Ugh frustration! Could anyone help me with my 1st time buyer questions?

I currently rent which makes saving for buying a house very difficult. I have saved something, but not enough and DH has not been able to put anything away. Truth is, even with minimum down, the mortgage for homes in the range we are looking at are still below our rent! Problem is that we would need help with down payment and closing costs. I have heard that sometimes sellers agree to pay closing, but how likely is that? Has anyone done this or heard of it? Also is there any 1st time buyer assistance programs that could aid with down payment and any other costs we come across?

I am looking at other rentals in the meantime and am getting frustrated and stressed at the cost!

Ugh frustration! Could anyone help me with my 1st time buyer questions?

When you're calculating the cost of a mortgage are you including taxes? Our total monthly payment is much higher than the cost of our mortgage alone-40% of our total payment is made up of taxes/pmi/insurance.

We did an FHA loan where you only put down 3.5% which helped with the down payment, but until we have 20% equity we have to pay pmi-although I believe you now need to pay for the life of the loan which makes a difference.

The closing costs are also reflective of when in the month/year you close and how much your taxes are. I doubt sellers on Long Island will pay closing costs, but I could be wrong. You *may* be able to roll them into your mortgage, but the house will have to appraise for the total value of your loan including the closing costs, and I believe that it affects how good your offer looks to the seller.

Eta: good luck with your decision!

Message edited 6/28/2013 6:46:29 AM.

Re: Ugh frustration! Could anyone help me with my 1st time buyer questions?

Step 1 - Have you talked to a mortgage lender to get an idea of whether you could even qualify for a mortgage now? (Leaving aside the cash you will need out of pocket for down payment and possibly closing costs.) That is usually a good first step -- there's no cost to consulting with a loan officer at a mortgage lender (and you are in now way committed to ultimately using them), and they can evaluate your credit, income, debt and let you know how much you can qualify for, and what you need to do to qualify if you don't currently. Sometimes people don't realize that there are things they need to fix on their credit report or a loan they need to pay off before they can qualify at all. Also perhaps you can qualify for more than you think, and a mortgage lender should be able to break down the monthly cost for you (ballpark) looking at what rate you can qualify for, if you are paying pmi, assumed taxes and insurance, etc. At the very least, the loan officer can counsel you on what type of loan is best for you.

Let me know if you need recommendations on good mortgage loan officers!

As far as the down payment and closing costs: With the down payment, you can do as little as 3.5% down with an FHA loan (and I think with SONYMA, you can do as little as 3% -- there are some downsides to a SONYMA loan, but they have first time buyer programs and I recently had a buyer successfully obtain a SONYMA loan). You will pay pmi if you get an FHA loan, no matter what your down payment. If you can qualify for a conventional loan, you will need a minimum of 5% down, but most conventional borrowers put down 10% or more. You will still pay pmi unless you put at least 20% down with a conventional loan. With FHA, your entire down payment can be a gift (conventional has different gift rules), but you need to talk to a qualified mortgage lender about what you need to do logistically if you will be receiving gift money for your down payment.

Closing costs - If you are buying on Long Island (or the NY metro area), you can't really negotiate the seller to pay the closing costs. It's not really done here. As the PP said, you can roll in some or all of your closing costs into your mortgage loan. With an FHA loan, you can roll in up to 6% of the purchase price as closing costs. So on a $300K home, you can roll in approx. $18K. With conventional loans, you can roll in 3% to 6% depending on how much you are putting down. Rolling in the closing costs is called a "seller's concession."

But this will cut into what you said is an already tight budget. In other words, if you only qualify for $300K and you want to roll in $15K for closing, you can't agree to pay the seller any more than $285K. And as the PP said, the house will need to appraise for the full $300K, which creates more risk for the seller (unless you can show that you have the cash and don't NEED to roll in the closing costs to make the sale work).

But I would definitely talk to a mortgage pro to figure out your options. And then if you do qualify, even if you have a tight budget for the area you want, you should consult with a real estate agent to see what you may be able to do. Right now, rates and prices are still decently low, but starting to go up. So if you wait a couple of years, and rates go up a few % points, you may be worse off (budget-wise, in terms of what you can afford) than if you had bought now (even if it means compromising a bit on the home or location).

Good luck! If I can answer more questions, feel free to contact me!