Buying the House... Part 4!

>> 7.21.2009

WOW! I'm really on my way...

Like I mentioned in part 3, I actually had an appointment with a lender last Friday! About 30 minutes after filling out the online form, the lending agent called me to set up an appointment. (I think the difference here was that I filled the form in as if I was ready to buy a house that day instead of within a few months... which I am) Luckily, my work schedule is flexible so I could go to meet her at 3:00 that afternoon.

When I arrived at the appointment, she asked me a few questions to verify the information that I filled in the online form and immediately began entering in the information into the preapproval form (it was for an FHA loan). As she continued through the form, I came ac cross some decisions that I wasn't exactly prepared to answer.

Since my credit is above 660 (it's 775), I qualified for really good interest rates. What I had not thought about was whether or not I wanted to pay extra in upfront fees (2 points) to get a 4.85% rate or if I wanted to pay less in fees to get a slightly worse rate... 5-5.5%. The decision I ended up making was to get a 5% rate and pay 1.5 points upfront. This made the difference of thousands of dollars upfront, but only $10 per month in mortgage costs. I decided that I can just add the extra cash into my emergency fund and I'll think of that additional $10 as an "insurance" payment. [side note: my parents said that they had a 16% interest rate back in the 80's!]

I was also a little unprepared in making the decision of my down payment amount. Leading up to this purchase, I always thought that I would put at least 10% as a down payment. I figure that this would lower the monthly payments and get me a better interest rate. What I didn't realize was that the FHA loan would only require 3.5% down while giving me the best interest rates. It might have been with an extra push from the lender, but I decided to go with the minimum of 3.5%. The lender explained to me that I could estimate $7 per month difference for each $1000 I put down. So, I made the choice again to keep more cash in my funds rather than save and extra $50-70 per month.

When it came time to add all of the numbers up, I was so happy that I decided to buy a house at this point!! After closing costs, down payment, and other fees, I'll be spending about $8000 to get into the house. This money will be completely returned to me next year when I file for the stimulus tax credit! Also, my monthly payments will come out to be about $1000 (including insurances) which is how much my place would go for in rent. After looking at the numbers, I would strongly encourage any first time buyer who has savings in the bank and a secure job to look into making this the time they buy a home. *I'm still not a professional, that's just what I would tell my friends

After initialing and signing all of the papers that she presented to me, I realized how so many people got into the problems with the adjustable rate mortgages! As a first time buyer (who has been researching home buying for a while), I wasn't as prepared with all of the answers as I thought I would be and I found myself trusting my lender to guide me through some pretty major decisions!

So, by the end of the day, I had already paid $500 in fees (appraisal) to get the process started. It looks like I'm committed to this home buying thing! My lending agent gave me a list of forms to copy and fill out. I gathered all of the information over the weekend and I'll turn them in today. Hopefully all goes through with the loan and I'll have a house next month (*crosses fingers)!!

How did your first meeting with a lender go? Are there things that you wish you knew ahead of time?

4 comments:

Lisa July 21, 2009 at 7:00 PM  

How exciting! It sounds like you are certainly doing all the right things. Have you picked out a house yet? You must post lots of pics so we can all oooh and ahhh!LOL It's kinda like a new baby.:)

thriftylittleblog July 22, 2009 at 1:36 PM  

@Lisa Yep, I have the house! I'll post plenty of pics when I've closed on it.

Debbie July 30, 2009 at 11:45 PM  

We are just about at the same point in home buying... my inspection is tomorrow for my future house.

I had applied for the FHA loan as well, but she said the USDA loan worked better for me. It is for 0% down, but I'm paying $10,000 down just to lower my monthly payments a little. I pay $950 a month for rent on the 3 bedroom house I live in, so paying $1050 a month shouldn't make that much of a dent in my budget. :) (It also includes all the taxes and such)

I also qualify for the $8000 credit when I file my taxes, which makes me super happy!

I can't wait to see photos of your house! I have mine posted on my blog.

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