Phone call with a relative

My cousin works in the mortgage industry, so I asked her for some advice. Here are some of my notes from what she's said.

Look at your budget to determine how much you can afford in a housing payment. That budget should include at least the following:
utilities (find out heating and electricity bills for similar places)
phone
cable
food
savings for home maintenance and repairs
house payment
taxes
insurance
association fees

The county I'm looking to buy in is not in the depressed counties.

How much money will I need on hand for the purchase?
At least 5% down plus closing costs.
$7500 (5%) for $150,000
$4500 closing costs (3%)
Can ask the seller to pay closing costs.

Can borrow money from 401k for purchase of a house with some plans, interest paid back goes into account
10% down payment will get better rates.

Do NOT use every penny you have to get in the house. There will be things you need after you move in. You'll also have all sorts of service fees for things like electricity and cable installation.


Estimated monthly payment exercise:
Assume 5% down of $150,000
mortgage = $142,500

6% interest rate for 30 years = $854 per month (principle and interest)
interest only = $713 per month
(good option to afford payment) If no prepayment penalties, can pay extra down towards principle.
$250 per month for taxes
$150 per month for homeowners association dues (includes insurance on exterior)
$25 per month renter's policy for inside
principle and interest: $854 + 250 + 150 + 25 = $1279 per month
interest only: $713 + 250 + 150 + 25 = $1138 per month

7% interest rate
principle and interest: $948 per month
interest only $831 per month
estimate about $100 per percent increase in interest rate


Interest rates bouncing all over right now.
When calling banks, ask how long you can lock in for when you're ready to close (5 days, 30 days, 60 days?)
Ask about the credit score requirements? for example, do you need a higher credit score to qualify for interest only

Documentation needed for pre-approval:
pay stubs
2006 and 2007 W-2s
bank statements and retirement fund statements
gift letter if gift funds

PMI (private mortgage insurance) is needed if you have less than 20% down payment.
Wells Fargo offers Lender Paid MI - instead of an additional payment, higher interest rate.
Cheaper than pmi and fully tax deductible.
PMI is tax deductible right now, but Congress has to reauthorize that or it won't continue to be.


When looking for a realtor, go to the county association of realtors. Find out how many houses they sold last year. If they only sold 3 or 4, it's too few. They could be just getting started or doing it on the side. You want a minimum of 6-9 per year. If they've sold 50, they might be too busy to give you the personal attention you deserve.