Will Banks Give Me a Loan Under My Current Situation at a Decent Rate?

[Symphony7X]

Originally Posted by Pfhtex

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Holy hell that's a long post


Long story short, is it significantly better in your opinion to wait until I can put down 10% or is 5% about the same thing?

[Pfhtex]

[quote=Pfhtex;36053586]Answers first:
1) Right now, 4.25%-ish. Your mileage may vary. Single family house? Condo?

2) 10% your cash down, First Mortgage for 80% of the price, Second mortgage for 10% of the price, this means you do NOT have to pay Private Mortgage Insurance. Second Mortgages can be a line of credit, at Prime +1% or somesuch, or a Fixed loan that has a payment that is calculated as if it were a 30 year mortgage, but there is a balloon payment in 15 years. Typically people pay these smaller loans off at an accelerated rate.

3) Let's go low-end: $6k per month x 45% debt ratio = max of $2700, consisting of all debts on the credit report, and the House Payment (inclusive of property taxes, homeowners insurance and Mortgage Insurance, if that is included)

4) Let's get inside the numbers.

If you did it now:

I'm going Ugly on your property taxes at $6k a year, shouldn't be more than that. Ballparking Homeowners insurance at $75 a month, again your mileage may vary.

5% down on $250k = $12,500 down payment. Maybe you can negotiate that the seller pays closing costs (property taxes, 14 months of homeowners insurance, Title and Bank fees)

Property taxes are due twice a year: march 1 and some time in the Fall that varies ( :: Cook County Treasurer's Office - Chicago, Illinois :: )

So depending on your closing date you MAY have to pay up to 6 months of property taxes, AND pay into your escrow account an additional 2 months. Worst case property taxes due at closing = 8x500=$4,000.

Also due at closing: 14 months of Homeowners Insurance. Based upon my absolute guess of a $900 Premium, that's $1050 due at closing.

Title fees: Figure $2300 due from you. I used a $250k price in Des Plaines here: Error .

Bank fees will be $1500 at the MOST.

So 4000+1050+2300+1500 = $8850. OUCH, right? More than likely, your Property Tax hit will not be that large. Again, this is Worst Case Scenario.

So if the seller does NOT pay your closing costs, a 5% down scenario = about 20 grand out of pocket.

So: 95% of $250k = a $237,500 Mortgage

Let's just plug in 4.25%. Again, worst case scenarios, at least for now.

$1169 BASE payment, just on the money itself.

Add in $500 per month for Property Taxes and that $75 Homeowners Insurance cost.

Sub-Total: $1,744.

BUT: You're not putting 20% down in this scenario, so you will pay $108 per month for private Mortgage Insurance. I use the calculator here: http://www.radian.biz

1744+108 $1852 per month if you did it now, until the loan balance is less than 80% of the value of the home.
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NOW: I can't begin to predict the future, but the economy at home and unrest overseas both suggest a continued landscape that includes rates near where they are now. So, for gigs, let's pretend rates are exactly where they are today, when you are ready to buy with 10% down.

$250k price. DP= $25k. (Closing cost estimates the same.)

First mortgage = $200k (80% of the price), at 4.25% = $983 per month

Second Mortgage: A couple ways to go with this. Look into a Line of Credit, or HELOC, and also look into Fixed Seconds. I'm just using numbers I know on recent deals.


Let's go with a Line of credit. It will start at the 10% amount of the price, or $25k in this scenario. For the first ten years you can pay it down, and run it back up like a credit card, or pay the thing off entirely. The first ten years will be Interest Only payments on the balance at, say 5.25%. Starting at $25k that is a minimum $110 per month payment, but that's only interest, you gotta pay more if you wanna pay it off. Interest only calculator here: Interest Only Mortgage Calculator

(yes it's higher because of the RISK, but it beats paying mortgage insurance - - or does it? I think it does, you make the call.)

$983 1st mortgage
$110 2nd mortgage
$500 Property Taxes
$75 Homeowners Insurance
$1,668 TOTAL Payment (more if you want to pay the 2nd mortgage down or off faster.)



AND: If there is an HOA that is paid separately, like quarterly or something.


Points to consider:

It's a total coincidence that Mortgage Insurance above and HELOC payment below are nearly identical.

Who knows where rates will be in January, or whenever.

Save yourself from Hell and avoid Major Banks such as Chase, Wells and B of A. Also, do not apply online to companies like Lending Tree. Avoid Quicken. Talk to a human being in an office, look them in the eye, and see if they can spell "to" and "their" in proper context. See if they answer your calls. Find a couple professionals who fit these criteria, and THEN compare their terms at the same time. That means ask them for their terms within an hour of each other so you see a true comparison.

NOTE: Not a big rate difference between a 5% and 10% down payment. The big difference is that 2nd mortgages are not available at an overall 95% position, so a 5% down payment rules out a 2nd mortgage.[/quote]


Answer added.

[Pfhtex]

I can't tell you what's better. You know the ballpark numbers now, it looks like you CAN be pre-approved. Find a lender you trust, start looking at houses, and ease into it. It might take six months to find the right home!