yamaha

This may as well seem to be the best time to buy a house.My girlfriend and I are looking in the 75,000-95,000 price range. Housing in Pittsburgh is interesting. Some things here can be marked up 20-25% in other cities. I know very little about mortgages, what to look out for and what not and was hoping to get some idea's on what to watch out for.

Tibbychick

The bigger your down payment is, the better of a position you will be, and the stronger any offer you make will be. Typically down payments can be as low as 5%, but usually are more like 10-20%. Plus you have to consider closing costs, lawyer fees, broker fees, stuff like that. Also the better your credit is, the better rate you will get on your mortgage. I would avoid any variable rates.

majik

Very good info TV, you've done your homework.

Utilize a realtor - tell them exactly what you're looking for, your price range, your requirements, your desires, and they can pinpoint houses for you. My mom's a realtor here in Nashville and it's amazing their ability to search through houses and know what neighborhoods to find things in.

Fixed Loans - whatever you do, GO FIXED. The "mortgage crisis" you've been hearing about isn't that bad... and rates SHOULD be getting lower in the next month or so as a result of the Fed lowering the rate. The people who are foreclosing on homes are those who went with an ARM (Adjustable Rate Mortgage) which promises you a low rate off the bat, but then they have the authority to raise it pretty much as high as they want after a few years.

If you take 95% or 90% financing (meaning you put a 5% or 10% down payment on the house) it'll be much easier to get a loan if you have poor credit.

Things the mortgage company considers when you apply for a loan:
Credit Score, cash in the bank, your income:debt ratio, how long you've been at your current job, how much you make at your job, if you have a history of mortgage/rent (if you've rented an apartment for 12 months or more), etc...

If you're approved for a mortgage, DON'T go out any buy a car, spend thousands of dollars on furniture, or make any large purchases until you CLOSE on the house. My mom has actually had people LOSE their "approval" for a mortgage because they went out and bought thousands of dollars worth of furniture and spiked their debt to income ratio, or bought a car and raised their risk on paying back the mortgage.

www.Bankrate.com gives you a general idea of current mortgage rates, and provides calculators and stuff.


Microsoft Excel has a template called "Loan Amortization" where you can plug in your loan amount, percentage rate, length of loan, and it gives you monthly payments. Remember to add a couple hundred dollars to account for home owner's insurance, PMI (private mortgage insurance), and property taxes.

Another hint... if you take out a loan for 80% or more on your house, you will pay PMI (Private Mortgage Insurance).. sometimes called something else. This is insurance for the mortgage company, in case you can't pay your loan. Once your outstanding balance is LESS than 80% of the value of your home (i.e., home worth $100,000 and you owe $75,000) you can request to drop the PMI. They won't do it automatically, they'll keep it in there forever unless you request they drop it. PMI can range from $50-$100/mo. (mine is $75/mo.).

Currently, with good credit, you should be able to get a mortgage somewhere in the 5% range. It COULD get as low as 4.5% soon, or it could go up to 6%. This is a very good rate on a mortgage... it's been as high as 15% or 20% in the past.

Bullfrog

North of Pittsburgh there are some nice houses from the 75K-150K. Will the morgage industry change much from now till the spring of 09? My lease is up in April and I don't have enough money saved for a down payment yet.

"Things the mortgage company considers when you apply for a loan:
Credit Score, cash in the bank, your income:debt ratio, how long you've been at your current job, how much you make at your job, if you have a history of mortgage/rent (if you've rented an apartment for 12 months or more), etc..."

Majik- Im in the IT industry, and have held quite a few jobs and not many have been over a year. Is this going to really hit me hard? I make some decent coin at my job and I've rented for 3+ years. Would that balance things out?

majik

you'd probably be fine. The salary is the biggest factor I would think. I can't be certain because I don't calculate mortgages or work for a mortgage company. BUT there are several factors they CAN consider (like they can choose to consider 3 of 5 or something).

If they WANT To give you a loan, they can find a way. When I bought my house, I was still in college, had an INTERNSHIP that I had only been in for a month, my wife had job she had only been at for two months and wasn't making great money at, but I was able to put down about 8% and still had money left in the bank. I had a great credit score, but no 12-month history of consistent rent/mortgage (I'd have an apartment for 9 months during school, then move back with my parents for the summer). I was borderline on getting the mortgage, they said they'd figure out a way, but I decided to speed up the process and had my grandmother co-sign on the house and they used her assets to make it happen.

So even in my situation (Good credit, little income, minimal job history, no rent history) they were going to make it happen.

Tibbychick

lol, it helps that I work in a real estate office now. I specifically got this job so I could learn about the market and how it works. Its really interesting.

baseballstud85

majik is right, you really need to use a realtor. if you happen to find one like my wife and i did, you'll be quite happy with the service. my wife and i were at the dog park and were just talking to people about the market up here. come to find out, one of the people we were talking to was a realtor. couple months later we gave him a call and we started looking through him. it's really great that they can get access to any house, regardless of listing agent, in the area.

tibbychick is right about the down payment. the larger the better, but you also want to keep some cash in the bank for those "oh sh!t" things that come up. my wife and i are getting a VA loan because i'm active duty army. we are pretty much gauranteed for a loan (amount changes with each situation) and it is ALWAYS fixed rate. i'm not sure what options there are for civilians, but i know there are several different types of loans.

just be sure to get in contact with a realtor. whoever you use should be able to recommend a mortgage company for you to work with (like mine did). you should also get pre-approved for an amount before you really start looking for a house, so you know what price range you should be looking in. just because you have a range to look in, doesn't mean the lender will finance in that price range.

majik

The realtor will also work with the other agent involved for negotiations, and making sure they do stuff right. My mom had clients who bought a house, arrived on move-in day only to find bags of trash left behind, damage done while the old owners were moving out (banged up walls/doorways), took stuff that was supposed to be left with the house... she contacted the other agent and dealt with everything so her clients would be happy. The realtors make sure everything's in the contract so you're covered if anything like that happens. They also deal with several mortgage companies and can get you in contact with someone, making the process easier. You never have to talk to the other home owners, you never have to meet them or their agent, all you have to do is deal with your realtor and they will take care of everything.

Of course, you'll have to deal with the mortgage company, since the realtor doesn't need to know your personal finances or ability to get the loan. My mom didn't even have anything to do with my mortgage, they don't need to know how much money you make or how much credit you have - that's for the mortgage people.

As stated in the post above - don't use everything you have in the bank as a down payment... keep some for safe keeping. The mortgage company will consider how much money you'll have in the bank after your down payment -- if you have nothing, then you're a riskier customer and they might give you a higher rate.

UrS0NvS

to give a idea on a fixed mortgage (hope you don't mind my view majik) this is what I had when i was married...

bought my house for $26,500 in NC Kansas (housing cheap, not a damn thing to do though and no jobs in that area pay worth a damn) I went through Fanny Mae as a first time home owner. I put down just over 20%(actually 3k) and had a FIXED interest rate on a 30 year loan around 6.25% if i remember correctly.

my monthly house payments were $306. 14/mo and that price involved everything from paying the house loan off ,home owner's insurance, and yearly property taxes. I had a fully furnished basement which i rented out to friends for $200/mo all utilities paid. with them living there my water bill went up 5 bucks a month and my electric bill was 10 more a month. my monthly home owners bills never changed.

my aunt's house however, stupid as she is, they went with a floating mortgage. they told me horror stories of paying 3.25% one month to almost 17% the next month! their payments went from $185.00/mo to over $400.00/mo depending on what the market was doing at the time.

there are some really good first time home buyers programs out there and take the time to research who is giving the better deal at the time, cause they change periodically.

majik

thanks for adding your personal experience. As I've stated in the past, I welcome EVERYBODY's input.

If at all possible, go with Fixed rates. NEVER variable... you'll get screwed every time.