[???] Looking into a mortgage loan ... what should I know?

• WebFire

  Sonofanump;1343577 wrote:Any way to borrow the $7 from another source? That PMI is worthless.

  PMI sucks. But how long do you plan to stay in the house? The PMI on this can't be much. It may not be worth borrowing $7k from someone else if you don't plan to stay long.
  
  If you plan on staying, the I would try to avoid the PMI. But it does require the down payment, which not everyone can swing.
• fan_from_texas

  PMI is tax deductible if your AGI is under $110k, I believe. And once you hit 20% equity, it'll come off anyway. On a $35k loan, PMI is probably $30-40/mo. Not a big deal, and if you want to get rid of it quickly, you can pay extra toward the principal.
  
  You should talk to several different banks. They should be able to give you an idea on whether your wife's credit would make much of a difference. I suspect the loan amount is small enough that you'd be better off including her on the loan. You may pay a few more bucks a month, but it will help rehabilitate her credit faster to have her making payments on a mortgage.
• WebFire

  fan_from_texas;1343637 wrote:You may pay a few more bucks a month, but it will help rehabilitate her credit faster to have her making payments on a mortgage.

  From a credit rebuilding perspective, that is a good point.
• fan_from_texas

  WebFire;1343642 wrote:From a credit rebuilding perspective, that is a good point.

  
  I think it's at least worth seeing what the differential is. On a loan of this size, it may be better to pay $10/mo extra and build her credit so they can qualify for better terms on their next home. Obviously, it depends on the differential, but I think it's worth exploring.
• LJ

  

  Sonofanump;1343369 wrote:Do you have $7000 down payment to avoid the PMI? For a $35,000 house can you swing a 15 year loan to get a lower rate?

  
  Spread isn't big enough right now to lock yourself into a higher payment. It's better to try to make it so you end up paying double every year/month when you can.
• fan_from_texas

  LJ;1343686 wrote:Spread isn't big enough right now to lock yourself into a higher payment. It's better to try to make it so you end up paying double every year/month when you can.

  
  This.
  
  Or, for liquidity purposes, rather than paying extra each month, put that extra in the bank, then make a lump payment at year end and ask them to recast the mortgage. Costs $50 or $100 at most banks, but actually reduces your payment going forward. And it gives you a cash buffer should something else come up.
• Sonofanump

  Yeah, you are right, at $35,000 not much for rates and PMI.
• O-Trap

  

  Honestly, you guys have been a big help. We'll be talking to banks this coming week.
  
  Much appreciated!
• Gameover

  Best of luck.
  
  Good info here!
• Sonofanump

  PM me if you want a reference in the area.
• gut

  O-Trap;1344167 wrote:Honestly, you guys have been a big help. We'll be talking to banks this coming week.
  
  Much appreciated!

  Might be the smartest thread I've seen yet
• LJ

  

  fan_from_texas;1343694 wrote:This.
  
  Or, for liquidity purposes, rather than paying extra each month, put that extra in the bank, then make a lump payment at year end and ask them to recast the mortgage. Costs $50 or $100 at most banks, but actually reduces your payment going forward. And it gives you a cash buffer should something else come up.

  A recast on a loan that small is gonna just waste money. If you wait to recast every 5 years or so, your net return will be much greater.
• fan_from_texas

  LJ;1344319 wrote:A recast on a loan that small is gonna just waste money. If you wait to recast every 5 years or so, your net return will be much greater.

  
  Depends on how much extra you have and how much they charge for it. Probably better to wait, but it depends.
• slcoach

  The asking price is $35,000 but is that the appraised value? If the house appraises for 40K and you buy it for $35,000, you would only have to put $3000 down to avoid the PMI. Just a thought.
  
  Also, for what may only be a couple of % points, I would put the wife on the loan to help rebuild her credit. It will make it easier when you want to upgrade in the future.
• gut

  slcoach;1345674 wrote:The asking price is $35,000 but is that the appraised value? If the house appraises for 40K and you buy it for $35,000, you would only have to put $3000 down to avoid the PMI. Just a thought.

  It may have used to work that way, but not anymore. A home these days is unlikely to appraise above what you pay, and even then banks will no longer credit that phantom equity on your loan. PMI will only be avoided here with $7k down toward the purchase price of $35k.
  

  slcoach;1345674 wrote:Also, for what may only be a couple of % points, I would put the wife on the loan to help rebuild her credit. It will make it easier when you want to upgrade in the future.

  Maybe so, but $200 a year is still a decent chunk of money ($1000 over 5 years!). Granted, they are going to be savings a ton vs. what they were paying for rent. Still, there are cheaper ways to rebuild her credit, and time is going to heal that by itself in some regards - over the next 5 years, some bad stuff will fall off while she can also boost her score by other means (paying off student loans, a few charge accounts with spotless history, financing and paying off an auto, etc...)
• LJ

  

  gut;1345680 wrote:It may have used to work that way, but not anymore. A home these days is unlikely to appraise above what you pay, and even then banks will no longer credit that phantom equity on your loan. PMI will only be avoided here with $7k down toward the purchase price of $35k.
  
  

  This. You only get equity on free and clear land value on construction loans anymore.
• slcoach

  gut;1345680 wrote:It may have used to work that way, but not anymore. A home these days is unlikely to appraise above what you pay, and even then banks will no longer credit that phantom equity on your loan. PMI will only be avoided here with $7k down toward the purchase price of $35k.
  
  
  
  
  
  
  
  Maybe so, but $200 a year is still a decent chunk of money ($1000 over 5 years!). Granted, they are going to be savings a ton vs. what they were paying for rent. Still, there are cheaper ways to rebuild her credit, and time is going to heal that by itself in some regards - over the next 5 years, some bad stuff will fall off while she can also boost her score by other means (paying off student loans, a few charge accounts with spotless history, financing and paying off an auto, etc...)

  Then that has changed recently. When I refinanced after my divorce, my appraisal came in at $165,000 and my PMI was dropped. Maybe I misunderstood how that worked on my loan.
  
  I guess I don't see cheaper ways of rebuilding her credit the way a mortgage would. I don't know all the numbers
  as far as how much her score would raise the rate. How much would it increase the rate. 1%? .5%?
• LJ

  

  slcoach;1345734 wrote:Then that has changed recently. When I refinanced after my divorce, my appraisal came in at $165,000 and my PMI was dropped. Maybe I misunderstood how that worked on my loan.
  

  Refi appraisals are different than purchase appraisals.
• slcoach

  LJ;1345742 wrote:Refi appraisals are different than purchase appraisals.

  Got ya!
• O-Trap

  

  At this point, I feel like I'm learning even more than I asked for. Reps to go around.
• gut

  slcoach;1345734 wrote: I guess I don't see cheaper ways of rebuilding her credit the way a mortgage would. I don't know all the numbers
  as far as how much her score would raise the rate. How much would it increase the rate. 1%? .5%?

  Time and a stable history is the best bet. Even a couple tenths could cost them $60 a year or more, x5 years you are talking $300+. It won't really cost them anything to rebuild her score thru other means. And I'm not sure her score would end-up significantly higher being a co-signor to a $30k mortgage, probably not enough to justify that $300 or whatever, anyway.
  
  I'd be interested to see what the experts say on this. But to me it seems like a complete waste of money to put her on the loan unnecessarily (assuming he can secure the loan without her income) just because you want to build her credit score.
• blue_berry

  O-Trap;1343249 wrote:Mine's in the 720-730 range.

  I think you'll do fine if you apply for a home loan. Just put a bit higher amount than the usual in terms of downpayment. Goodluck!
  ________________________________
  http://www.loans-portal.com/non-owner-occupied-mortgage-rates/
• O-Trap

  

  I got pre-approved today. Given the price, my wife and I are going to offer the asking price on the condition that the seller covers closing costs and the inspection fee. Does that sound reasonable?
• gut

  O-Trap;1348417 wrote:I got pre-approved today. Given the price, my wife and I are going to offer the asking price on the condition that the seller covers closing costs and the inspection fee. Does that sound reasonable?

  Sounds reasonable, but banks are sticklers these days so it might not quite play out that way. You might consider that the bank balks and you need to pay your closing costs ($800?) in addition to your 20% down. So between that and the inspection it's instead written-up for $34k and you need $1k for closing and inspection.
  
  Personally this thread started a week ago, so it ain't movin' like it's hot. I'd offer $32.5 and not mess with closing costs. If you close at $34k same thing basically, but I understand the upfront cash is a bit tight.
• LJ

  

  O-Trap;1348417 wrote:I got pre-approved today. Given the price, my wife and I are going to offer the asking price on the condition that the seller covers closing costs and the inspection fee. Does that sound reasonable?

  
  Inspection would be money back, that can get iffy. I think underwriters are usually ok with up to 3% of the contract price for closing costs.