Find Mortgage Home Mortgages Find Mortgage Home Mortgages

Www Findmortgagehomemortgages Tag Falls Find Mortgage Home Mortgages Re: A Home Buying Primer - 未名空间(mitbbs.com)

Www Findmortgagehomemortgages Tag Falls Find Mortgage Home Mortgages

have to produce upfront?"
search5 Findmortgagehomemortgages Tag qosearch;Jssearch searchhsearchtsearcha

Tag w Falls search searchi Falls dsearcho Falls tsearcha Www ehsearchmsearchm Www r Findmortgagehomemortgages g Findmortgagehomemortgages g Www ssearchi Www e Falls r Tag h Tag searchi Tag dm Tag r Tag gsearchg Findmortgagehomemortgages h Www msearchm Findmortgagehomemortgages rga Falls e Tag ,

gsearcha searchww Falls s Falls asearchc

asearchF Www n

msearchr Falls ga Findmortgagehomemortgages esearchom

msearchrtgasearche Www search T Findmortgagehomemortgages gsearchq Tag F Tag nmo Findmortgagehomemortgages t Findmortgagehomemortgages a

eh Www msearchm Www rg Tag g Findmortgagehomemortgages s Tag osearch
6. "How long after I apply will I get the money?"
7. "How do I know the house won't fall apart?"
8. "I've got a deal with the seller. Now what?"
9. "Where do the tax benefits come in?"

IF YOU'VE NEVER BOUGHT A HOUSE BEFORE, much of the jargon and terminology
could prove daunting. After all, who would give "discount points" or "5-1
adjustables" the slightest thought unless they absolutely had to? We've
arranged this short primer on the basics of buying a home as a series of
questions and answers that try to address the basic issues with which every
home buyer must grapple.

1. "Do I really need to use a real estate broker?"
The first thing you need to know about real estate brokers is that they
typically work for the people selling the home -- not you. The standard
practice is for the seller to hire a broker, who then takes over marketing the
home and seeking out potential buyers. For this, brokers usually are paid
around 6% of the sale price, which gives them a built-in incentive to find the
seller the highest price they can.

That sounds simple enough. But as you begin to drive around town with seasoned
agents, you'll quickly find that they act like they are, in fact, working for
you. So don't get too cozy. You will probably be tempted to tell an agent the
highest price you are willing to pay for a house or the size of down payment
you can afford. Don't. The agent is obligated to pass those details on to the
seller, which could hurt you in any negotiation. Also, don't feel obliged to
buy a home through one particularly helpful broker. Use several to have the
widest selection of possible homes.

You don't need to use a broker at all if the house you want is being sold by
an owner himself. Indeed, you'll have a lot more room to negotiate on price if
the broker's 6% fee is absent from the equation. It's also not that difficult
to sell your house without a broker, though it is a significant commitment of
time and energy -- one you may not be willing to make. Check out Going Solo
for more information on what you can expect.

Are all brokers bad? Of course not. A good agent can be very helpful, if only
because he or she has access to a large database of listings in your
neighborhood of choice. Agents can also recommend schools, local contractors,
and mortgage brokers. (Although, you shouldn't rely too heavily on their
advice; they've been known to take kickbacks.) And they can often help steer
you through the home buying process, while smoothing out bumps in the
negotiations. Remember this, too: An agent's fees are always negotiable. Are
you and a seller at loggerheads over who's going to repair that damaged
furnace? Maybe it should come out of the broker's fee.

In the past few years, so called "buyer's brokers" have become more popular in
certain parts of the country. Unlike traditional real estate agents, they work
for -- and are often paid by -- the buyer. They are supposed to help assure
you get the best deal. They can be invaluable if you are moving to a town or
part of the country you are unfamiliar with or have little time for
house-hunting. Like a regular broker they are a font of listings.

The problem is, their terms often require that you use only them for a set
time period. That's fine if you trust the broker and just want someone to
screen homes for you. But it can leave you hamstrung if you'd like to go out
and do some looking on your own or if you want to use a number of brokers.
Also, compensating a buyer's broker can be tricky. Paying by the hour adds up,
but paying a percentage of the purchase price gives a broker the wrong
incentive: Getting you to pay the highest price returns the most to him.
Sometimes, a buyer's broker will settle for splitting the fee with the broker
who has the listing.
Back to Top

2. "How do I figure out which type of loan makes sense?"
The answer to the first question is easy enough: Mortgage products proliferate
because lenders, hungry for business, are trying to rope you in any way they
can. That certainly makes mortgage shopping confusing, but it also means you
can probably find a mortgage tailor-made to meet your needs. What Kind of Loan
Should I Get? can help familiarize you with the different types of loans
available and which might be right for you.

At the most basic level, mortgages come in two categories: fixed rate and
adjustable. In both cases "rate" refers to the rate of interest you pay the
bank for the privilege of borrowing its cash.

Fixed-Rate loans
A fixed-rate mortgage is so called because its interest rate doesn't change
over the life of the loan, no matter what rates do on the open market. Many
people feel more comfortable with a fixed rate, because they know their
monthly mortgage payments will remain steady over the years, making at least
one aspect of their monthly cash flow predictable. The downside is that you
pay for that comfort: Lenders charge a higher rate of interest for fixed-rate
loans. Why? Because they figure that if interest rates shoot up, they lose the
opportunity to make more money on the funds they are lending you.

The standard fixed loan lasts for 30 years, but if you can handle higher
payments and want to build up your equity in your home faster, you can opt for
a 15-year fixed. With a 15-year, you'll get a lower rate and pay much less
interest over the life of the loan. The payments each month, however, will be
quite a bit higher since they aren't being stretched over so long a period.

Here's an example: If you get a $125,000 loan with a 30-year fixed rate of
7.75%, you'd be on the hook for monthly payments of $895.52. On a 15-year
version of the same loan, you might get a rate of 7.25%, but your monthly
payment would be $1,141. If you were cash-short and wary of higher monthly
payments, you'd go with the 30-year loan. But ultimately it would cost you: On
the 30-year loan you pay a total of $197,386 in interest over the life of the
loan, while the 15-year mortgage sticks you for only $80,394.

A fixed rate makes the most sense for those who plan to stay put in their new
home for a long time. You pay a little more in interest, but it is stretched
over a longer period so the monthly effect can be minimal. And if you're
buying when rates are low, locking in a good deal is probably worth it.

Adjustable-Rate loans
Adjustable-rate loans get their name because the rate you pay changes
according to a set formula as interest rates fluctuate on the open market. As
noted above, the upside is that lenders charge a lower rate for such loans
because you are taking on some of the interest-rate risk. This makes your
monthly payments lower -- at least in the beginning. Such loans provide a way
for many buyers to afford a larger loan amount for a given monthly payment. An
adjustable works out wonderfully if rates drop -- something you should never
count on. But watch out if interest rates rise. In a year or two, your
payments could far exceed what you would have paid for a 30-year fixed.

The trick with adjustables is to tailor the loan to your needs. Generally, the
cheapest rate out there is on a one-year adjustable. (Well, yes, there are
even cheaper loans that adjust monthly, but those are too esoteric for most
buyers.) With a one-year, your rate can change annually, making these loans
particularly risky. Lenders often try to draw you in with "teaser" rates that
are especially cheap for the first year, but which will almost certainly jump
up the next year.

There is a limit to how much an adjustable can adjust, however. Lenders limit
the amount the rate can rise, often to no more than two points a year, with a
lifetime cap of six points. Moreover, if you are willing to endure the hassle
and expense of refinancing after a year, it's possible you'll come out ahead.
See Should You Refinance? for more.

A slightly more expensive option is what's known as a "delayed adjustable."
When you see "3-1 adjustable" or "5-1 adjustable" it means that the loan stays
fixed for three or five years and then resets annually. The same pattern holds
for a 7-1 or a 10-1. The longer the fixed period, the higher the rate. The
idea is to match the loan to the amount of time you plan to stay in the house.
For instance, if you expect to move after three years, a 3-1 is a great
option. After 10 years, you might as well opt for a fixed rate. The price
difference will be minimal.

Figuring out which kind of loan makes sense for you depends entirely on your
circumstances and temperament. But several of the sections found here can
help. What Kind of Loan Should I Get? walks you through some typical home
buying scenarios and suggests mortgage solutions. And you can use the
worksheets found in How Much House Can I Afford? and Fixed or Adjustable? to
help you decide what size loan you can handle and whether to take a chance on
an adjustable.
Back to Top

3. "How does a bank decide if I get a loan or not?"
There are many factors that go into the bank's decision, from how long you've
been at your job to how many credit cards you carry. The most important thing
lenders look at, however, is your ability to meet your obligation to them,
which is a function of your income and debt levels.

To gauge your ability to pay, lenders look at a pair of numbers called the
"housing ratio" and the "total-obligation ratio."

They're not as daunting as they sound. The first is just the percentage of
your gross monthly income that you'll need to spend on housing expenses after
you buy the new home. It includes your mortgage payment, taxes, insurance and
maintenance. Lenders will want to see a ratio of 28% or lower. The
total-obligation ratio, meanwhile, is the portion of your income that goes to
covering both your housing expenses and any other obligations, such as credit
cards, car loans and child support. There, your lender will want to see a
ratio of 36% or lower. Both of these ratios are often negotiable upward.

Our worksheet, How Much House Can You Afford?, will take you through the same
process a lender uses to assess your application. It will tell you your ratios
and give you an idea of what size house they will allow you to buy.
Back to Top

4. "How much cash am I going to have to produce upfront?"
These days, not much. Ideally, you would have enough cash for a 20% down
payment, closing costs equal to about 3% to 5% of the purchase price, and
enough left over to cover two or three months of monthly housing expenses.
That gives you a big chunk of equity in your house upfront and makes the
lender happy -- something that usually translates into a better deal. The
trouble is, coming up with that much cash can be all but impossible for many
first-time buyers. After all, we're talking $40,000 on a $150,000 loan or
$70,000 on a $250,000 mortgage.

The good news is that lenders over the last couple of years have become
increasingly willing to finance as much as 95% or even 97% of a home. The
reason: They can now unload the risk of such loans onto somebody else. To
limit their exposure, many lenders regularly sell their loans to the Federal
National Mortgage Association (Fannie Mae), which then bundles them into
securities which are eventually sold to investors. It used to be that Fannie
Mae only would buy loans for 80% financing. But it recently standardized the
lending criteria for 97% financing and will now buy these loans, making
lenders much more willing to provide them to you. It's now common for
first-time buyers to put down only 5%, or $7,500 on a $150,000 loan.

While this sounds enticing, remember that puny down payments have their price.
First of all, you start with very little equity in your home. Also, if you
don't have 20% to put down, you'll probably have to ante up for mortgage
insurance (which protects the bank against default and can top $1,000 a year
if you put 5% down on a $200,000 loan).

If you are buying in an urban area or have low to moderate income, look into
programs offered by your city or state that provide below-market loans with
little or no down payment required. If you're really cash-strapped, you can
get 100% financing by "piggy-backing" a second loan equal to 20% of the
purchase price on top of your 80% loan. But that 20% second mortgage will come
at a much higher rate.
Back to Top

5. "Just what are points, anyway?"
Lenders and home buyers are constantly referring to "points" when talking
about mortgages. This is a fancy term for the considerable fees you pay when
you take out a loan. One point is equal to 1% of your loan amount. So, if you
need a $150,000 mortgage and you have to pay one point in fees, that charge
equals $1,500. Lenders refer to points variously as loan-origination fees,
discount fees or buy-down fees.

Like the interest you'll pay each month, points are essentially finance
charges -- only you pay them up front. Lenders blend them with interest rates
to come up with the characteristics of the loan. For example, the more points
you pay up front, the lower the interest rate the bank will charge you over
the course of the loan. Also, like interest, points are 100% tax deductible in
the year you pay them.

There is a science to figuring out how many points you should pay under what
circumstances. Sometimes you can opt out of paying points altogether, taking
higher monthly payments instead. To figure out what makes sense for you, check
out our Points or No Points? worksheet.
Back to Top

6. "How long after I apply will I get the money?"
These days it can take anywhere from two weeks to two months to get a loan
commitment from the bank, depending on how complicated your application is or
how flooded your lender is at the time you apply. If your loan is fairly
standard, you should be able to get a commitment within two to four weeks
after you apply.

Once the lender says it will give you the money, you'll probably still have
some hoops to jump through. Most commitment letters come with certain
conditions that you'll have to meet, like providing more financial information
or submitting to a final inspection of your property.

You won't actually get your hands on the money until you close the deal,
usually a week or two after you get final approval from the bank. Don't
dawdle. Loan commitments expire about 45 days after you receive them and the
rates and terms you agreed to may have to be renegotiated with the bank. All
in all, you should count on it taking six to eight weeks from the time you
apply until the home is yours.
Back to Top

7. "How do I know the house won't fall apart?"
You won't know for sure until you move iWww Findmortgagehomemortgages Tag Falls Find Mortgage Home Mortgages Re: A Home Buying Primer - 未名空间(mitbbs.com)s s Find Mortgage Home Mortgages Comodity Mortgages tWww Findmortgagehomemortgages Tag Falls Find Mortgage Home Mortgages Re: A Home Buying Primer - 未名空间(mitbbs.com)y Robot