12-21-2012 07:58 AM
I am interested in buying a home and have no idea where to start, people say to contact a reputable lender but where do you start with that when you hear about so many scams?
First I have not found a property, I would like to know what I would qualify for with a low down payment and very good credit with low debt to income ratio. I have long term job history and a fairly good salary unfortunately raising 2 kids hinders a better down payment so I assume since I have not owned a home in the last 3 years, I would qualify for first time home buyer and have the 3.5% down. The problem is closing costs, is there a way to incorporate these fees into a mortgage? I should also state that I would be the only one on the mortgage.
With short sales or foreclosures, are banks willing to pay buyer closing fees? Is that a reasonable request in this market on Long Island?
I don't really mean to sound naive and am trying to determine my options without wasting anyone's time if buying a home is even an option for me, I dream of getting out of the endless money pit of renting.
Any advice or recommendations would be very much appreciated.
Thank you for taking the time,
12-21-2012 09:21 AM
The best choice for financing would be the vetted and reviewed Redfin Open Book listed mortgage service providers. You'll need to work with one either licensed in New York, or someone who works at a bank as they are for the most part licensed in all 50 states. (I'm not BTW - only California so this isn't a shameless plug) If your not finding what you need through Redfin, Yelp! is another resource. Your Realtor will have 2-3 accomplished mortgage professionals they've worked with. Some of your friends may have refinanced their homes successfully with a good mortgage lender. Beware however that most lenders who focus on refinanancing are terrible at closing purchase loans.
No matter how you slice it, you're really paying the closing fees. What do I mean by this? Lets assume a price of your new home is $200,000, the rate available is 4.0%, and the closing fees are $4,000 (2% of the sales price) your options are:
1) Pay the $4,000 cash yourself.
2) Have the seller pay the costs - which often means that you could have reduced the price by $4,000.
3) Have the seller raise the price to $204,000 to pay the costs - which then means you've got a higher tax and mortgage expense over the life of ownership of the property, or
4) Have the lender pay for it by closing at a 4.50% rate - which means you're really paying for the cost of closing with a higher than market rate.
All of these are reasonable and customary ways to pay for closing fees, but the seller or the lender isn't paying the costs, you are in some form. Since buying a home tends to be at a higher cost than already owning a home and refinancing, you might opt for closing your purchase at a higher rate, then if rates are lower in 6 months refinancing into a lower rate. It's risky since no one knows where rates will be in the future, but with mortgage rates as low as they are today, a 1/2 percent change in rates isn't that big of a deal when it comes to wiping out your closing fees. Lay out each option and see what makes best sense for you in the long and short view of things.
Thanks for reading,
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12-21-2012 08:20 PM