs don't have much if any public information available). We went through a mortgage broker, got 5.875% on a 100% loan. This was while my wife had such bad credit she can't be on the loan, and we already had high revolving credit payments; my take-home income is about 85% utilized by debt payments...

On a 140k house, our out-of-pocket expenses were $~1600. Big things are first year's taxes, taxes until the end of the current year, interest from date of close until end of month (mortgage is paid in arrears - i.e. after you have used the money, you pay the interest), 12 - 14 months of insurance. There will always be a bunch of fees, too. We had seller pay $2500.

Remember, if you try to roll closing costs into the loan by having sellers pay closing costs, the appraisal will still have to be at least the total amount financed, or it falls through. If you go the other route and get a 103% loan, you'll probably pay notably higher interest rates.

If you can put 3% down, you're doing fine and have a ton of options available. Do NOT put more down unless you can make it 20%, you're going to pay PMI (Private Mortgage Insurance) under that. If you can't even afford the loan unless you put 5-12% down, you probably can't afford the loan at all.

Also remember the other things you'll need, out-of-pocket: Utilities security deposits + hook-up fees (for Gas/Water/Electricity, this ran us nearly $800 - check with your utilities). Home inspection: $300-500. Moving Expenses. The home will probably need some repairs, even small ones add up quickly, little things like paint, thermostat, some garage door repair, rekeying the locks, fire extinguishers and smoke detectors wound up aroung $600.

Getting the loan is only the start of out-of-pocket expenses...

 

[glenn1]

If you can put 3% down, you're doing fine and have a ton of options available. Do NOT put more down unless you can make it 20%, you're going to pay PMI (Private Mortgage Insurance) under that. If you can't even afford the loan unless you put 5-12% down, you probably can't afford the loan at all.

A 3% down payment isn't going to be a problem. 20% would probably be a bit of a stretch unless I go with a shack in the ghetto or a town house needing a lot of work. Should have starting funds of $10-15k to work with, and could always take a withdrawal from my 401(k) and then I could use the $10k withdrawal allowance for first-time home purchase and be comfortably in the $20k range. I will probably be looking at something in the $125-150k range. I'll also have VHA financing (I'm a vet) and a ton of other options available. Don't know how realistic this is but seems doable to me.

 

[IHateMyJob2004]

Originally posted by: farmercal
Unless you buy a piece of crap place that needs a lot of work, down payment should be all you need. You do have furniture don't you? Make sure you can afford the mortgage payment and don't get a ARM unless you plan on moving within 5 years.

Yes, ARMs are a bad idea right now unless you use the described scenerio above.

 

[IHateMyJob2004]

Originally posted by: glenn1
Going to go out there and start looking for a house. Never been in the buyer position before, so need to get a handle on all the costs which will be involved. Down payment shouldn't be a problem but it would make a big difference in whether I'd wind up eating only mac-n-cheese for the first sixth months after moving in should I underestimate....

Get the Dummie's guide to buying a home. I did and it clears up alot of these questions.

The idea of having hte seller pay some of your closing costs is a GREAT idea, especially if it's your first home.

As for hte mac-n-cheese scenerio. That won't happen beause a mortgage lender wouldn't loan you that much money if you are that strapped for cash. I'm assuming you went to an online calculator to quickly see what you can afford?

 

[IHateMyJob2004]

Originally posted by: glenn1

If you can put 3% down, you're doing fine and have a ton of options available. Do NOT put more down unless you can make it 20%, you're going to pay PMI (Private Mortgage Insurance) under that. If you can't even afford the loan unless you put 5-12% down, you probably can't afford the loan at all.

A 3% down payment isn't going to be a problem. 20% would probably be a bit of a stretch unless I go with a shack in the ghetto or a town house needing a lot of work. Should have starting funds of $10-15k to work with, and could always take a withdrawal from my 401(k) and then I could use the $10k withdrawal allowance for first-time home purchase and be comfortably in the $20k range. I will probably be looking at something in the $125-150k range. I'll also have VHA financing (I'm a vet) and a ton of other options available. Don't know how realistic this is but seems doable to me.

DO NOT USE A 401K FOR MONEY! You have to pay taxes taking it out and you have to use after tax dolalrs to repay it. I'm also not sure, but I think interest is also involved.

$10K is plenty to start with.

If you are a vet, go look into that. I think you can get out of mortgage insurance as the government gaurentees the loan for you. I think...

 

[DrPizza]

<---- Voice of experience

Stay away from things like Lending Tree.com.

I lost a house as a result of an inept mortgage broker. Still debating what we should do.

 

[Jzero]

Originally posted by: IHateMyJob2004
DO NOT USE A 401K FOR MONEY! You have to pay taxes taking it out and you have to use after tax dolalrs to repay it. I'm also not sure, but I think interest is also involved.

If you pull money from your 401k, you will have to pay income tax PLUS a penalty (I think it's 10%). But many plans allow for you to take a loan against your 401k, with the advantage being that the interest you pay typically goes back into your account.

I think I dumped close to $10k between the cash portion of the down payment ($8000) and the other relative nickels and dimes for taxes, inspection, etc.