Q&A ABOUT HOME LOANS WITH CALEB OUR MORTGAGE GUY!
FAM! We finally did it! We closed on our first home October 18th and couldn't be happier. But let me tell ya....this has been a process. To be completely transparent with y'all, we did end up switching loan officers at the last minute. It was something that kind of just fell into our lap and we ended up getting a MUCH better interest rate than before - so we were thrilled!
So a while back I asked on Instagram to send me your questions about the home buying process in regards to loans. Well the time has come for the answers to finally be here! Caleb Heaton of Great Plains Bank in Frisco not only helped us but went ABOVE AND BEYOND throughout this process. As in, he went out of his way to call us and walk us through line by line of our home loan to make sure that we understood what every item meant as well as to ensure that there was nothing 'snuck in'. That was a HUGE comfort point for us because buying a home is a big deal! Anyway, we don't get any kick back from promoting him we just genuinely believe in supporting a local business that truly cares about their customers.
So let's get started with this Q&A!
What are all the fees for closing costs?
This can vary depending on the situation, type of financing, who you are buying from, etc, etc. I have attached two worksheets. One is FHA and one is conventional financing on a 350k purchase price. These two programs are what most people use when purchasing a home.
2. Are there hidden fees?
Not if you go with someone you know is honest, informative, and you as the consumer take the time to become an informed consumer and ask questions when you don’t understand.
4. What are the different mortgage options?
Conventional, FHA, VA are the typical options. In Rural areas there is USDA. If you are above a 484,350 loan amount then you need a Jumbo or “portfolio loan.” If you have credit issues then there are subprime loans
5. Are there resources for first time buyers?
Yes, FHA is a great program for that. Conventional also has a 3% down option as well. There are down payment assistance programs however I am not an expert in them. I find most of the time the cost associated with participating isn’t attractive, but if you don’t have the down payment and you don’t want to save then you can go down that path.
6. How much is a down payment?
If you are a doctor, veteran, you are in a USDA area with an income below the 80% of the HUD median income, or you qualify for down payment assistance (most of the time the income limit is 80% of HUD median income along with a bunch of other stipulations) than the down payment is 0%; you just have to cover closing cost.
For most people it is 3 – 3.5% down payment minimum.
7. How important is credit when you buy a home?
How important is it to repent for your sins?
8. Is it really less expensive to own than to rent when you add all the fees associated with home buying costs up front?
This is a great question. If you are in it for the long haul then you will make money on your home if you take care of it. If you are going to be moving in and out within 5 years you might make money you might lose money; if you’re comparing it to renting you will probably make money. Depends on the market. When you own a home however you can move out of your home and rent it instead of selling it. I know many people who have done this. They are on their 3rd and 4th home now and the profit they make on the other homes pays a big chunk of their mortgage payment…cause you know they upgraded. They also get tax write offs, etc, etc. But when buying a home there are costs. When selling a home there are costs so make sure you have the long game planned out. If you are in a situation you don’t know where you are going to be living in 2 to 3 years then renting is most likely the best deal for you unless you are going to go the buy your home and rent it out later plan.
Also rates are low right now. Rent goes up, fixed mortgage rates don’t.
9. What are interest rates?
This changes daily…sometimes multiple times a day. The rate today at 11:53AM on 10/18/2019 for a 30 year fixed conventional is 3.875% with zero points if you have a 740 FICO and are putting 5% down, 3.5% on an FHA loan.
10. How do I know how much home I can afford?
Generally speaking you take your total debt including the new mortgage payment and divide that by your income. That is called the debt to income ratio. Very generally speaking it needs to be below 45%. Total debt = loan payments, credit card payment, basically anything that would show up on your credit report. This doesn’t include food, insurance payments, utility payments, etc, etc. Just loans, lines of credit, and other reoccurring debt which most of the time shows up on the credit report.
I hope this Q&A helped you understand a little bit more about the not-so-scary home buying process! Feel free to message me or Caleb if you have any further home buying questions!