Morgage Advice

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WhiteDice
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Morgage Advice

Post by WhiteDice » Mon Jan 09, 2017 10:20 pm

I am not a regular viewer of this forums but it is the first place I come to when I need some financial help. Im hoping I can get some advice on a mortgage, and I certainly appreciate your help.

I am in a position where I will be looking to purchase a home in the next 2-6 months probably. I spoke with my credit union this past weekend and was able to gather some information. I am looking at pretty much anything in the 50-100,000 range. Realistically, I dont think I could manage anything over 100,000 for any long period of time unless I jumped to a 30 year loan and I dont want to do that. I would be thrilled if I could find a cheap house for 50,000 and go with that, but I might end up having to spend more just to find something that is reasonably priced and not a money pit.

However, and I guess this is my question for you all, I don't think I will qualify for a loan. Bank said a credit score of 640 was needed. 3 months ago I got my first credit card, but at the time I got that my credit score was 0 so Im sure I havent built it up that much in such a short time period. Bank recommends taking out a 6 month loan against my vehicle but thats just insanity in my eyes. Why would I pay money to get a loan plus pay interest? Anything I can do that isn't going to cost me money to boost my credit score quickly. I would be content just letting it build slowly with my credit card if it weren't for the short time frame that I am looking at.

Also, any other advice for a first time home buyer? Any considerations I should make in finding a place that works as both a house and an investement? Ideally I could find a place that I can pay off quickly because long term goals include owning land and building. Gotta get past this first step though.

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warowits
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Re: Morgage Advice

Post by warowits » Mon Jan 09, 2017 11:08 pm

Your credit score doesn't start at 0, have you checked what your actual score is? Many credit cards allow you to check your score for free once a month, maybe check with yours. Knowing what your actual score is would get you better advice from the forum. Also there are credit score improvement forums you could check.

As for buying a home, don't buy something that you won't be happy with long term just because it is cheap, and don't spend so much you can't save for retirement and still have enough to live on.
There are an army of people whose pay checks depend on convincing people to invest in ways that are against their self interest. This forum is the volunteer army that fights back!

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CaliJim
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Re: Morgage Advice

Post by CaliJim » Mon Jan 09, 2017 11:45 pm

First: being a Californian, I had to check.... where can you buy a home in the US for under $100k. You can't buy a closet for under $100k in my neck of the coast. Well... turns out you can still buy a home for under $100k that isn't places that are not Detroit. Article here: http://www.realtor.com/news/trends/ten- ... easy-buys/ Who knew?! :wink:

Second: The advice to borrow some money and then pay it back is not a bad way to build your credit score. If you borrow $5k at 4% for 6 months, the interest would be $100. That is less than a trip to Home Depot... and as a home owner... you may be making those trips at least once a month. Might be worth doing to prove you are worthy credit risk

Which brings me to point #3

Third: Home ownership comes with lotsa other expenses. Make sure you factor all those things in as well. Consider the furniture, cost of water, power and utilities, trash collection, fire insurance, internet, telephone, property tax, landscape maintenance (even if you do it yourself, lawn mowers are not free), home maintenance (ie.saving for repaint every 10 years, appliance replacement every 10-20 years, roof replacement every 15-30 years, plumbing repairs, etc,) etc etc. These figures could add up equal a $400/mo mortgage payment on a $80k mortgage.

Fourth: To find a place that works as an investment also - find a property in a neighborhood that has low rental vacancies. What rents do similar homes in the neighborhood command? My concern would be that a place that costs under $100k might be pretty far away from good jobs, and might not have a very good rental market. Also check the crime maps for the area.
Last edited by CaliJim on Mon Jan 09, 2017 11:52 pm, edited 1 time in total.
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Watty
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Re: Morgage Advice

Post by Watty » Mon Jan 09, 2017 11:51 pm

WhiteDice wrote:Any considerations I should make in finding a place that works as both a house and an investement?


Being a landlord is not for not for everyone but one option would be to buy a duplex or triplex and rent out the other units.

I would assume that you are relatively young and just getting started out. One big hidden cost of home ownership is that it makes you less mobile and that can be a big problem if you get a promotion or find a great new job that is fifty miles away or even on the other side of town but it has a really bad commute.

WhiteDice
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Re: Morgage Advice

Post by WhiteDice » Tue Jan 10, 2017 8:27 pm

Well, I tried to figure out my credit score today. Went to the annual credit report site to get my 3 free reports. 2 out of the 3 did not allow me to view them online, apparently I answered some questions wrong? The third I was able to view, however there was no actual score available. So now I am not sure what to do. If I am close to having a credit score that allows me to qualify for a mortgage, I hate to take out a loan against my vehicle. But then again, even if I am not close I still hate to do that. Its just a little frustrating I suppose that I have been financially responsible throughout my life (although growing up I had no expenses), saving up cash to pay for school, never buying something I don't have the money for, and now it ends up being a negative.

There is always the possibility that I could borrow money from my parents at a similar interest rate as the bank. Going this route would be beneficial in that I would not have as high of closing costs from a bank. Would still pay for home inspection, that sort of thing. However, in this scenario my parents are taking on the full risk of the loan at a minimal interest rate considering a time frame of 15 years. Additionally, I do not know if I have to go through an approved lender in order to qualify for grants and first time home owner programs, I assume this would be a requirement?

fcb
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Re: Morgage Advice

Post by fcb » Tue Jan 10, 2017 10:47 pm

WhiteDice wrote:Also, any other advice for a first time home buyer? Any considerations I should make in finding a place that works as both a house and an investement? Ideally I could find a place that I can pay off quickly because long term goals include owning land and building. Gotta get past this first step though.


Some banks offer community lending products for folks that are purchasing in low income census tract or earning less than 80% of the county's median income. Call at least half a dozen lenders (Banks, credit unions, mortgage brokers) to understand their fees and see if they are running any promotions. Lenders are not your friend, they are sales people and are incentivized to make the sale. The main difference between the mortgage lender and the guy selling stereos at Circuit City is the ticket price of the underlying goods (and that Amazon hasn't put the banks out of business...yet). After closing, you will rarely (if ever) interact w/ your mortgage broker again. Remember that most people live in their first home for far less than 30 years (I've read averages as low as 5 years and as high as 13 years). Regarding the property, understand the HOA Covenants (if any exist). HOA fees are not necessarily a bad thing as a strong HOA helps maintain the value of the homes. Look at the grade of the lot - it is the lowest laying lot in the hood and thus water will pool in your front / back yard? Look at the ceilings - any water stains potentially from leaking roof, etc. Know the age of the roof, age of the water heater and age of the furnace. If you don't know the age of the water heater, see if it is rusting anywhere. How well insulated is the house... do you want heating / ac bills of hundreds of dollars each month? Do you get good cell phone reception in the neighborhood? If it has a front / back deck, look at the wood to see how soon the boards may need replacing. Does the subdivision have more than one entrance? Is it a bear to get out of during rush hour? Is the neighborhood predominantly renters who don't give a darn about the area, who park on their front lawns and play loud music all night (i.e. bad / nonexistent HOA) or does everyone park in their driveways (good HOA). If this is a long-term hold, it's oftentimes better to buy the worst house in a good (elementary) school district than a decent house in a mediocre school district. Hope this helps.

Novine
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Re: Morgage Advice

Post by Novine » Tue Jan 10, 2017 10:58 pm

"Went to the annual credit report site to get my 3 free reports. 2 out of the 3 did not allow me to view them online, apparently I answered some questions wrong? The third I was able to view, however there was no actual score available. So now I am not sure what to do."

These sites don't provide a credit score for free. They allow you to view your credit reports for no charge. Those are two different things.

What's the rush to buy a house? Instead of rushing to pull the trigger on a major financial decision, slow down and spend some time to learn what you don't know right now.

WhiteDice
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Re: Morgage Advice

Post by WhiteDice » Tue Jan 10, 2017 11:14 pm

Thanks for the tips. I guess I left out quite a bit of information that might be useful.

I currently am renting in a small town. There is a fairly large demand for rental properties because there are 3 decent sized manufacturing facilities. So much so that an outside company is currently putting up brand new duplexes for rent, which means any of the old smaller houses for rent are going to be a lot less desirable I think. Not sure how this will effect housing.

But anyways, I have been at my job for maybe 6 months, but I really enjoy working here and can see myself staying in this town for a good duration of time. It has good benefits, good work schedule, and good pay. Staying in my field, I dont think I will find anything better.

Any house I look at in this town will be less than a 10 min commute to work. I like the idea of living in this town because I save travel expenses and I am able to go home for lunch everyday instead of eating at the office. However, there are surrounding locations that offer a lot more in terms of housing than this town does.

And finally, financially I might be able to qualify for some of the lower income grants because I only have a half year of pay in 2016. Currently I am paying roughly 500 per month on rent, 130 bills, 500 savings, and the rest goes to living expenses and entertainment. I think with a 15 year loan on a 100,000 morgage I would be looking at roughly 1,000 mortgage a month with taxes, insurance, ect. I would have to cut the majority of my entertainment but I would still be able to save 500 month for home repairs and expenses. Ideally I can find a place that is livable that costs less, but 100,000 is my max.

Hopefully this gives you guys a better idea of my situation, and a big thanks for the tips so far.

WhiteDice
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Re: Morgage Advice

Post by WhiteDice » Tue Jan 10, 2017 11:24 pm

Novine wrote:"Went to the annual credit report site to get my 3 free reports. 2 out of the 3 did not allow me to view them online, apparently I answered some questions wrong? The third I was able to view, however there was no actual score available. So now I am not sure what to do."

These sites don't provide a credit score for free. They allow you to view your credit reports for no charge. Those are two different things.

What's the rush to buy a house? Instead of rushing to pull the trigger on a major financial decision, slow down and spend some time to learn what you don't know right now.


Oh, well that makes sense. I seriously did not know that so thanks for sharing. Is there anyway I can obtain my credit report that is legit? Those free online scores always seem fishy to me but I have never considered my credit score before so this is kind of new.

As far as my rush to buy a house. Well, there are two reasons. First, I feel like I am just throwing money away on rent. I have rented long enough that I know I want to stay at this job, and so I figure I might as well get into a house.

Second, and the real reason for the 2-6 month timeline, will probably seem silly to most but it is important to me. I moved out a while ago from parents home but left my dog with them. Still able to go back on weekends to visit a lot. However, they are moving to a new city and renting for a while themselves while they make the transition. My dog won't go with them, and the place I am renting does not allow pets. So either I move to a new rental (not easy to find), only to move out again shortly when I am able to buy a home, or I find a way to purchase a home now. I think its financially viable for me, just not sure if I can qualify for the loan. Might seem silly to make large financial decisions based on a pet, but this dog is worth more than just money to me.

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CaliJim
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Re: Morgage Advice

Post by CaliJim » Wed Jan 11, 2017 12:26 am

WhiteDice wrote:
Novine wrote:"Went to the annual credit report site to get my 3 free reports. 2 out of the 3 did not allow me to view them online, apparently I answered some questions wrong? The third I was able to view, however there was no actual score available. So now I am not sure what to do."

These sites don't provide a credit score for free. They allow you to view your credit reports for no charge. Those are two different things.

What's the rush to buy a house? Instead of rushing to pull the trigger on a major financial decision, slow down and spend some time to learn what you don't know right now.


Oh, well that makes sense. I seriously did not know that so thanks for sharing. Is there anyway I can obtain my credit report that is legit? Those free online scores always seem fishy to me but I have never considered my credit score before so this is kind of new.

As far as my rush to buy a house. Well, there are two reasons. First, I feel like I am just throwing money away on rent. I have rented long enough that I know I want to stay at this job, and so I figure I might as well get into a house.

Second, and the real reason for the 2-6 month timeline, will probably seem silly to most but it is important to me. I moved out a while ago from parents home but left my dog with them. Still able to go back on weekends to visit a lot. However, they are moving to a new city and renting for a while themselves while they make the transition. My dog won't go with them, and the place I am renting does not allow pets. So either I move to a new rental (not easy to find), only to move out again shortly when I am able to buy a home, or I find a way to purchase a home now. I think its financially viable for me, just not sure if I can qualify for the loan. Might seem silly to make large financial decisions based on a pet, but this dog is worth more than just money to me.


Have you tried calling the telephone support numbers for Equifax, Experian and TransUnion. It takes forever to navigate their phone tree - but it may be worth the effort.

If you have never used a credit card - it may be that they simply don't have a file open on you - and that may be the reason behind your problem getting a credit report from them.

FreeCreditReport.com is a subsidiary of Experian - it is legit.

Taking out a loan on your car is not the only way to build a credit history. Talk with a bank manager where you have a checking/savings account. Ask about getting a credit card with them. Then buy gas and groceries using the card and pay it off every month. Some say even pay the minimum payment and then pay it all off a week later, to establish better credit. There are many sites on the internet where you can get advice on how to build your credit. Bogleheads may not be the best source for that type of info.

Mortgage brokers don't only look at credit scores. Stable work history and reliable income stream is also important, as is the loan to value ratio. The bigger the downpayment, the lower your mortgage interest rate, and the less risk there is for the bank to loan you money. So scrape up more than 20% down.
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Ace$
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Re: Morgage Advice

Post by Ace$ » Wed Jan 11, 2017 12:10 pm

We haven't borrowed money in a number of years now, but we do keep a Discover Card which I use for business travel, online purchases, and recurring monthly charges which we payoff bi-weekly. I chose this card because it provides our FICO score on-demand. You could possibly get that car and your credit score will steadily increase over time.

As far as securing a mortgage loan quickly, a short-term (15-year) loan with a strong down payment (20% or more) that results in an affordable payment (25-35% of take-home pay) would qualify you at most lenders that do manual underwriting.

But, to be direct, I would probably recommend you get a full year on the job and a full year living in the area to make sure a home purchase is the right decision.

WhiteDice
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Re: Morgage Advice

Post by WhiteDice » Wed Jan 11, 2017 7:19 pm

Ace$ wrote:As far as securing a mortgage loan quickly, a short-term (15-year) loan with a strong down payment (20% or more) that results in an affordable payment (25-35% of take-home pay) would qualify you at most lenders that do manual underwriting.


What exactly is manual underwriting? How exactly would I find a lender that does this? I am unfamiliar with pretty much all aspects of mortgages but in particular manual underwriting. I might struggle to make a down payment of 20% but I think that might be achieved quicker than a 640 credit score.

Ace$
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Re: Morgage Advice

Post by Ace$ » Wed Jan 11, 2017 7:35 pm

WhiteDice wrote:
Ace$ wrote:As far as securing a mortgage loan quickly, a short-term (15-year) loan with a strong down payment (20% or more) that results in an affordable payment (25-35% of take-home pay) would qualify you at most lenders that do manual underwriting.


What exactly is manual underwriting? How exactly would I find a lender that does this? I am unfamiliar with pretty much all aspects of mortgages but in particular manual underwriting. I might struggle to make a down payment of 20% but I think that might be achieved quicker than a 640 credit score.


You'll typically find this at a smaller local bank or credit union. Most underwriting is done by computer nowadays. Your application is plugged in, ratios calculated, a credit score pulled, and a decision made primarily based on what is spit out. Manual underwriters will typically be a person calculating ratios, reviewing your credit report (as opposed to just looking at the score which may or may not be a good indicator of creditworthiness), and reviewing the characteristics of your application.

You might just conduct an internet search for "manual underwriting" and see what pops up.

Easy Rhino
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Re: Morgage Advice

Post by Easy Rhino » Mon Jan 16, 2017 5:49 pm

Still sounds like you're rushing it. I'd use some time renting (500 rent makes me jealous) to save up for a home down payment and let your credit score build up. Probably need to give it a year.

You can get a free credit score from credit karma

And 30 year mortgage are common for a good reason; it's hard for the average working person to afford the payment on a shorter mortgage.

And seriously, owning a home is mind bogglingly expensive. Realtor fees, repairs, property taxes, dumb things like curtains....

Maybe you can find a place for rent that allows pets.

Grt2bOutdoors
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Re: Morgage Advice

Post by Grt2bOutdoors » Mon Jan 16, 2017 6:39 pm

Easy Rhino wrote:Still sounds like you're rushing it. I'd use some time renting (500 rent makes me jealous) to save up for a home down payment and let your credit score build up. Probably need to give it a year.

And seriously, owning a home is mind bogglingly expensive. Realtor fees, repairs, property taxes, dumb things like curtains....

Maybe you can find a place for rent that allows pets.


+1 - My advice, is WAIT. Wait until you've saved more money. A real test is to artificially crimp your spending as if you were living with a mortgage, skipping entertainment and restricting all discretionary expenses. See if you can swing that for a few months, then if you feel comfortable go ahead and explore a purchase.
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jono1337
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Re: Morgage Advice

Post by jono1337 » Thu Jan 19, 2017 10:07 pm

I'm an underwriter (the person who actually approves the loan) at a large mortgage lender so i think i can lend a little bit of info here that might help you. If you're looking for a conventional mortgage, you are going to need a 620 FICO minimum (thats the minimum specified by Fannie Mae and Freddie Mac - if you find a bank that will give you a conventional mtg with under 620 you are looking at a portfolio loan for that bank i.e. they will probably never be able to sell it to anyone so they will charge you a higher rate and/or you will pay more points).

Once you have an acceptable FICO score the more important thing is going to be your income and employment history. Your debt to income ratio is going to need to be under 45% (sometimes we can go up to 50%, but lets just say 45% for simplicity sake). That is, whatever your monthly debts are including your new mortgage payment, taxes and insurance and HOA dues if applicable, will need to eat up 45% of your gross monthly income or less. Credit score is not as important in the mortgage business as other types of lending since there is legitimate collateral. You can have a FICO of 580 or less and qualify for FHA loans from many lenders.

In my opinion, the best 0 cost way to build up your credit would just be to buy everything with your credit card and pay the who statement balance off immediately once you get the statement. That way you don't incur any interest but the credit card reports a balance and payment to the credit bureaus. Even then though, that will take time and its tough to build up credit with only 1 trade line. Manually underwritten loans often have minimum trade lines requirements (for instance, an FHA loan if it is being manually underwritten) so you may be required to provide proof of rental payment history, utility history ETC, as needed to show alternative/non traditional credit history.

It seems to me like it might not be such a bad idea to sit back, save up some CASH, build up your credit history a bit and wait for a good purchasing opportunity to come to you. 100 bucks in interest for that car loan may not be an awful cost if it saves you .25% on a mortgage rate for having better credit. The biggest mistake you can make, IMO, is buying a house that you might not be able to comfortably afford just because you feel like you have to buy a house. That is how people get stuck in a money pit or get in over their heads. It never hurts to be patient, especially if you can build up your credit and cash over a few months that way you are ready to roll quickly once a good opportunity presents itself to you.

Jack FFR1846
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Re: Morgage Advice

Post by Jack FFR1846 » Thu Jan 19, 2017 10:25 pm

There are a few ways to get your credit score. creditkarma.com is the easiest and is quite thorough. I also get it from my credit union, from Citi credit card and from Discover card. They'll all be different, but should be close enough.
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