Homebuying Questions

[merithyn]

I'm offering more for two reasons: One, I need them to cover the $7000 closing costs, and two, I want the furniture.

So, by offering $210,000, I'm asking them to cover $2000 of the closing costs and give me the furniture for free.

cc, I'm not sure that I can come up with $2000 in a week for the earnest money right before I move across the country. Hence, my request to lower it to $1000.

How much of the price are you getting financing for?

$203,000 (I'm putting down $7000 downpayment.)

[Barrister]

I'm offering more for two reasons: One, I need them to cover the $7000 closing costs, and two, I want the furniture.

So, by offering $210,000, I'm asking them to cover $2000 of the closing costs and give me the furniture for free.

cc, I'm not sure that I can come up with $2000 in a week for the earnest money right before I move across the country. Hence, my request to lower it to $1000.

How much of the price are you getting financing for?

$203,000 (I'm putting down $7000 downpayment.)

Okay.  I was worried you were maybe trying to 100% finance it which had me worried.  I mean you're still quite leveraged here, but not insanely so.

Any reason you can't get $2000 from the amount of your downpayment?  Assuming "earnest money" is a deposit it's money that goes towards the total sale price so you'd have to pay it sooner or later.  Otherwise your reasoning makes sense.  Closing costs seems really high to me, but that's from comparing doing residential RE deals in Canada vs the US so I probably shouldn't say anything.

[Tamas]

Wait in the US&A you can get a loan with, what, a 3.5% deposit? Nice, I like. I think?

[crazy canuck]

Wait in the US&A you can get a loan with, what, a 3.5% deposit? Nice, I like. I think?

And the interest is tax deductible.

[Tamas]

Wait in the US&A you can get a loan with, what, a 3.5% deposit? Nice, I like. I think?

And the interest is tax deductible.

OH COME ON.

You could only do that here when buying property to let out thereby blocking off more people from owning their own home. But that's been removed now I think.

[merithyn]

Okay.  I was worried you were maybe trying to 100% finance it which had me worried.  I mean you're still quite leveraged here, but not insanely so.

Any reason you can't get $2000 from the amount of your downpayment?  Assuming "earnest money" is a deposit it's money that goes towards the total sale price so you'd have to pay it sooner or later.  Otherwise your reasoning makes sense.  Closing costs seems really high to me, but that's from comparing doing residential RE deals in Canada vs the US so I probably shouldn't say anything.

What do you mean "quite leveraged"?

The earnest money would go toward the downpayment at closing, so I'd have to bring $5000 to the table that day. But again, I don't want to be cash poor when I'm moving across the country. I'd rather just give them $1000 now and $6000 at the closing in December.

I asked my mortgage broker what the average closing costs were in Illinois, and he said that we should expect 3.5% for closing costs, plus the downpayment. So, basically, $7000. A Google search says closer to 2% - 3%, which at the largest amount is still ~$6000.

[HisMajestyBOB]

Wait in the US&A you can get a loan with, what, a 3.5% deposit? Nice, I like. I think?

Some banks even offer no down payment, though credit requirements are generally higher.

You also have to pay a small mortgage insurance premium if the loan to value is above 80%. For conventional loans, the premium goes away when you get down to 80%, but not for FHA. You can refinance the loan at that point though.

[merithyn]

Wait in the US&A you can get a loan with, what, a 3.5% deposit? Nice, I like. I think?

It's a special kind of loan called an FHA. My credit is good enough to get it to 3.5% downpayment, but a lower credit score would require 5% down. As a first-time homebuyer, I qualify.

[merithyn]

Wait in the US&A you can get a loan with, what, a 3.5% deposit? Nice, I like. I think?

Some banks even offer no down payment, though credit requirements are generally higher.

You also have to pay a small mortgage insurance premium if the loan to value is above 80%. For conventional loans, the premium goes away when you get down to 80%, but not for FHA. You can refinance the loan at that point though.

Of course, once I get to that point, I'm fairly sure that my interest will be higher than 2.5%.

[Grey Fox]

Around here, we don't have closing costs.

[Admiral Yi]

I'm surprised the FHA allows that small a down payment.

[Oexmelin]

Around here, we don't have closing costs.

Yes we do. It's the notary fees...

[merithyn]

I'm surprised the FHA allows that small a down payment.

Yup.

FHA Loan Requirements
Important FHA Guidelines for Borrowers
The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders. FHA insures these loans on single family and multi-family homes in the United States and its territories. It is the largest insurer of residential mortgages in the world, insuring tens of millions of properties since 1934 when it was created.

FICO® score at least 580 = 3.5% down payment.
FICO® score between 500 and 579 = 10% down payment.
MIP (Mortgage Insurance Premium ) is required.
Debt-to-Income Ratio < 43%.
The home must be the borrower's primary residence.
Borrower must have steady income and proof of employment.

[DGuller]

Holy fuck, you can buy a house at 33:1 leverage ratio?  That seems like an unwise policy.  Maybe we need to move this discussion to AR's thread about the last bubble.

[Grey Fox]

Only 580 needed for the lowest down payment. Wow.