(Posted in Lounge, too.)

We've begun the process to buying our own home and naturally have a lot of questions. The last several months have been paying things off and getting rid of unnecessary stuff, etc. I know there are tons of you who have purchased homes/condos/townhomes, some pretty recently and we could use your help with some questions.

My mother is a mortgage broker/loan officer but she lives in Florida and I live here in Austin, Texas. She can't do the loan for us as her company won't allow her to due to the fact it bridges their ethical guidelines as we're family. We have to therefore go through someone else, but she's helping as best she can to find us someone out here through contacts she has. I believe I found us a lender through Jeremy's work program for first-time buyers and I'll run that by her, so that helps too.

Now our questions are:

1) I know most home loans have 4 parts: principal, interest, homeowner's insurance, property taxes. Therefore, some people pay their property taxes monthly along with their mortgage payment (if in escrow to the mortgage company) and some pay all at once to the tax collector in one lump sum at the end of the year. I would think the once a year would be more advantageous, but would like some opinions on both methods if you can.

2) Homeowners Insurance - what are some good, reputable companies? Any particular type of insurance we should make sure that we ask for (like GAP insurance on a car) that they may not mention upfront? I've heard about umbrella liability and flood insurance, but any others?

3) Any other icky-stickies we may need to know would be great.

Thanks!

 

The mortgage co. you go through may depend on where you buy your house. we bought our house in September of last year and by going through the lenders the builder wanted us to we got a good rate, plus they paid all of the closing costs. We didn't have to put anything down. We put $700 down to make sure we got the house we wanted and we got that back at the closing. We bought our house through Pulte. We had never bought a house so we had a realtor friend walk us through it. he couldn't beleive how it worked. Some crazy deal where they donate money to a charity and the charity gave us 3K to put down. Our friend said it was all legal, but the word he used was "ingeneous". Just saying don't get stuck on a lender until you find a house and see what the options are. We would have spent 10K more if we went through a private lender.

Also, if you happen to buy a Pulte home they gave me a $1000 gift certificate to give to someone, I'd be happy to send it to you. Every little bit helps!

One more thing as I ramble, make sure you can explain everything thathas gone on with your bank accounts. My wife put $700 in my account to cover half the rent in our apartment and she had to write a letter stating why!

 

You have the option to do either one. I find it easier to wrap it up in the monthly note so you don't have to worry about the big sum at the end of the year. It would be hard for me to come up with it at once and pay that months bills also.

Check with your car insurance company. They will usually carry home owners insurance. Usually it is very cheap also. Considering the house does not move anywhere....lol. Also see if you are in a flood zone. Your insurance will go up or you will have to carry flood insurance. If you are in a flood zone, see if the house has ever been flooded. I looked at buying a house one time and started checking into it and found out it had flooded twice.

Be prepaired to fax this and that over and over, and the phone calls of we need this or that. It got so bad I couldn't stand it anymore and told them to just **** off and was wasn't going to buy the house now. Make sure your loan officer is a nice person. Mine always wanted to call my wife instead of me. My wife would tell him to call me and he never would. Another reason for the FO treatment.

Thanks! [/QUOTE]

 

I wouldnt know. But i just wanted to say congrats and good luck with the house

 

Yeah it is alot of running around, faxing work history, W2's for the past two years, paycheck stubbs from the past six months, everything but your blood type. But you are spending 70-250,000 $$$ probably. People are going to have questions, And are going to want quick respones. It is well worth it when you pick up your keys for YOUR HOME! The hardest part is going to be finding the house you want to buy. Take your time reserch the city, schools, dont forget to make sure they sell beer in this city.
Germania insurance is who I went with for home owners insurance, They crushed everyone!!!!
Good Luck
Steve

 

My wife and I bought our first house in June of last year. It is a long, tedious, p.i.t.a. I did learn some things that could be useful.
1.) Pinch everything you can get out of the builder. Fans, flooring, window treatments, wall colors, etc. I made them re-paint the whole house, add 2 fans, add more tile, put up blinds, pay origination fees and most of the closing. Remember, the longer the house sits, the more it costs the builder. The interest they pay is outragous. So, sometimes when you say you will close on the home earlier, the more willing they are to cooperate with you.

2.) Decide on what loan you want. Some builders will pay a lot of the fees if you go with their lenders. Find out how much you have to put down. Sometimes there are specials where you don't have to pay anything or very little. If not, you may have to do an 80/20 or an 80/15/5. 80% financed 20% down or 80% financed for 30 years 15% financed for 15 years and 5% down. If you put 20% down, you don't have PMI, which is private mortagage insurance...in other words paying them money to finance you..by putting the 20% down it saved me almost $300 a month. Make sure you don't have PMI.

3.) Insurance...I used Alamo Insurance...they were the cheapest and I shopped about 5 companies. You will usually pay a years taxes at closing...I am very glad I did it, for I still have a couple months left not to worry about it.

4.) Paying the taxes is very debatable. I chose not to put it in an escrow. I take the money out everymonth and put it into a savings account that earns interest for me...not the mortagage company. You will get back any taxes that were due from when the house was built to when you bought it from the builder. At the end of the year, you will get a homestead exemption form from the city, and it allows you to use this exemption to your advantage...it is usually between 15%-20% off of your taxes.

5.) Make sure you get an inspector out to the home to make sure everything works externally and internally. Make sure he is reputable and goes over everything with a white glove.

Just make sure that everything is covered. And don't get discouraged if you don't close on your close date. Mine got pushed back twice.

Hope it helped.
John

 

I had an escrow account for years. It is gteat until there is a property tax hike or an insurance rate hike. The escrow seems to lag a year.

What that would mean is if in 2003 there was a $100 hike in taxes, I would pay the calculated 2002 rate to my escrow account for all of 2003. When the 2003 taxes were paid, the shortfall was added to 2004 escrow payments along with the new calculated tax rate. In effect, I would pay $200 for the year of 2004 and then it would fall back to the actual rate in 2005.

This porpoising caused havoc with budgeting, auto deduct/auto pay and irritation in general.

So, the last refi I did, I chose to NOT use an excrow account.

I set up a separate savings account. In 2004, I knew EXACTLY how much my property taxes were and I knew EXACTLY what my homeowner's insurance is. I added the 2, divided by 24 (how many pay periods I have), added 20% and have that amount auto transferred each paycheck.

The 20% addition is a pad for changes in tax or insurance rates, insurance deductibles if needed and/or home repairs if needed. There is nothing cheap about repairing a home.

I highly recommend this approach ....

Without a doubt ... Germania.

After having State Farm, Farm Bureau and Farmers, Germania has the best rates, the best customer relations and the easiest claims department available.

 

Old post, but what the heck...

Mitch: Is there any advantage to using an escrow account, assuming you are good at keeping a budget? Doesn't seem like it.

Also, how can you figure out your property taxes? County website?

Trying to figure this out before I get blind sided.
Ryan

 

You might try Fannie Mae for the home loan. They have a good reputation. Other than that, I don't have a clue.. I have an apartment :-\

 

Ryan, no advantage that I can see. I did it for years. At times it was great and other times it was a nightmare.

The "pad" that I referred to is now over $3000. I haven't had any claims in 3 years and it really ads up quickly. We are gonna use part of it to paint the living area.

Taxes are public record. A lot of counties have websites that you can go to and look up yours and your neighbor's appraised value.

One other thing ...

Lowering debt is a very good thing and allows you to get more "value" out of your borrowed dollar.

However, make sure the accounts are CLOSED. A zero balance on a credit card that has a $5000 balance is considered a $5000 hit on your debt load. It will lower your credit score.

 

Mitch,

Thanks for the info. However, I always understood that closing old CCs was a bad idea because it makes your debt:credit ratio look worse. I won't pretend to know exactly how it works, though.

Regarding credit and home loan approval, is it much more strict that an auto loan, from a credit score point of view? For example, my credit was in the top tier when I went to get a loan approved for the car. I think it was 710-720, and my fiancee has similar credit as well. Would we stand to get a better rate even though we have pretty decent credit?

Ridding ourselves of our debts before we move forward into a home/marriage is a priority, but if there is more to gain (tenths of a point make a huge difference at this level!), then we have more incentive to get things paid off.

Ryan

 

I guess things could have changed in the last 18 years. It was 1988 when I applied for my last mortgage.

I have refinanced a couple times since then, but a loan application is VERY intrusive.

Good luck on everything ...

 

Thanks for the info . I'm just chipping the iceberg so I'm not sure how anything works .

Ryan

 

Be careful when you are getting pre-approved to buy a home. They will always finance more than you can afford! I have no idea why but they do. As for escrow, they usually will hold extra in the account (there is a law stating it cant be over a certain amount but i dont know it) for higher taxes/insurance. My lender actually requires an escrow account too but not all companies do. For the credit, they are much more lenient when purchasing a home. You can explain all your mishaps on your credit report/score. They dont just look at your credit score. If you have a credit score in the 700's and you have not made a late payment in the past 12 months, you will be good to go. Im sure alot of this will be dependent on the company you chose but that is how mine worked out and i just purchased my home a year ago. Oh yea, one more thing. Dont change ANYTHING on your credit unless your lender tells you to. If you find a good company, everything will go smooth. The hardest part is going to be finding the house you want or having someone build it properly.

Good Luck
Bobby

 

Hey Bobby,

Thanks for the warning . I didn't mean to come across like I was worried about how much i might be able to get approved for. I was more concerned with credit score /available APR. My fiancee and I are definintely looking to stay within a budget regardless of what is exended to us.

We aren't looking to be "house poor." For the first year we are expecting to carry a monthly "note" (planned expenditures) of 1-300 bucks on furnishings and decor. That's my way of saying "cool stuff for the garage" .

Ryan