Questions from a potential first time property buyer

[Soul Invictus]

I'm a first time buyer and I'm considering purchasing a duplex or townhouse since I cannot afford a multi-unit. I'd like to owner occupy the building. I found out that my credit score is 745. I believe that's supposed to be a good score, so I would hope that my credit worthyness is pretty good.

I have a few questions - I'd like to know how to plan my actions out.

1) How do banks typically handle the amount that they will finance for this type of loan? I know they factor in rental income from the other unit, however I'd like to know how they factor your income (gross vs net monthly income; gross vs net annual income)

2) Does one receive a lower rate for investment properties that are owner occupied?

3) How much would be advisable for a down payment? I would be looking to work with a housing agency such as Acorn Housing, WHEDA, or a local community program to see what type of first time homebuyer grants I might qualify for.

This is all I can think of right now. If there is anything that I might want to consider, please feel free to let me know.

I look forward to your feedback.

[OregonLO]

"1) How do banks typically handle the amount that they will finance for this type of loan? I know they factor in rental income from the other unit, however I'd like to know how they factor your income (gross vs net monthly income; gross vs net annual income)"

I believe to factor in the rental income you would have to have a lease agreement set up as you were purchasing the property. So if you know someone who would be interested in renting out the other side I'd try to get something like that established early on to try to use that money. We'll factor your income based on gross Year-to-date earnings and average that by the amount of time that has passed through the year. so if you've made $60,000 as of September 31st you'd have a gross average of roughly $6,667/month. We'll then take that amount and weigh your current liabilities plus the new mortgage against this. Say your total car payments, credit cards, etc and your mortgage payment all came to $3,000/month then your "Debt-to-Income" (DTI) would be the $3,000/$6,667 = 44.9% You want to this number to be under 50% for a lender to accept the loan.


"2) Does one receive a lower rate for investment properties that are owner occupied?"


yes for the reason that you are going to live in the property and it would be an owner occupied residence versus an investment property. It'd be your "Primary Residence" not an investment property at that point.


3) How much would be advisable for a down payment? I would be looking to work with a housing agency such as Acorn Housing, WHEDA, or a local community program to see what type of first time homebuyer grants I might qualify for.

well this would depend on your income level? What kind of payment could you afford? How much can you rent the other side out for? If you could come up with 5% down then you'd be in a much better position than trying to finance 100%



What state is the property located? If you have anymore questions feel free to email me at rick@loansbyrickgrand.com I'm happy to answer to the best of my knowledge.

[Soul Invictus]

Thanks for the feedback. Have you gone through this process before? Are you a banker?


We'll factor your income based on gross Year-to-date earnings and average that by the amount of time that has passed through the year. so if you've made $60,000 as of September 31st you'd have a gross average of roughly $6,667/month. We'll then take that amount and weigh your current liabilities plus the new mortgage against this.

When you say current liabilities, how does this apply for credit card bills. I owe ~$4000.00 on my credit card, so would it be that balance or the minimum payments? I throw a couple hundred dollars towards that bill...like around 4-5 hundred as an FYI.

well this would depend on your income level? What kind of payment could you afford? How much can you rent the other side out for? If you could come up with 5% down then you'd be in a much better position than trying to finance 100%

I don't have a property yet. I'm actually supposed to be talking to a broker today or tomorrow. I want to find out I'm supposed to be able to afford, however I wasn't sure how much of your pre-approval and approved loan amount is tied to your credit, overall existing debt burden, and ability to pay for the particular deal in place.

What state is the property located? If you have anymore questions feel free to email me at rick@loansbyrickgrand.com I'm happy to answer to the best of my knowledge.

I live in Milwaukee, Wisconsin, and I expect to purchase a property in this city. It would be good if there was a way that I could evaluate the market health in this area.

Thanks again

[OregonLO]

Thanks for the feedback. Have you gone through this process before? Are you a banker?


I'm actually a Broker. I have a number of "Banks" or Lending Institutions that I can get money from. So yes I have done this a few times :)



When you say current liabilities, how does this apply for credit card bills. I owe ~$4000.00 on my credit card, so would it be that balance or the minimum payments? I throw a couple hundred dollars towards that bill...like around 4-5 hundred as an FYI.

we'll look at minimum payments.




I don't have a property yet. I'm actually supposed to be talking to a broker today or tomorrow. I want to find out I'm supposed to be able to afford, however I wasn't sure how much of your pre-approval and approved loan amount is tied to your credit, overall existing debt burden, and ability to pay for the particular deal in place.

Your credit will weigh hevily on what kind of interest rate and what programs you can do.




I live in Milwaukee, Wisconsin, and I expect to purchase a property in this city. It would be good if there was a way that I could evaluate the market health in this area.

Thanks again

You could always contact a Real Estate Agent in your local area to help you with that.

Let me know if you have anymore questions.

[Soul Invictus]

we'll look at minimum payments.

I'm glad to hear that. Even with the new policy upping minimums, I can handle my one credit card minimum easy.

Your credit will weigh hevily on what kind of interest rate and what programs you can do.

I sure hope so. I know my score is pretty decent. I just want to get moving as soon as possible. Instead of throwing a lot of money at my relatively small credit card bill, I'll save a little more, even though I know I will let finance fees get me. Ouch. I just want to work a nice down payment...or a decent one at least.

You could always contact a Real Estate Agent in your local area to help you with that.

Here are a few general questions.

1) How do higher interest rates affect housing prices?

2) What are some tools that I can to gauge the health of the housing market in my area? I want to try to evaluate if/when is a prudent time to buy. Also, do you refer to bankrate.com's rates for the housing market?

[OregonLO]

Here are a few general questions.

1) How do higher interest rates affect housing prices?

2) What are some tools that I can to gauge the health of the housing market in my area? I want to try to evaluate if/when is a prudent time to buy. Also, do you refer to bankrate.com's rates for the housing market?


1. It won't affect the housing prices. It will affect your payment and what YOU can afford on a monthly basis. If you have 700+ credit scores you should get a very good rate. I'd check around with a couple brokers before picking one. Compare what they are offering you as far as rates and also the term of the loan. an arm versus a 30 year fixed.

2. Find out how long the average listing is in place before the home sells. I'd find out how many houses are on the market versus how many are actually selling. If there are more houses than buyers than you can look around more and you can negotiate yourself a better deal. If there are few houses and they keep selling very quickly you'll have to pay more to get the home.

I don't look at bankrate.com I get daily updates from my lenders of the current rates. This is a little more beneficial to me since these are the people I'm getting the money from. I want to know what THEIR rates are, not the average rate. But bankrate.com should be able to give you a decent idea of how the market is.

[Soul Invictus]

1. It won't affect the housing prices. It will affect your payment and what YOU can afford on a monthly basis. If you have 700+ credit scores you should get a very good rate.

The reason I asked was because I thought higher rates meant lower demand, which might cause selling prices to become depressed. Is this at least partially correct, or not significantly related? What does affect the selling prices for homes?

I'd check around with a couple brokers before picking one. Compare what they are offering you as far as rates and also the term of the loan. an arm versus a 30 year fixed.

I have one broker that I will talk to tomorrow to assess my situation. How do I evaluate how good my broker is? Also, I don't want a lot of pulls on my credit to lower my score. How many brokers would you suggest that I consider working with? I thought brokers valued an exclusive relationship? If I say that I'm working with other brokers, would that possibly effect their motivation to help me?

2. Find out how long the average listing is in place before the home sells.

How do I find this out, and what resources would I use to gauge this?

I'd find out how many houses are on the market versus how many are actually selling.

Again, I would like to know what resources I should use. I know the local papers will tell me what people are advertising as available for sale. Is this the scope of my inquiry? What resources will advise of the sales?

I don't look at bankrate.com I get daily updates from my lenders of the current rates. This is a little more beneficial to me since these are the people I'm getting the money from. I want to know what THEIR rates are, not the average rate. But bankrate.com should be able to give you a decent idea of how the market is.

I want the best deal possible, so does this mean that I should be able to consider non-local banks to get that? I don't know if most people deal with banks that are considered local or not.

[RobynG]

Dear Soul Invictus:

So many questions!!! Buying your first house is, more than likely, one of the largest financial decisions you will have to make. I only have a couple jumping off points to suggest for you....

1. Attend a local home buying seminar. You can find FREE seminars in the Milwaukee Journal Sentinal in Sunday's real estate section. These seminars are hosted by Realtors, Lenders, Appraisers, Inspectors, Insurance Agents. They will all provide you with valuable insight and knowledge about the decision you are going to make.

2. Ask friends and family members for referrals... Most have a realtor they work with, a lender they use, and an insurance agent.

3. Get Pre-Approved for a Mortgage. They will take the time to go over your financial situation and not only tell you how much house you can buy, but what you really can afford. Talk to several different lenders: banks, credit unions, mortgage companies. Get Good-Faith Estimates on rates and closing costs. Try to do it all within a week. This will give you the most accurate estimates and will have the least impact on your credit score.

4. Select a Realtor. Find someone who has worked, specifically, in the neigborhood you want to purchase. Ask for references and ask to see homes they have recently sold (in the past 30 days).

5. Take your time!!! This is a buyer's market. There are 10-15 houses on the market for every one buyer. Many are reducing prices, including incentives, or offering to pay closing costs. Your realtor can help you with that. JUST REMEMBER!!!! YOU WANT THIS HOUSE TO BE YOUR HOME!!!!!

Please feel free to email me with any questions (robynwemi@msn.com)!!! Good luck and Happy hunting!!!

~Robyn G.

[Soul Invictus]

1. Attend a local home buying seminar. You can find FREE seminars in the Milwaukee Journal Sentinal in Sunday's real estate section. These seminars are hosted by Realtors, Lenders, Appraisers, Inspectors, Insurance Agents. They will all provide you with valuable insight and knowledge about the decision you are going to make.

There's one going on this month and I expect to attend. I am unsure if I should start engaging brokers before then, since there will be several in attendance.

2. Ask friends and family members for referrals... Most have a realtor they work with, a lender they use, and an insurance agent.

I already am!

3. Get Pre-Approved for a Mortgage. They will take the time to go over your financial situation and not only tell you how much house you can buy, but what you really can afford. Talk to several different lenders: banks, credit unions, mortgage companies. Get Good-Faith Estimates on rates and closing costs. Try to do it all within a week. This will give you the most accurate estimates and will have the least impact on your credit score.

Should I go ahead and do it now, or wait until the homebuying seminar? How soon should I be expecting to buy? I want to buy ASAP, however I want to be careful that I am doing everything I need to do.

4. Select a Realtor. Find someone who has worked, specifically, in the neigborhood you want to purchase. Ask for references and ask to see homes they have recently sold (in the past 30 days).

This is probably going to be the toughest part for me. I am hearing that I need to talk to a variety of people, however I am not sure what determines who will eventually be the exclusive realtor that I will be working with. :(

5. Take your time!!! This is a buyer's market. There are 10-15 houses on the market for every one buyer. Many are reducing prices, including incentives, or offering to pay closing costs. Your realtor can help you with that. JUST REMEMBER!!!! YOU WANT THIS HOUSE TO BE YOUR HOME!!!!!

Just as a reminder, I am looking to preferably purchase a duplex...not a single family home. Any idea if duplexes are more/less attractive than townhouses as investment options???

Please feel free to email me with any questions (robynwemi@msn.com)!!! Good luck and Happy hunting!!!

Thanks. I'll definitely drop you a line. I wanted to ask a couple of questions publicly in case someone might have similar concerns.

[WesLayke]

Hello,, dont know if you found what you were looking for yet, but in regards to a Realtor; I am a Realtor and specialize in what is called "Buyer Agency" that means that I work for the best interests of my buyer .. not the Sellers.. In the state of Wisconsin, all licensend real estate agents are required to work for the seller regardless of who that seller is.. UNLESS.. that agent has an agreement in place to work for the buyer specifically ... If you want to learn more about this .. feel free to contact me.. and best of luck to you .. would also like to start networking with you regarding your investing prowess etc... And by the way .. way to go on the 745 credit score.. thats phenominal.. I have only met a couple people in 10 years that have even come close to that.. :)