mortgage question

Discussion in 'Credit Talk' started by elisa, Sep 27, 2000.

  1. elisa

    elisa Guest

    I would like to buy a house that is around $100.000 (in greater Boston area) and I have $10.000. But I do not know anything about mortgages. I make about $25.000/year and paying $850.00/month for rent. I do not have any depts or dependants. Do you think I can qualify for a mortgage? I read that I also need some money for the closing costs. Does it mean that I need to pay at least 5% down payment+some money for the closing costs? Are there any other expenses I need to consider? And where can I get detailed information about these?
    Thanks a lot!
     
  2. me

    me Well-Known Member

    With traditional programs, I think it would be a far stretch (next to impossible).

    The max. that most loans will allow is for your mortgage, taxes, insurance payments to be at most 28% of your gross monthly income.

    Also, there are lots of misc. fees associated with the closing. You have your down payment, your closing costs (title insurance, recorders fee, appraisal fee, etc), and some others. These include (among others): approx. 1 years taxes, lawyer fees, 1 years paid home insurance (to be done before the closing), interest on your mortgage for the current month, etc.

    Also, I would recommend an engineers inspection which is an additional cost.

    Also don't forget all the things you need when you buy a house - appliances, window treatments, etc.

    I would also recommend having enough money saved up so that after you move into the house you still have an emergency fund. (You know, Murphy's law - If something can go wrong it will). Its nice to have a little something for when that happens.

    I don't mean to discourage you, but I want to make sure you have thought of all these things.

    On the upside - Given your income, you may want to check into many of the government sponsored programs. Also, many banks have additional programs for people with low to moderate income. Many of these allow for less money down, and many allow for a higher debt to income ratio. But they often come with slightly higher interest rates.

    Another thing to keep in mind is when you put an offer in on a house, you can generally get a seller's concession (contribution from the seller) that will help cover closing costs. The max. that you can get depends on the loan type. For example, a conventional loan has a max of 3%, but an FHA allows for 6%.

    Hope that helps!
     
  3. slan

    slan Guest

    I'm well into the first time home buying process and that previous post even discouraged me! If you're paying $850 in rent every month I don't think its such a stretch - especially if you $10k down and no other debts. The condo fees will have to be factored in, however.

    There are so many different mortgage options out there to help the 1st timer - but
    most of what you see advertised on the web doesn't cover it. The bank I'm working with offers a 7.25%, no points, no PMI, fixed rate with only 3% down. I found this program from my real estate agent.

    Also, states and or local govt.'s often have programs that allow you to borrow funds to cover closing costs at really low rates - and they are acceptable to the primary lenders.

    Here's what I suggest. Call one of the HUD approved housing counselors listed here:

    http://www.hud.gov/fha/sfh/hcc/lists/massachusetts.txt

    They have special (free) counseling programs for first time hombebuyers. I went through this, and did tons of research on the web.

    Pre-approval (not pre-qualification) is a relatively painless process that will tell you quickly whether or not you qualify.

    Good Luck!

    me wrote:
    -------------------------------
    With traditional programs, I think it would be a far stretch (next to impossible).

    The max. that most loans will allow is for your mortgage, taxes, insurance payments to be at most 28% of your gross monthly income.

    Also, there are lots of misc. fees associated with the closing. You have your down payment, your closing costs (title insurance, recorders fee, appraisal fee, etc), and some others. These include (among others): approx. 1 years taxes, lawyer fees, 1 years paid home insurance (to be done before the closing), interest on your mortgage for the current month, etc.

    Also, I would recommend an engineers inspection which is an additional cost.

    Also don't forget all the things you need when you buy a house - appliances, window treatments, etc.

    I would also recommend having enough money saved up so that after you move into the house you still have an emergency fund. (You know, Murphy's law - If something can go wrong it will). Its nice to have a little something for ....
     
  4. Crdt Dfnse

    Crdt Dfnse Well-Known Member

    Youâ??ll Get A Mortgage, No Doub

    Elisa:
    With $10 grand down, a gross annual income of $25,000, and a couple of credit references (one of these can even be your landlord) as well as clean or justifiable credit; youâ??ll get a mortgage! How? FHA would take you in a heartbeat and as a matter of fact, your $10,000 would cover closings (costs) for a $150,000 loan! Needless to say youâ??ve plenty of money and the income is certainly there.

    I broke out a payment for you and at current rate (8%) with impounds (taxes, insurance, etc.) calculated in, your payment should be around $872.08 per month. You may be â??quotedâ? a slightly higher payment for a TILA Good Faith Estimate, but mortgage folks always do this just to be safe. Donâ??t let it scare you, itâ??s just part of the process.

    Keep The Faith,
    Anthony Villaseñor
     
  5. me

    me Well-Known Member

    RE: Youâ??ll Get A Mortgage, No

    How can that payment include the taxes when she did not tell you how much the taxes are?

    I too am in the process of buying my first house. I am paying 3% down, with a monthly payment of about 1150 for a 117k home. (That includes almost $300 for taxes).

    My closing costs are $2500, plus $3500 (for taxes), plus about $400 for a lawyer, plus I have already paid $200 for the inspection). My down payment is around $3500. That right there is over the $10,000 mark. Plus as I have been told from those who have recently purchased homes, there are other misc. fees that come up.

    She will need to find a lender that allows for a higher percent of her income to go towards the monthly payment. Most programs have a max of 28% (Which for a 25K annual salary is only $583) However, there are some special programs that allow higher. For example, an FHA allows 29%, we have a SONYMA loan (NY state) that allows 33% and has an interest rate the lowest interest rate by far. Unfortunately due to my income, I cannot qualify for the SONYMA program.

    As I said, given that her income is low, she may qualify for some of these programs that are designed to allow those with low-moderate incomes to become home owners.
    We even have some banks that have their own special niche programs for these situations.
    Since many of these programs vary by location, and I am not familiar with the programs in the Boston area, she needs to do some research on her own (talk to some mortgage brokers, real estate agents, etc).

    Most likely, it can be done, but It's not going to be easy. But I very much feel that it is wise to have an emergency fund that does not get wiped out by the closing because you never know what might happen, or what you might need that you hadn't planned for.
     
  6. me

    me Well-Known Member

    slan,

    Does the program you are in have a maximum income limit? What bank is it you are working with?

    Thanks
     
  7. Crdt Dfnse

    Crdt Dfnse Well-Known Member

    Somethingâ??s Missing...

    Well, I donâ??t know where youâ??re getting your info but some of it doesnâ??t appear to be accurate. The fact is if your paying $300 per month for tax impounds alone, someoneâ??s not telling you the real deal! Either that or youâ??re buying in a mighty expensive tax area, like Rodeo Drive! <wink> Nonetheless I sense, and correct me if in error, that youâ??re under a conventional not FHA plan â?? not with a payment of $1150 per month on $117k! (Yikes!!!)

    I just put together a deal for a client, where an 80 year old woman obtained approval on $150k with payments of $1250 including impounds. And complete closing for her is only $9800, through FHA. Her payment is $200 more than what youâ??re prepared to pay, for less house!

    As for Elisaâ??s debt to income, FHA will allow as much as a 42% ratio depending on carry back issues. The point to remember here is that every mortgage situation varies, but generally certain aspects do apply. Those youâ??re referring to certainly donâ??t jib, however, which could be justified in several ways. Perhaps you do not fully understand what it is â??yourâ? particular case entails? Ether that or Iâ??m missing something.

    As far as calculating payment the general rule is to add $150 for impounds, whereas in Elisaâ??s case I added $175. Irrespective her payment could escalate depending on association fees and such, so itâ??s hard to pin down precisely (in this forum that is). Thatâ??s why I suggested the TILA-GFE would reflect more, they usually do.

    Keep The Faith,
    Anthony Villaseñor
     
  8. me

    me Well-Known Member

    RE: Somethingâ??s Missing...

    The payment minus taxes is about 850. The taxes are about $3500 per year which is about $292. I live in Rochester NY.

    Also, I was referring to the front-end ratios, not the back-end. FHA allows a 29% front-end (housing ratio), and a 42% back-end (total debt to income).

    Actually, I am in a conventional loan which I chose because the interest rate and monthly payments were about lower than an FHA. The rate through my bank is lower by about .5% and the payment by about $100.
     
  9. Momof3

    Momof3 Well-Known Member

    RE: Youâ??ll Get A Mortgage, No

    I am a littel confused here. We were in the process of getting preapproved for mortgage last year, didn't b/c of hubby new job not long enough but that's another story, anyway we were told by several lenders that our income of 45K would at the most get us a mortgage of 75-80K tops Yes we have some debts, 375 a month, I realized she has no debts but 100K on 25K income just does seem like enough income??
     
  10. Crdt Dfnse

    Crdt Dfnse Well-Known Member

    Now It Makes Sense :)

    Me:
    Boy oh boy, you ARE in a high tax area; although I hear some parts of Rochester (like most places) has some very nice areas. But hay Iâ??m in California so youâ??re a better judge of Rochester than I. And you know, look at it this wayâ?¦ If one is going to live in a nice area where taxes are a bit higher, you are probably going to benefit by lots of community services and support. So in this sense itâ??s a good thing.

    Anyway, thanks for the clarification what youâ??ve indicated makes a little more sense now.

    Keep The Faith,
    Anthony Villaseñor
     
  11. me

    me Well-Known Member

    RE: Now It Makes Sense :)

    Good - I thought I was loosing it! :)

    The taxes are pretty high - On a 150k house in a nice area, you could expect to pay $5500 (give or take a couple of hundred depending on which township and school district)

    My fiance owns a duplex in the city of Rochester, assessed for tax purposes around 45k and he pays about $1700 per year in taxes. The bank appraisal is about 72k.
    I'm not really sure why there is such a difference?
     
  12. Crdt Dfnse

    Crdt Dfnse Well-Known Member

    That Depends

    MomOf3:
    Well I can see your point, however, based on what Elisa indicated Iâ??d tend to differ. Her income IS enough because we are presumably talking about a 30 year fixed, and actual payments of only $697.08 (without impounds) and quite a healthy down (considering).

    Keep in mind your situation, Meâ??s situation; mine and everyone elseâ??s are different with differing variables (property, location, square footage, recovery parameters, etc.). Generally speaking, however, Elisa shouldnâ??t have a problem getting the mortgage based on what sheâ??s indicated. So itâ??s not that anyone is necessarily wrong, per se, only that the variables play a part in the equation.

    Keep The Faith,
    Anthony Villaseñor
     
  13. Momof3

    Momof3 Well-Known Member

    RE: That Depends

    Thanks, I know every situation is different, it is just confusing at times:)
     

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