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Home Loan experts chime in... help me weigh my options!

 
Old 09-04-2009, 06:21 AM
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Default Home Loan experts chime in... help me weigh my options!

So I'm in the housing market now and will actually be visiting some on Saturday. I've been pre-approved at a couple of banks and am curious about my various options. I'm currently leaning towards a FHA loan, although I've also recently discovered the Rural Housing loan which covers around 90% of the houses in my area. My absolute maximum is 300k, though my target area is about 250-275k. I also only intend to put 5% down and keep the rest in savings. (Have enough for about 10-12% but obviously don't want to spend it all). Also will obviously be going Fixed Rate and non of the ARM crap. Here's pros and cons of the options:

Conventional - At least 5% down, cannot avoid PMI unless paying 20%. PMI goes away after reaching 20% equity.

FHA - Only 3.5% down necessary, though I'd still go with 5% anyway. Seller may now cover your closing costs (very typical in this market anyway). Cons are that a 1.5% Mortgage Insurance Premium is rolled into your loan, and you must pay an annual 0.5%. I'm not sure if this 0.5% is for the life of the loan or not... anyone know?

Rural Housing - Must make less than 115% of median income in your county (I do). 0% down, full financing available. Also, NO MORTGAGE INSURANCE!! The only con here is that there's a 2% premium rolled into your loan to compensate for the insurance, but I wonder if that could be paid as a closing cost and sent to the seller? Sellers typically cover all closing costs here as well.

Also, rate difference is negligable between all three options. FHA is currently the cheapest around 5%, Rural Hosing is 5.25% or so and Conventional actually is even more around 5.375%. You don't see breaks in conventional fees unless putting down 20%.

Any experts here to give some advice? The Rural Housing loan is quite tempting I must admit. I could remain completely liquid and keep about 15 months of emergency funds in the bank and pay no costs whatsoever if the seller covers closing. Not to mention getting a free 8k next year at tax time, that personally seems like one hell of a deal.
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Old 09-04-2009, 06:24 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Is that 2% a one time charge or is that annually? The way you put it, it's onlyy one time.

Think you could get a better interest rate? Are you going to buy down points? My interest rate is 4%.
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Old 09-04-2009, 06:31 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Originally Posted by Backk InTheDA View Post
Is that 2% a one time charge or is that annually? The way you put it, it's onlyy one time.

Think you could get a better interest rate? Are you going to buy down points? My interest rate is 4%.
One time charge, that's why it's so wonderful.

I'll buy down as low as I can and just stick the seller with the bill Buying down the rate just raises up the closing costs and if I write the contract right, they'll buy down my rate for me.

I've never seen 4% advertised here, I've been to 3 banks and 5% is the lowest I've seen. Even Zillows daily rate shows about 5%.
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Old 09-04-2009, 06:35 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Yeah, it's all about who you know in that sense. But that's another story for another thread.

How would you get the seller to pay for the purchase of points? I've never heard of that before. A guy I work with he paid close to 3k for 1/2 a point and I'm guessing closing costs are probably around 10k'ish on a 300k loan?
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Old 09-04-2009, 06:39 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

FHA also limits you on when you can sell it and use as primary residence also.
They also make closing a lot harder. If you can do fixed conventiona then that I believe is a better option.
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Old 09-04-2009, 06:41 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Jone, is this a section 502 loan/rural housing loan? Trying to get some additional info on google but I only see things about section 502. Is it the same thing?
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Old 09-04-2009, 06:50 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Yeah it's a section 502, you can read a bit about it here (at least how it relates to MD):

http://www.rurdev.usda.gov/MD/housing.htm

When I mean having the seller buy your rate down, discount points are one of the components of closing cost. Get your seller to pay the closing cost, then you take the most amount of discount points offered, foot him with the bill and enjoy the low rate
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Old 09-04-2009, 07:14 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

I wouldn't be against an FHA loan though. That's what we have, it's working so far. As long as the rate is fixed then that's all I was really concerned about.

Yeah, that is the website I was reading about on thhe google.

When are you thinking about buying?

Can you post up some stuff of what 250-300k will buy you over there?
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Old 09-04-2009, 07:34 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Have you even contacted someone who knows what they are doing in your local area yet? This is your second thread on this stuff and it looks like you just google'd everything.

You say you can go 5% down on a conventional?
Leaving you with a 95% LTV?

So that must mean you are A paper, right?
Why are you even on HT asking for home loan help?
If you were A paper anyone would be willing to talk to you.
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Old 09-04-2009, 08:14 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Originally Posted by im a monster hehe View Post
Have you even contacted someone who knows what they are doing in your local area yet? This is your second thread on this stuff and it looks like you just google'd everything.

You say you can go 5% down on a conventional?
Leaving you with a 95% LTV?

So that must mean you are A paper, right?
Why are you even on HT asking for home loan help?
If you were A paper anyone would be willing to talk to you.
Cut him some slack. Buying a home is usually the biggest financial decision a person will make in their life. It can be very intimidating to go into a bank and talk to someone you don't even knowabout a loan that towers you and your partners annual salary.
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Old 09-04-2009, 08:20 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Yes I have been to banks and yes I do have a real estate agent. So far this is what I've been given in preapprovals:

1. Navy Federal - 5.375 rate, 0.25 discount points, 1.0% origination fee - 5% Conventional

2. Bank of America - 5.0 rate (Don't believe it yet), .65 discount points, 1.0% origination fee - 3.5% FHA Loan

And after work I'm going by a local mortgage company (not a bank) called George Mason Mortgage and talk about FHA / Conventional / Rural Housing loans.

I've already gotten all my W-2s in check, printed out last 2 months of statements from my banking accounts, have current paystubs and know my credit score to be around 750.

So yes I have done some work. I haven't found the lenders to be too helpful, not anymore than googling has done. That's why I'm here asking for direct advise from people who aren't going to be motivated by the profit on closing a deal with me.
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Old 09-04-2009, 08:50 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Just be aware that not all homes will do all types of loans. Most do, but all don't.
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Old 09-04-2009, 11:42 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

Sorry jonebone, looks like you have everything in line.

Here's some info I think you should consider.

Although they do have 95% financing, it is very hard to get it in this market. Many requirements to qualify, and once you get to the funder it may likely be denied.

With the FHA loan, you also have to pay MIP 1.75% and the FHA insurance is for 5 years.

Now that you know exactly what you have to work with I would def talk to your agent about finding the home that will most likely be approved or is already FHA approved.

I hope the agent you are using is experienced otherwise you will be in and out of houses over and over again.
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Old 09-04-2009, 11:44 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

i had 0 problems going with an FHA loan. no issues whatsoever, only issues i had were with the sellers. the MIP sucks though but its not the whole life of the loan. I got in at 5%
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Old 09-07-2009, 12:53 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

i just bought a townhouse with fha financing. just make sure all the properties u make offers on are fha approved.
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Old 09-07-2009, 05:53 AM
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Default Re: Home Loan experts chime in... help me weigh my options!

since I'm lazy today... my only advise is talk to a mortgage broker and have them 'shop' around for different loans for you. If you go straight to a bank (BOA, etc) and apply for a home loan straight through them, they are very strict on their debt-income ratios and will give you a 'lowball' amount based on the numbers you supply them (pay stubs, W2's, gross income, assets, debt, etc). With a mortgage broker, they'll shop around for better rates and loans, and will be more lenient on your debt-income ratio as they'll take other factors into consideration so you can get a good loan.

I just went through this in the past 8 months. The good thing is I'm all done with it as I've already closed on my new house last Thursday.
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