Main Forums > The Roundtable

How do I not get screwed on a mortgage?

(1/7) > >>

cfabe:
So I have a new house under contract. Negotiations went well, had the home inspection and no major issues there. Now I'm going to go meet with a mortgage banker tomorrow, and I'm largely clueless about mortgages. I mean I understand the basics, but I don't have a feel for what all the different fees are and what is a typical cost for things. Normally I am a super-researcher spending hours researching information on a big purchase.

I'm initially meeting with a mortgage guy at a local bank my dad used and reccomended. He wants $350 up front for an application fee. Seems high to me, but what do I know. I'm going to probably have the same reactions to other fees in the process, too. In the pre-approval he mentioned a PMI of $61 a month because of my small downpayment. Agian I don't know if this is a reasonable cost.

The state of ohio has a first-time homebuyer grant program that lets you get a below-market rate mortgage, and this is what I'm planning on doing. So that may remove some of the 'shopping around' in terms of rate. At the moment the rate on this program loan is 5.70% on a fixed 30-year mortgage. Seems like a good deal to me. I asked about any restrictions or catches and have not been told of any yet.

I've been trying to research this online and I'm not coming up with any information that's detailed enough to make me comfortable with my understanding of the process. Any tips, links, suggestions would be appreciated.

Chris

Shalako:
Here's a thread from a couple weeks ago that really helped me a lot. (thanks Monkeyleg and posters)
http://www.armedpolitesociety.com/viewtopic.php?id=2583

I'm also buying a home now and went with the 30-yr fixed product to eliminate the risky interest only and ARM loans. I plan to stay at the new place for at least 10 years so I think a 30-yr is a good deal. Sorry I'm not an expert so can't answer your questions about fees. In case it helps, here's a run-down of my loan package:
first mortgage: 30-yr fixed at 6.775 on 80%
second mortgage: 30-yr fixed (due in 15 yrs) at 8.2% on 20%
No down payment, no PMI, but I am impounding my taxes and insurance.
Closing costs: 1% of total to loan broker, $5500 to title company covers title search & paperwork, set up the impound account, half of May mortgage and all of June mortgage.

The only other fee was $325 out of my pocket to the home inspector.

garrettwc:
My opinion is that you should go for nothing but a fixed rate loan. Rates are low right now and have too much potential to go up. Adjustable rates are weighted and they go up much easier than they go down. If you can swing the payment, try for a 15yr rather than a 30 yr. The savings are huge.

Spend some time here and do some reading.
Bankrate.com's Mortgage Tutorial

Brad Johnson:
Ummm.. well.. (*trying to figure out a way to say this without sounding accusatory*) you should have taken care of the mortgage first. As it stands, you really don't know if you can get approved or not (no matter how much money you make). Don't be surprised if problems pop up, because they will.

But, you're already under contract so let's start there.

Unless there is some overriding good thing about the Ohio grant program, I'd stick with a conventional, fixed-rate, low-down-payment mortgage. It's simple, easy to calculate, and you know exactly what you're getting. Insist on a Good Faith Estimate up front. If the lender won't give you one, go somewhere else.

And don't get caught up in the "Rate Game". Lenders can monkey the rates just like car salesmen can monkey trade-in prices. That low interest rate might sound good, but at what cost? Keep in mind that an 1/8th point difference on a fixed-rate $100K loan only makes an $8 difference in your monthly payment. If they charge you a 1% buydown ($1000 up front) for that 1/8th point rate drop, that's a $96 a year savings. At that rate it will take 10.5 years for the monthly savings to justify the up-front fee. Chances are you will have moved long before then.

In general terms...

Be prepared for the loan to cost you somewhere in the neighborhood of 1% of the loan value - possibly less, given the competition in the mortgage market these days. And by cost I mean the fees charged directly by the lender, and other than actual expenses (actual expenses are outside services like appraisals, surveys, etc). The lender may call their fees all kinds of things - Processing, Origination, Documentation, etc. - but they are still just direct charges from you to the lender. Don't be surprised if they insist on a couple hundred bucks up front. Tell they you will be happy to as long as they provide a Good Faith Estimate for you to examine before making your decision whether or not to use them.

Expect the actual expenses, insurance, and misc assorted other "stuff" associated with buying the house to add up to 3.5-4% (give or take half a percent, depending on the market in your area). All this will be detailed on your Good Faith Estimate. Some lenders and loan programs will allow you to roll this into the loan, but be careful. If you roll in costs outside of the actual value of the home it puts you upside down immediately. If you are forced to sell the home in the next few years, you will end up paying out of pocket to do so.

Hope this helps!
Brad

K Frame:
Two words...

Credit union.

Navigation

[0] Message Index

[#] Next page