Home loan

[nightrythm]

Can anyone explain this stuff to me in an easy way? I've read everything and I'm still confused.

Why can't I just go in and say, I can afford to spend $x a month on my home (mortgage/insurance/taxes etc.) and I have $x to put down, how much money can I get?

Math is hard and I wanna go shopping, but I can't without doing the math first. *grump*

Comments

[stacymckenna.livejournal.com]

well, there are four big numbers associated with calculating loans:
down payment
monthly payment
interest rate
loan amount

You've only spec'd two so far. The banks, obviously, have control over the interest rate and from that you can calculate loan total. For starters, assume 6% (it's higher than what I was recently quoted for a refi on a 30yr fixed, but it'll give you a conservative estimate which means some breathing room).

This calculator may come close to what you're looking for. Remember, even if YOU think you can spend 45% of your income every month on mortgage/tax/ins, the banks won't let you. You will be capped by income ratios (we were, darn it all - that spare $10K woulda been handy).
http://www.mortgage-calc.com/mortgage/howmuchborrow.html

[stacymckenna.livejournal.com]

or try this one (it updates every time you change an input value) http://www.mortgageloan.com/calculator/mortgage-qualifying-calculator

[stacymckenna.livejournal.com]

the more I look at this, the more I find your question is unanswered because you can not dictate to the bank "I can afford $x every month" - they really don't operate that way. THEY tell YOU how much they will allow you to afford every month... (granted, in the recent past these numbers have been ridiculously high, but the calculators are all designed based on this approach)

[nightrythm]

I have no problem with having the bank look at how much I think I can afford and then they tell me sure, or no, we think you can only afford $x. But there are still to many unkowns and incomprehnsibles in this process.

[stacymckenna.livejournal.com]

This is why you hire mortgage and realty people. You ask questions until they eliminate the unknowns. If you don't interact well with the first one you talk to, find another until you match with one you like.

[nightrythm]

Hire mortgage people? Is there some source outside of the bank/credit union?

[stacymckenna.livejournal.com]

Mortgage Brokers act much like insurance brokers or investment brokers/financial advisors - they know the products out there so you don't have to study and scratch your head over the offering of every single bank or lending institution you can think of, going nuts in the process. http://en.wikipedia.org/wiki/Mortgage_broker
http://www.wisegeek.com/what-is-a-mortgage-broker.htm
They often work on commission, but they have to provide you with something you like, so it's in their interest to not offer up crap you could easily best by hunting on your own.

Many realtors have mortgage lenders they will recommend because they've worked with them before successfully (remember, it's a boon to the realtor to have a well connected, efficient, not-screwing-customers mortgage broker as well, because escrows are less likely to fall through, meaning commissions/fees for the REALTOR happen faster, too).

[nightrythm]

Thanks!

[nightrythm]

Funny, I'm not willing to spend more than 24%. :-)

The mortgage calculator has exactly what's frustrating me about this whole process. It wants an amount for property taxes and hazard insurance. How am I supposed to even begin guessing if I don't know what house I'm getting, or in what neighborhood?

[stacymckenna.livejournal.com]

Those numbers are usually based on percentages. If you know how much you're putting down, you know how expensive the house is. In LA Co, tax is 1%. Ins is usually 1/2%

[nakeygirl.livejournal.com]

I found the mortgage calculator frustrating as well. What it really came down to was to talk to the bank. Then, they will ask you for a bunch of paperwork- bank statements, paycheck stubs, tax forms etc. the tell you how much they'll lend you based on down payment and what they decide you can afford.

[deliriumx.livejournal.com]

I picked up a couple library books to help figure some of this stuff out. And once I had a good grasp of the terminology I attended a seminar offered by my credit union where I learned useful things like that they will base financing off the lower of the two credit scores between you and your spouse. And as I understand it, the seller pays for the buying agent, so there is no reason not to get one.. of course you don't want the buying & selling agent to be the same person.. bit o' conflict of interest there.
Good luck!

[stacymckenna.livejournal.com]

we actually did a transaction on this house where the buying/selling agent was the same person - she sold both this and our house so we could move next door. We were not really in the market to buy at the time until the house next door went on the market, so J walked over and talked to her about it, and boom, she had twice as much work to do to get this house sold. It worked out ok because there really wasn't anything complicated *we* wanted out of the neighbors before we moved, but typically speaking, yeah, not the wisest option. ;)

[stacymckenna.livejournal.com]

Oh, and for library books, here's some recommendations. There's always the Dummies series - they have volumes on "Home Buying" and "Mortgages". The book I recently read about Neighbor Law was published by Nolo who also has "How to Buy a House in California" and "Nolo's Essential Guide to Buying Your First Home". I've read none of the books I'm currently recommending, but the series are good in general. You might even consider reading Neighbor Law so you can keep an eye out for potential problems while viewing potential properties, and ask pertinent questions of neighbors on the blocks of promising houses. Amazon can suggest other highly reviewed titles based off those starting points.

We did all of our home buying education by the seat of our pants since we've not yet intentionally started a house hunt - property #1 was "we'll just fucking buy the place - don't make us move!" and the second was "hey, wait, it's just next door, the right size, and affordable..."

[nightrythm]

I may just go to the library today.

[digital-rider.livejournal.com]

You could try contacting mortgaged on LJ. I've known him since 93 and he can help explain things. As his LJ name says, yes he works in the biz. He may or may not be able to do a loan for you.

Regardless, if the mortgage broker you work with can't explain things well (BEFORE THEY PULL CREDIT), move on.

[alouicious.livejournal.com]

er...that is pretty much what i did and the realtor if i remember correctly worked it out with the broker but that was in 2002 so things may be extremely different right now.