posted
Its looking like I might be buying a condo...but I was curious about a couple things...and didn't have much luck with google.
I have been looking for a while, but really didn't plan on buying for another month or two because that is when I am getting a large bump in pay. However, I just ran across a very good deal which is making me lean towards moving now rather than later. The problem is, my current salary is borderline on being able to qualify for the loan. My parents said that they are willing to cosign, like that did back when I got my car...but can you do that on a house? Can I get a house and loan in my name, but with one of my parents listed as guaranteeing it? I didn't see that option on the lenders' websites that I checked.
Also, do you have to pay something similar to a sales tax on a house when you purchase it...or is that what the property taxes are for? Nothing online I saw mentioned anything like that...the places I saw seemed to say that any taxes you paid were monthly, not a huge payment when you first bought the place.
posted
You might be talking about points....points are due when you buy the house, unless you can roll it into the total.
You can co-sign, but it is a pain, and they would have to offer up serious collateral, usually. Most banks don't do it, IIRC. Most of the time loan companies use the LOWEST credit score of the people involved to determine if you qualify for a loan, so it doesn't really help much.
Can your parents 'gift" you some money? It is allowed, and having a larger cash balance for the down payment could make the loan approval go through as well. You could pay them back, of course, but don't put it down as a loan. Make sure it is listed as a 'gift'.
Posts: 15082 | Registered: Jul 2001
| IP: Logged |
posted
You can have the folks co-sign. It's not against the law, or anything, but most lenders aren't into it. Just because you go and shop for, bid for, have your bid accepted on a house, doesn't mean that you move in that day. These things can take a while. There are inspections, legal back-and-forths, and more things that can delay move-in day than I can remember. The point is, why not wait that month or two until you have the money? In the end, it won't make that much difference to when you move in.
Mortgage rates are tied up to points. The more points you pay, the lower your rate. Points is a bundle of cash, based on the price of the house, that you pay up front to the bank. Separate from the down-payment. I hate points!
There are plenty of other expenses involved that you have to cough up. You'll be needing a real-estate lawyer to handle the closing. (That's one of the expenses). You should get some recommendations for good ones, and ask your lawyer all these questions. I wouldn't recommend handling a real estate closing without a lawyer, especially for someone naive to the process.
Posts: 10397 | Registered: Jun 2005
| IP: Logged |
posted
Points are pre-paid interest that make the mortgage more attractive to the loan originator. If a mortgage has a bit of risk (marginal income, first time buyer, less than 20% down from the buyer)it gives the mortgage company some profit up front to make up for the slower, probable, sale on the secondary mortgage market.
Sometimes, however, points are just profit for the originator with little more reason behind it. Right now, the mortgage market is slowing down and you might be able to pay fewer points or none at all with another lender. Shop around, it can literally save you thousands.
There are a lot of non-traditional mortgages being offered out there. Avoid them. Do NOT get an ARM (adjustable rate mortgage), or a 100% mortgage, an 80-20 loan (80% value mortgage from one lender and a 20% loan from a separate) and no matter what, NEVER EVER let anyone talk you into an Interest-Only loan.
Honestly, save up until you get 20% of the value in the bank and never finance for more than 15 years.
Also, with the slow-down in the housing market, shop around. You may find house prices that would be attractive in comparison to the condo.
Posts: 45 | Registered: May 2006
| IP: Logged |
posted
Well, the 80/20 loans do make sense at times. They keep you from paying PMI, and many times the 80/20 loan payment is the same as a more traditional loan because of that.
It depends on the situation, and how good a deal the houseis....a lot of people get an ARM with a cap on how much it can be raised, both monthly and over all, and then refinance in a year. If that helps you get into a house that is significantly underpriced then it is worth it.
But never get an interest-only loan, or an ARM without caps. Both place you at significant risk.
Out of all loans sold, less than 15% of them are under 20 year loans. Most are 30 year loans, and have been for decades. If you can swing a 15 year, great, but most people can't.
BTW, I use to sell mortgages about two years ago. I was working with someone, and learned a lot about them, but YMMV.
Posts: 15082 | Registered: Jul 2001
| IP: Logged |
posted
My husband is a loan officer. From what I can tell, a lot of it depends on your credit score. However, most of the lenders he works with (he works as a broker for several hundred) use your middle score to determine eligibility for certain programs, as well as debt to income ratios. So a lot depends on that picture.
There are also lenders who work with sub-prime borrowers (which you may or may not be, depending on your credit history (little credit history (as a lot of young people might have) can be as hard on your score as bad credit), but a lot of that depends on your state.
It can be hard to find a loan guy you can trust to talk to about these things. Do your parents have a guy they use and trust that you could talk to without being reeled in and possibly taken advantage of? Or maybe a friend? It would help to talk to someone in your state who is knowledgable, but those pools can be full of sharks.
Posts: 9293 | Registered: Aug 2000
| IP: Logged |
quote: Well, the 80/20 loans do make sense at times. They keep you from paying PMI, and many times the 80/20 loan payment is the same as a more traditional loan because of that.
They make a lot of sense because of that. That was how I did my first home loan. The interest on both loans was deductible and I didn't have to pay PMI, which is not deductible.
If you are buying a condo, an ARM might make very good sense. You need to think about how long you plan on being there. If you think you'll only be there a few years and likely won't want to rent it out after you leave, then you really need to look at an ARM.
Posts: 4625 | Registered: Jul 2002
| IP: Logged |
posted
I started with an 80/20 loan, and was able to refinance them only 6 months later with Wachovia into 1 loan, no points or PMI, and fixed for 30 years.
Also compare ALL fees associated with condos, with what a house would cost monthly. In my area (Baltimore/Washington) condos can be as much as a house, AND have $100-$300 extra a month for condo dues.
Posts: 3134 | Registered: Mar 2005
| IP: Logged |
quote: There are a lot of non-traditional mortgages being offered out there. Avoid them. Do NOT get an ARM (adjustable rate mortgage), or a 100% mortgage, an 80-20 loan (80% value mortgage from one lender and a 20% loan from a separate) and no matter what, NEVER EVER let anyone talk you into an Interest-Only loan.
*laugh* While I agree with the last, we actually have an 80/10; the 80 part of that is a 7/1 ARM. And it makes perfect sense for us. While it would've been nicer to have the full 20% down, we had to move to Madison in a hurry and didn't have time to save another $15,000. We went with the 7/1 because the interest rate on that was 5.25%, and it can't go up more than a single point every year after the first seven. Mathematically, then, we break even after twelve years in that house, and actually benefit more from overpayment. Since we're probably not going to be in our current house for more than twelve years, this arrangement works out for us.
Actually, above all, I'd strongly recommend finding a loan officer you can trust to advise you well (and not just thrust the loan they're currently promoting hardest at you).
Posts: 37449 | Registered: May 1999
| IP: Logged |
posted
Yeah, ARMs do make sense for some situations, for sure. As do interest-only loans and so forth. It depends on a lot of factors, which is why you need to talk to someone trustworthy.
My husband started the business working with a Broker who was HUD certified, and super honest. When she retired, he briefly worked with a group that was totally raping people on hidden fees. (He was used to needing to close 7-8 mid-size loans a month to meet our family expenses, but these guys made that money on 3-4 smaller loans a month. The pressured him to increase the yield spreads and stuff, and he left within a month to work for a smaller, honest broker. It was sickenning.
posted
You can also ask the seller what they paid last year for property taxes -- they vary wildly from place to place.
I definitely don't see any problem with an 80/20 mortage, a conventional 30 year fixed mortgage, an ARM or an interest-only mortgage (in certain situations). They all have their places.
Find out your credit score (you can request it free online from each of the three major credit bureaus), and go see a loan officer at a few major banks. Talk to them about what amount of money you can get pre-qualified for, and ask about your debt/income ratio. Cleaning up any minor dings on your credit report can help a good bit and usually isn't that difficult.
If you're looking at a condo, be sure to find about the condo association fees -- they can be a pretty good chunk of money, and they're due monthly.
Posts: 5462 | Registered: Apr 2005
| IP: Logged |
quote:Originally posted by El JT de Spang: You can also ask the seller what they paid last year for property taxes -- they vary wildly from place to place.
In some states (like California) that won't tell you much -- taxes are based on home sale price, so a long-term owner will have been paying much less than you can expect to pay.
Posts: 32919 | Registered: Mar 2003
| IP: Logged |
posted
We bought a home about 10 years ago in Winter Springs, FL that had been owned by a Pearl Harbor veteran. Apparently, they don't have to pay property taxes in Florida so our mortgage company guessed what they would be.
After the first year, they discovered that they hadn't guessed very well. That was a nice letter to get. "Thank you for doing business with Acme Mortgage. By the way, your payment will be going up by 25% in the coming year due to our inability to check millage rates for your location."
And yes, I know I should have checked that myself, but it was my first home purchase. I know better now.
Posts: 4625 | Registered: Jul 2002
| IP: Logged |
quote:Originally posted by rivka: In some states (like California) that won't tell you much -- taxes are based on home sale price, so a long-term owner will have been paying much less than you can expect to pay.
That is insane! My state (or maybe county) has it capped at a 2% increase each year, regardless of the sale price.
Posts: 3134 | Registered: Mar 2005
| IP: Logged |
posted
Oh, I forgot about the 2% increase per year. Prop 13
However, given that the rate of rising home values far outstrips 2% per year, it can make a huge difference in one's property taxes versus those of the previous owner.
Posts: 32919 | Registered: Mar 2003
| IP: Logged |
quote:Originally posted by rivka: Oh, I forgot about the 2% increase per year. Prop 13
However, given that the rate of rising home values far outstrips 2% per year, it can make a huge difference in one's property taxes versus those of the previous owner.
In my case, I bought my house for about $100k more then the seller did 5 years before. The cap here did not take that into consideration, my property taxes are not more then a few dollars then what she paid.
Posts: 3134 | Registered: Mar 2005
| IP: Logged |
posted
Ok, but you seemed to be implying that your property tax rates would be affected by Prop. 13 . . . ? Posts: 32919 | Registered: Mar 2003
| IP: Logged |
quote:Originally posted by rivka: Ok, but you seemed to be implying that your property tax rates would be affected by Prop. 13 . . . ?
My state might have something similar. In the link you posted it said many states adopted something similar.
Posts: 3134 | Registered: Mar 2005
| IP: Logged |
quote:The problem is, my current salary is borderline on being able to qualify for the loan. My parents said that they are willing to cosign, like that did back when I got my car...but can you do that on a house?
They can, but they shouldn't. It's a heck of a lot of liability to take on, and there are so many things that can happen.
Your personal losses are basically capped by the house - if you lose the house, you've lost pretty much everything most likely. By them co-signing, you put their assets at risk as well.
Posts: 26071 | Registered: Oct 2003
| IP: Logged |
posted
Interest Only loans are NEVER a good idea. Plain and simple. The only way anyone should EVER use them is if they "flip" the house right away.
More people lose everything they own because or leveraged borrowing and interest only loans than any other factor in the housing market.
Congrats on getting the regular loan....what type did you end up getting, if you don't mind me asking?
Posts: 15082 | Registered: Jul 2001
| IP: Logged |
posted
Congratulations, Lupus! If this is your first owned home, you're in for a treat the first time you walk in after it's yours. It's a wonderful feeling.
Posts: 26071 | Registered: Oct 2003
| IP: Logged |
thx. And yep, it is my first home. I have always rented apartments before. That actually helped me qualify, since there are those first time home buyer programs.
Posts: 1901 | Registered: May 2004
| IP: Logged |
posted
Well, others have covered the situation with more expertise than I have, but I will make a couple of points.
Condos- Keep in mind that most condos cost more than a house. Though there are certain maintanence aspects that might work to your advantage.
On the suject of maintanences, condos have Association Fees. These fees go to cover building maintanence and upkeep. SOMETIMES just the Association Fees alone are equal to a house payment. When you consider buying a condo, make sure you add the association fees into your monthly payment to get a true cost of ownership.
Downpayment- People only look at the price tag of a house when they consider buying it. But they are usually in for a nasty shock at closing when the true end-of-loan price is revealed to them. I bought and $80,000 house, and the final payout was close to $300,000. So any house is going to cost you Three to Four times the asking price. [on a 30 year mortgage][Note: my mortgage interest rate was relatively high]
That means if you put $10,000 down up front, it will save you $30,000 to $40,000 in the long run. Make as large of a downpayment as you possible can.
A house with a initial value of say $100,000 will have a final payout of say $200,000 with a 30 year mortgage [5%]. The same house with a 15 year mortgage will have roughly [for purposes of illustration] about <$150,000 payout.
Using an on-line morgage calculator-
$100,000 price at 5% for 30 years = $536/month Total= $192,960
$100,000 price at 5% for 15 years = $790/month Total= $142,200
That's about a $51,000 difference, about half the original price of the house. Some people perfer to take out a 30 year mortgage, but make additional payments every month. Doing so can save you thousands of dollars in the long run.
Note an increase of 1% [from 5% to 6%] will add $23,000 to the final cost of the mortgage.
House vs Condo -
There are a lot of on-going cost to owning a house; painting, roof replacement, general repairs and remodeling. The condo association will usually take care of all that, and that is good, if they actually do it. If the overal building deteriorates, then your investment deteriorates with it, and within limits control of the building is out of your hands.
There is also the element of freedom. Condo associations usually have stict rules about what you can and can not do. And there is a chance, if you raise to much hell, they can literally kick you out of your condo.
Also, check that you are allowed to sub-lease your condo if the cost gets to be too much for you. That way you can keep your investment, but get out from under the payments. Note: it would be unwise to mention the payments being 'too much'. Just ask if you are allowed to sub-lease.
Determine whether your association fees include your real-estate taxes, and whether, as I'm sure they do, include water, heat, lights, etc....
posted
Ok, now a lot of the papers are out of the way, I just have closing now. Thanks for all the advice guys, it really was helpful.
Oh, and zgator, the person in charge of my mortgage gave me a lecture about property taxes.
I did look into the developers, and they have been around for a long time and are reputable. I had the good fortune of knowing people that work in the business, so I was able to ask around.
I did debate getting a stand alone home...but decided on this (partially) so I don't have to worry about exterior upkeep. Again, I was able to look into the developer and they have a history of keeping their places up well without needed special assessments. Of course a monthly fee is needed, but that is to be expected.
I do have another question. How much insurance should have have? The main building is covered (as is usual for condos/townhomes) but the interior is not. I called statefarm (my auto insurance company) and they recommended 50% of the purchase price for the inner walls, pipes, and that sort of thing along with 300,000 personal injury, and 20,000 property (with a 500 deductible). It would come to about 782 a year.
The agent that I am buying the home from said that seems way to excessive. She said most people get around 25% of the value to cover inner walls and such, and about half the liability insurance that I was quoted. Keep in mind I only need personal injury liability for injuries inside the house, anything outside is already covered. Also, I'm not really worth all that much. The home will be my biggest asset by far, and in Florida that can't be touched.
I've tried google, but it is really hard to nail down a straight answer, and my parents really were not sure since they switched from owning a townhouse to owning a stand along home about 35 years ago.
posted
It depends...I would say don't ask an insurance person, as their entire job is to sell you ....insurance.
I would say at least 25%, but not more than 35-40%....that puts you in the middle of coverage, but doesn't cost you too much.
Posts: 15082 | Registered: Jul 2001
| IP: Logged |
posted
Do you know exactly what the condo insurance covers? The way our building's is set up, if I got insurance it'd pretty much be renter's insurance, and I don't own enough things to make it worth the money. It depends on exactly how it's worded.
posted
pH, the main difference is I also have to worry about the inner walls, my property, appliances and such (ie: if a pipe bursts, a tornado/hurricane hits me...). Also liability if someone were to get hurt inside the condo.
My mortgage company doesn't require it...but it was recommended that I get it.
Posts: 1901 | Registered: May 2004
| IP: Logged |
posted
If it's really like renter's insurance, it will be fairly cheap. I have very little to insure, but I've always had renter's insurance -- although that's partly because of the waterbed.
Posts: 32919 | Registered: Mar 2003
| IP: Logged |
posted
Renter's insurance is on our list, right after life insurance. We are paying off credit cards with our tax refund this year, so the money for those payments will be able to go to insurance, knock wood...
Posts: 21182 | Registered: Sep 2004
| IP: Logged |
Printer-friendly view of this topic
![[Eek!]](eek.gif)
![[Mad]](mad.gif)
![[Confused]](confused.gif)
Your profile says you're in Maryland.
![[Smile]](smile.gif)
