Michael

A couple of percent more down payment won't make much (if any) difference but clearing up credit card debt will. First it improves your debt to available credit ratio but also very important, credit card debt is short term debt and has a much greater impact on maximum loan approved than long term debt. Reduce the credit card debt and quit using the credit card for a month prior to approval since a snapshot of your debt is taken during the approval process.

Also you should try to get a pre-approved and not a pre-qualified loan since pre-qualified is below pre-approved when the seller evaluates offers.

GeoffM

I got a bit confused between pre-approved and pre-qualified when with the WF bloke, though I knew beforehand. What I understand we have right now is pre-qualification, but by late this coming week we should have pre-approval.

The reason I asked above increasing the deposit slightly was some idea I had that if somebody looked at, say, 3.5% deposit, they might think we're struggling. But 5% maybe not so much. Just a thought, rightly or wrongly. But yes, generally paying off debt first is always a good thing!

Thanks. Got 5 houses lined up to view tomorrow with a realtor.

Sally Redux

Do you mean the bank or a seller? Seller will only be interested in whether you are approved for the price.

GeoffM

Either really. Anyway, only guesswork on my part!

bewildering

You need at least 5%. The 3.5% is an FHA loan and you really don't want one of those loans. Historically FHA loans were not used much but during the crisis they became the only game in town. Unfortunately that meant major default rates and so they just introduced new rules - tight rules. Mortgage insurance for the life of the loan, higher rates, tight examination of finances.

You should go for the conforming loan at 5% down. That will give you a good rate and the possibility of losing the mortgage insurance after a few years. I think you can borrow up to 417,000 with 5% down?

The more you put in down payment the better the interest rate.

Also, make sure this house is affordable to you. The mortgage people use a formula which overstates what you can afford. And by giving you a value you tend to shop houses to that value.

You should also have money to cover closing costs and some emergency money put aside. Life happens and you do not want to be exposed.

I tend to follow the Dave Ramsey and Elizabeth Warren view of affordability. Google them if you can, it will help you in the long run.

Finally, the pre-approval is nothing compared to the analysis when you actually try to get the loan. They want information on every little bit of comings and goings in your account...

Good luck.

Michael

I'm going to disagree with you. FHA mortgages always required mortgage insurance for the life of the loan. Whether you have 3.5% or 15% down with a FHA loan shouldn't make any difference to the lender since it is government guaranteed and the lender can sell the mortgage to Fanny Mae or Freddy Mac. Interest rates may possibly be higher only because the bank wants to get more money but their risk of not recovering their money is very low.

The part I agree with is that FHA has tight rules about finances but then if the requirements were looser, interest rates would likely be higher.

The same was true about government back student loans that banks were charging 6-7% for risk free loans when they acquired money at near 0% interest rates. Now the government issues those loans directly at much lower rates. The right opposed that move and now want the government to increase their rates to the 6-7%. The right was happy having the government taking all the risk with no rewards but are unhappy about the government not getting 6-7% and still taking all the risk.

GeoffM

Thanks again.

We've found two houses we like (out of 5 we saw today), At this stage we don't see any point in looking at any more so we've made an offer. Even this is more involved than in the UK as we've got paperwork, paperwork, and paperwork to e-sign!

One question on it though: "Seller to pay 3% of buyers recurring and non-recurring closing costs". Is that normal wording where I want the buyer to pay for my realtor? What I don't want to happen is that the realtor charges $8k and the seller happily pays 3% of $8k, ie $240.

Is there a recommended level of home inspection? For example in the UK I think the most basic is "does the house exist", right through to somewhat more intrusive inspections. The house is in residential desert and the offer at the moment says the seller will pay for a wood pest report, and for the septic tank to be pumped and certified.

Michael

.
Typically the seller pays 100% of the real estate commission for both the buyer and seller agents (up to 3% each). If the home is listed for sale by owner, usually they don't have a selling agent.

There is a possibility that the seller is also willing to pay up to $8,000 (3% of the sale price) for your closing costs.

Your agent should have gone through the contract with you if there were any out of the normal charges or reimbursements. Since you are confused, contact your agent.

Since the termite inspection (an overall inspection) is paid for by the seller, read the report carefully. The owner can possibly ask the inspector to not inspect certain things but that will be reported on the report. If there is an entry like that on the report, hire your own inspector to inspect everything.

GeoffM

Well, yes and I did do that, but I want a completely independent opinion! She might be my realtor but at the end of the day her main goal is to make money, which is fair enough. That alone makes it sensible (IMHO) to seek impartial advice!

Ok. I notice that the seller would pay for anything in stage 1 (evidence of infestation) but the buyer would pay for anything in stage 2 (risk of infestation). That sounds reasonable as to me it seems pretty much like general preventative maintenance.

Having re-read your recommendation, do you mean the report produced after the inspection? So if the owner asked the inspector not to look at X, that will be specifically noted on the report (and a big red flag), and I should just pay for my own report regardless? Just making sure I understand.

Sally Redux

I would say that is different from paying for the realtor.
You need to pay for your own inspections.

Home inspection will cover the fabric of the house, electrics and plumbing. It seems wise to have foundation and roof checked also.

GeoffM

Hmm, so I need to get that reworded? Googling "what are closing costs" it doesn't seem to include realtor costs. Eek.


Yes, I didn't say that this was the (pre-)chosen option on the form I have not yet signed. Ok, so I need to make sure those are inspected.

Sally Redux

Your agent should be able to tell you how he/she is getting paid.

Michael

Stage or category 1 problems are critical problems such as termite problems, structural problems, electrical wiring problems, serious plumbing problems, etc.. Stage 2 could be anything from beer cans in the crawl space to a missing cross member under the floor. Usually only category 1 problems are required to be fixed prior to sale.

If something is not inspected, it has to reported at the beginning of the report. Some people jump over that section and just look at the reported problems.

bewildering

Yelp or get a referral for a good home inspection person. You won't get a loan without a home inspection and appraisal, you pay for both. I also paid a plumber to check the pipes, but that is because they are cast iron and coming to the end of their life (it passed).

Make sure to get a good termite inspection report. They also check for fungus and rot. Crucial in CA. As an example their first termite guy missed water damage in our house The 2nd identified it and saved me lots and lots of money.

Good luck

GeoffM

Thanks. The realtor has just confirmed in writing that the seller will be paying her fees.