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First Time Home Buyer- Running thread

The last post in this topic was posted 1333 days ago. 

 

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Applied for preapproval with Navy and the local place yesterday.

Both have already responded with follow up docs needed.

 

755 TU score. I guess that is an 04 score?

Make sure with NFCU that you understand the discount points and origination fee that come with the rate they give you.

 

That's obviously advice for anywhere, but especially with NFCU. For these sample rates linked below you are paying lender fees equivalent to 1.5% - 1.75% of your loan amount, which is awful (unless you loan is pretty tiny). Presumably your third-party fees are additional, which would make these some expensive originations!

 

EDITED TO REMOVE LINK

 

 

 

I got my preapproval letter from Navy even though I haven't submitted by W2s yet.

1.0% origination fee and 1.25% discount points.

Haven't had time to read through it all yet to figure out what it means, but I know that's close to $7,000 in fees.

 

 

 

Seeing a couple places with the agent tonight.

Hoping I don't try to kill her or my fiancé.

Edited by CreditNewb15

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Applied for preapproval with Navy and the local place yesterday.

Both have already responded with follow up docs needed.

 

755 TU score. I guess that is an 04 score?

Make sure with NFCU that you understand the discount points and origination fee that come with the rate they give you.

 

That's obviously advice for anywhere, but especially with NFCU. For these sample rates linked below you are paying lender fees equivalent to 1.5% - 1.75% of your loan amount, which is awful (unless you loan is pretty tiny). Presumably your third-party fees are additional, which would make these some expensive originations!

 

EDITED TO REMOVE LINK

 

 

 

I got my preapproval letter from Navy even though I haven't submitted by W2s yet.

1.0% origination fee and 1.25% discount points.

Haven't had time to read through it all yet to figure out what it means, but I know that's close to $7,000 in fees.

 

 

 

Seeing a couple places with the agent tonight.

Hoping I don't try to kill her or my fiancé.

 

 

As expected. You need to very carefully compare the costs from one place to another, including the upfront fees and the interest you will pay for the time period you expect to have the mortgage.

 

We recently paid a higher origination fee than others were charging on a refi, but we got a great rate (1.99% on a 3/1), so we recouped the additional fees in interest savings in just a few months.

 

It's easy to get lost in the numbers...

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Thankfully shifting numbers around is what I do for a living, so as long as I know what they represent, I'm good.

 

Thanks for the clarification.

 

Great, should be a piece of cake for you. Many people shut down when you try to go beyond the monthly payment. :P

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I talked to a few people I know about ARM options and they flew off the handle about how terrible they are.

 

I don't really get it though. It's just a risk assessment, right?

You pay less now and potentially/probably a lot more once it resets. Do most people just refi or sell at that point?

 

I'm considering it only because I'm very nervous about depleting savings while moving into a new house. I know there will be massive expenses I'm not prepared for.

Trying to hoard as much cash as possible now, and wanting to work out the undesirable stuff down the road.

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I talked to a few people I know about ARM options and they flew off the handle about how terrible they are.

 

I don't really get it though. It's just a risk assessment, right?

You pay less now and potentially/probably a lot more once it resets. Do most people just refi or sell at that point?

 

I'm considering it only because I'm very nervous about depleting savings while moving into a new house. I know there will be massive expenses I'm not prepared for.

Trying to hoard as much cash as possible now, and wanting to work out the undesirable stuff down the road.

Great question - here is my take as someone who worked through the melt down and saw what higher risk loans can do and how they impact everyone

ARMS can be a very udeful tool for those that are ready and willing to take the risk - but only when that risk is worth the reward -

Right now we are seeing historically low rates - because of this it makes sense to lock in to a fixed rate now - if you can get a 30 yr mortgage in the 3's you should never need to refi as long as you own that home - if you grab an ARM (just saw that the 10 yr arm for Jumbos up to 80% was in the mid 2's) you will save money every month but at the end of the term there is almost zero chance rates will go lower so you will see an increase to your payment - that adjustment is going to be capped but if your rate can adjst 1% a year thats a big jump in payment - why risk that when you can get that fixed rate now and not have to worry -

 

For JUMBO loans the ARM is probably the better option but I would always recommend the 5 or 10 yr -

 

If you are confident and have ran the numbers it is your call but because of what I shared many banks do not offer them - especially for loans that are in the conventional loan limit range -

Good Luck whichever way you go

 

B

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I talked to a few people I know about ARM options and they flew off the handle about how terrible they are.

 

I don't really get it though. It's just a risk assessment, right?

You pay less now and potentially/probably a lot more once it resets. Do most people just refi or sell at that point?

 

I'm considering it only because I'm very nervous about depleting savings while moving into a new house. I know there will be massive expenses I'm not prepared for.

Trying to hoard as much cash as possible now, and wanting to work out the undesirable stuff down the road.

 

 

Now that I've done a couple of ARMs I regret the fixed rate mortgages I've done. Of course, the environment for most of the past X years has been one of declining or static rates. I had a 5/1 ARM adjust downward when the 5 years elapsed, and it saved me money every single month.

 

For your own risk analysis, consider:

 

- How likely you are to have the home for 30 years.

 

- There are ARMs with fixed-rate periods of 1, 2, 3, 5, 7, 10 and 15 years (and probably others).

 

- When the fixed rate period expires there are multiple possible outcomes: the rate could stay the same, it could go down, or it could go up (likelihood and amount is unknown, but will likely vary by term the rate is fixed).

 

- If rates goes up considerably, you can mostly probably refinance. At that time you may be ready for a 20-, 15- or 10-year mortgage term. You may want another ARM at that time. Even though all of the rate options may be higher than today, your payment may not change much because your new loan amount will be lower.

 

- There are some options out there that let you re-lock your interest rate for another fixed term (at then-current ARM rates) without the expense or hassle of a refinance. We did one of our refinances this summer with Third Federal, who offers this option. Rates dipped a little before the second payment was due, so we simply wrote a check for $295 and signed a single piece of paper to change our rate from 1.99% to 1.74%, which was locked in for the next 36 months without changing the end date of the 30-year mortgage term.

 

We just refinanced both homes, and this time around ARMs in both circumstances were no-brainer decisions. We have relatively short timeframes for paying off both, if we don't sell one or both homes first.

Edited by cv91915

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Thanks for the detailed replies there.

 

I more than likely won't do an ARM because I honestly just don't know how long we'll be in this house. If I had to guess I'd say 5-10 years.

Even if I did 100% financing, with the way this area is exploding, I don't even think it would take that long to break even.

 

And now we're looking at a new build more than likely.

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So we've decided to go with a new build.

As expected, it's more complicated than I initially thought.

 

 

Here's what we're expecting from an FHA loan:

3.5% down - not sure when this is due yet, assuming it is due at contract signing?

roughly 3% closing costs - not sure when this is due yet, assuming after construction is complete?

1% earnest money (which gets credited towards closing costs) - due when contract is signed

appraisal- "rolled into lender fees"? I'm guessing this gets added to the loan amount

 

 

One thing that I did not expect, and am not sure if this is typical, is that the builder does not communicate our requests to the subcontractors- we have to do that with each sub.

I find that irritating, considering everything has to be approved by the builder anyway.

Edited by CreditNewb15

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So we've decided to go with a new build.

As expected, it's more complicated than I initially thought.

 

 

Here's what we're expecting from an FHA loan:

3.5% down - not sure when this is due yet, assuming it is due at contract signing?

roughly 3% closing costs - not sure when this is due yet, assuming after construction is complete?

1% earnest money (which gets credited towards closing costs) - due when contract is signed

appraisal- "rolled into lender fees"? I'm guessing this gets added to the loan amount

 

 

One thing that I did not expect, and am not sure if this is typical, is that the builder does not communicate our requests to the subcontractors- we have to do that with each sub.

I find that irritating, considering everything has to be approved by the builder anyway.

Your down payment and closing costs will be paid when you close on your home after its completed - the Earnest money will show as a credit on your closing disclosure (CD). The appraisal costs will be included in your closing costs and will also be shown on the CD.

 

The CD will detail all costs and the source of funds and who pays which costs. They just updated them so they should be even easier to understand than the HUD-1 forms previously used.

 

Every builder will do things differently.

Edited by tiggerlgh

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So we've decided to go with a new build.

As expected, it's more complicated than I initially thought.

 

 

Here's what we're expecting from an FHA loan:

3.5% down - not sure when this is due yet, assuming it is due at contract signing?

roughly 3% closing costs - not sure when this is due yet, assuming after construction is complete?

1% earnest money (which gets credited towards closing costs) - due when contract is signed

appraisal- "rolled into lender fees"? I'm guessing this gets added to the loan amount

 

 

One thing that I did not expect, and am not sure if this is typical, is that the builder does not communicate our requests to the subcontractors- we have to do that with each sub.

I find that irritating, considering everything has to be approved by the builder anyway.

Your down payment and closing costs will be paid when you close on your home after its completed - the Earnest money will show as a credit on your closing disclosure (CD). The appraisal costs will be included in your closing costs and will also be shown on the CD.

 

The CD will detail all costs and the source of funds and who pays which costs. They just updated them so they should be even easier to understand than the HUD-1 forms previously used.

 

Every builder will do things differently.

 

 

Thanks so much, that was really helpful.

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I'm generally a pessimist and try to assume the worst or be ultra conservative in my estimates, but this is exceeding all of that.

 

I'm looking at 3 different mortgage options. I'm hoping someone can correct my assumptions and/or help me with the math here.

This is all assuming a $300,000 home. Just to make the math easier.

 

Navy 0% Down.

- 1% origination fee ($3,000)

- 1.75% funding fee ($5,250) OR .325% interest points

- 3% closing costs ($9,000)

- 1% earnest money that is put towards closing ($3,000)

Total cash out of hand: $17,250 OR $12,000

 

*no PMI

 

 

 

Navy FHA

- 3.5% down ($10,500)

- 1.75% UMIP ($5,250) OR roll into loan

- 1% origination fee ($3,000) OR .25% interest points

- 1% earnest money that is put towards closing ($3,000)

- 3% closing costs ($9,000)

Total cash out of hand: $27,750 OR $22,500 OR $19,500

 

*PMI for life of loan

 

 

 

The third option is with the recommended lender I mentioned earlier.

I still haven't gotten my official preapproval letter from them yet, but it would also be an FHA loan.

I'm thinking it will look like this:

 

Recommended Lender

- 3.5% down ($10,500)

- 1% earnest money put towards closing ($3,000)

- 1% towards closing FROM lender ($3,000)

- 3% closing costs ($9,000)

Total cash out of hand: $13,500

 

*unsure of PMI

 

 

 

 

 

 

Am I thinking the right way? Will the FHA loan from the recommended lender also have some of those fees?

Edited by CreditNewb15

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I think NFCU rolls the origination and funding fees into the loan. Obviously it costs you money, but it isn't money out of pocket.

 

You should try and figure out an estimate of PMI and compare numbers until you would have enough equity to refi and get rid of PMI.

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I think NFCU rolls the origination and funding fees into the loan. Obviously it costs you money, but it isn't money out of pocket.

 

You should try and figure out an estimate of PMI and compare numbers until you would have enough equity to refi and get rid of PMI.

 

 

Even the origination fee for the 100% Homebuyer's Loan?

I will try to estimate PMI when I find out the actual cost of the build. I might* have that piece of information as early as this evening.

 

 

 

I would also try to compare total out of pocked over the life of the loan or how ever long you expect to be there vs just the upfront costs.

 

Oh, there's no doubt that rolling the upfront fees into the loan is a poor financial idea. As in, over 30 years, I'd pay more money for the same house than I would if I just paid the upfront fees and/or money down.

I don't think we'll be there more than 10 years.

 

 

 

 

 

Ideally, I'm trying to figure out what I would end up with in the bank if I went with least amount possible out of pocket and what I'd end up with in the bank after FHA options.

Then compare that to the rates and potential PMI.

And find a happy medium where I'm comfortable with payments and "cost" of the home that's balanced with money still in savings.

 

 

 

 

I think in the end I'm going to be more comfortable with a heftier savings account than with a lower interest rate or lower overall mortgage.

Edited by CreditNewb15

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Yes, that's rolled into the loan IIRC. Call them to confirm.

 

Trying to "chat" with them online. I see that you can trade the origination fee for .25% on your rate as well.

Trading both fees would lead to a .575% rate jump. :swoon:

 

 

 

EDIT: The 1% origination fee cannot be rolled into the total loan amount. You CAN get the fee waived for .25% interest points. The 1.75% funding fee CAN be rolled into the mortgage for no interest points.

Edited by CreditNewb15

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What are the interest rates on these options?

 

Do you need to escrow for taxes and insurance? If so, you'll also have to come up with 1-? months of reserves for those, based on when you close. You will also need to pay some prepaid interest that will accumulate before your first payment is due.

 

What are the third party fees for title, appraisal, flood, credit, tax, etc.?

 

You really don't have enough data to start comparing.

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What are the interest rates on these options?

 

Do you need to escrow for taxes and insurance? If so, you'll also have to come up with 1-? months of reserves for those, based on when you close. You will also need to pay some prepaid interest that will accumulate before your first payment is due.

 

What are the third party fees for title, appraisal, flood, credit, tax, etc.?

 

You really don't have enough data to start comparing.

 

I really conflated two issues here, so let me clarify.

 

The taxes and insurance will be the same amount over time, whether you escrow or don't. If you lender requires you to escrow these, you need to factor that into the upfront cash required. The prepaid interest also falls into the cash upfront category.

 

As for comparing the costs of loan itself you need to have a good estimate of all the third-party and lender fees, the PMI amount and the interest rate. You need all of these to figure out the total cost of the loan over X years. If you can get rid of PMI at some point, factor that into your calculations beginning at the time you realistically believe it can be eliminated.

 

if you haven't already, whip out Excel. You're going to need it.

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What are the interest rates on these options?

 

Do you need to escrow for taxes and insurance? If so, you'll also have to come up with 1-? months of reserves for those, based on when you close. You will also need to pay some prepaid interest that will accumulate before your first payment is due.

 

What are the third party fees for title, appraisal, flood, credit, tax, etc.?

 

You really don't have enough data to start comparing.

 

I really conflated two issues here, so let me clarify.

 

The taxes and insurance will be the same amount over time, whether you escrow or don't. If you lender requires you to escrow these, you need to factor that into the upfront cash required. The prepaid interest also falls into the cash upfront category.

 

As for comparing the costs of loan itself you need to have a good estimate of all the third-party and lender fees, the PMI amount and the interest rate. You need all of these to figure out the total cost of the loan over X years. If you can get rid of PMI at some point, factor that into your calculations beginning at the time you realistically believe it can be eliminated.

 

if you haven't already, whip out Excel. You're going to need it.

 

 

 

Thanks.

You're right with the first post though- I don't have enough data yet.

Waiting on the formal letters that will come within the next couple of days hopefully.

 

I have an idea of what to expect, but I don't know what will actually turn out. So, I wait and see.

I put everything in Excel. I don't even use Word for Word docs anymore.

 

We're estimating all the "closing costs" will be about 3% which I believe includes the taxes, insurance, and prepaid interest.

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Is it normal to not get anything in writing until we forward the signed contract to the lender?

 

One of the lenders is telling me that everything is good and gave me a worst-case scenario in payment over the phone, but I don't have a preapproval letter from them.

Said that once they get the contract they could write me something up.

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Is it normal to not get anything in writing until we forward the signed contract to the lender?

 

One of the lenders is telling me that everything is good and gave me a worst-case scenario in payment over the phone, but I don't have a preapproval letter from them.

Said that once they get the contract they could write me something up.

http://www.consumerfinance.gov/askcfpb/1995/what-is-a-loan-estimate.html

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