Wednesday, June 29, 2005

getting your first mortgage

Part of buying your first home involves researching a lot of different concepts and terminology that you don't typically use or need while renting or living free of a mortgage...

Now that I'm almost through the process, I'm going to document the things I've learned thus far about financing your first real estate purchase.

Good credit. Pay your bills on time, even if it is the minimum. If you miss a payment, make sure to pay it within 30 days. If you wait, 30, 60 or 90 days, it will be reflected on your credit report and will affect your credit score. Your score along with your income are the key factors towards determining how much you can afford, and how much the bank will lend you. The lender will tend to pre-qualify you for more than you actually should spend.

So, I didn't have a whole ton saved up for a down payment, but I was told that wasn't a huge problem as there are programs out there for first time homebuyers with good credit and without much cash on hand. The catch is: seasoned reserves, the lender and bank underwriter like to see that even though you don't plan to put much money down, they want to see that if need be you could afford a few months (2-6 depending upon the program) of mortgage payments. This means money that has been untouched for 90 days or more. In order to cover closing costs (estimate 5k), I ended up getting a seller concession clause in my mortgage, meaning I got a bigger mortgage to pay for the closing costs over the period of the mortgage terms. You still will need some money on hand for the costs you incur prior to the closing date; to cover for a small deposit to show the seller you are serious about the property and are making a serious offer. Prior to closing you will also need to pay upfront for a home inspection and appraisal which generally run between 250-350 each. You should also start saving your bank and credit card statements, pay stubs, investment and retirement account statements as well. If you've been renting, keep a running list of landlords, their address' and phone numbers because you'll need to provide this information to them. Keep a steady job for 2 years, they will contact your employer for reference.

Here is a chart of the current average 30 year fixed mortgage:

From what i've learned so far, the rate is a reflection of the amount of money out there in mortgages. If the rates going down, people are still buying homes, and taking out mortgages... This is a national chart, and there are a lot of other things to consider aside from the rate... (As the rate goes up, prices of homes actually tend to go down) And being a new homebuyer with not much assets, youre rate will most likely be higher than the average.

I was supposde to close on May 31st, but instead closed on June 29th and captured a nice low rate of 5.25 on the 80% portion of my loan.

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