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Old 08-18-2010, 01:01 PM
Location: Downtown Raleigh, NC
2,086 posts, read 7,014,615 times
Reputation: 1299


The murky waters of home loans have my head spinning. I've been trying to research as much as possible, but everything seems to be somewhat vague. In the time it has taken for us to figure out what we need to do, the house we wanted to make an offer on has already gone under a contingent contract, so now we are pretty bummed out by the whole process.

I'm really not sure what route we should take. I have a good amount of money saved for a down payment and have been offered a monetary gift from relatives to contribute to our down payment. We most likely would be putting 20% down on a loan ~$200k. I'm thinking a fixed rate, 30 year loan would be best. My fiance is a veteran and has received his VA qualification letter (but that has its own confusing elements).

My fiance and I have very different credit situations. I have no debt, pay off my credit card each month, and have an "excellent" credit score. He has a car loan and student loan, had a few credit issues many years ago, has no credit cards, and has a "good" credit score.

1. My fiance's best friend is a mortgage banker in another state. He cannot work for us in NC because of the laws here. He said we could apply for loans in several different ways, such as just me, just him, or the two of us together. What are the pros and cons of the two of us applying together considering our different credit situations?

2. I know being pre-approved is almost a necessity. However, I'm concerned about getting pre-approved and then not finding a house within the timeframe the pre-approval is good for. Would this affect our credit scores for future applications?

3. I completely don't understand how anyone is able to estimate the true cost of purchasing a house. I know how much money I have for a down payment and how much I'm keeping as my emergency savings cushion. But what the heck about closing costs, fees, etc.? It seems as though you would need to know those outright in order to truly know what you can afford, yet only estimates are provided up front. I looked at the Wells Fargo Morgage Toolbox that kind of estimates all those things and it really just made me even more confused. My "down payment" allowed me to "afford" a certain price house, but the closing costs added nearly $5k to up front money - eating into my emergency savings, which I'm not willing to do. So that really means we need to look at a lower purchase price than what most of the calculators are telling us are affordable, I guess...

4. Shopping for a lender. Where to start? We were told that we should try to work with a mortgage "banker" if possible. What exactly is APR (I've seen so many explanations on lenders' websites, but none really clicked with me)?

5. FHA and VA loans - are they worth it? What are the pros and cons?

Sorry for being long winded! Can anyone help clear the water for me a little? Thanks!

Last edited by miamiblue; 08-18-2010 at 01:09 PM..
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Old 08-18-2010, 02:04 PM
28,449 posts, read 72,693,835 times
Reputation: 18469
Default I'm in a good mood...

Most of this stuff is pretty easy to find online. One of the better sites fir this type info is at Your Page Title where the is link that is list of arti clew for "first time home buyers". I recommend you read ALL the info there, but I will summarize your questions as best I can.

Start with "affordability" -- use the calculators but, as you learned BACK OFF so that you can maintain you 20% down AND be prepared to pay closing costs out of pocket WITHOUT depleting your total cash reserves. The calculator is more of a "hard ceiling" and in the current environment you probably can get sellers to contribute to closing costs, but for peace of mind / no heartbreak do not shop at the top of your range...

Do not worry about pre approvals "expiring" as long as your situation dies change ( job loss, new car, added family members to support) the basics will still be valid. Getting a formal pre-approval from ONE AND ONLY ONE lender is fine, but you should be fully familiar with both mortgage brokers, large nationwide lenders, smaller regional banks, credit unions and other sources of mortages. You should ask the kinds of questions that will allow you judge which local office / representative will be responsive, relaible to get you from accepted offer to close in a smooth way...

Your pal is probably overly technical in suggesting that you run the loan w/o spouse. The hassle of that is rarely worth the savings unless their credit is truly awful, further their income will almost certainly be vital to qualifying for loan big enough to afford home. Instead spend time getting both of your credit reports from the free government site. If any false info is hurting your reports take the time to correct it...

APR is simply the Annual Percentage Rate and it must be calculated w/o incentives. It is the only real rate to compare loans.

Generally folks that are eleigible for a VA loan and are willing to pay a little higher rate to have a smaller / no downpayment. The loans are also assumable, which means if you sell down the road and rates rise significantly that would be a huge plus to other buyers. FHA is the other major way for folks that do not have full downpayment to still get into a house. The organizations for Vets are great resource to explain specifics.

Should be a solid start...

Good Luck!
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Old 08-19-2010, 08:14 AM
Location: Downtown Raleigh, NC
2,086 posts, read 7,014,615 times
Reputation: 1299
Wow, thank you so much for the info and the website. I've been reading the website, and so far it has been very informative, with all the information in one place.
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Old 08-19-2010, 03:47 PM
Location: Plano, Texas
1,676 posts, read 6,535,262 times
Reputation: 688
If you plan to put down 20%, you should consider doing a conventional loan and not a va loan. Conventional loans offer the same rate as VA loans, but when you do a VA loan you have to pay an additonal 2.15% of the loan amount as a upfront fee to VA. You wont have to pay this on conventional.

Also, VA will require you escrow taxes and insurance but you have a choice not to if you do a conventional loan. However, a VA loan would be much better for you than a FHA loan.
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