I want to buy a condo and need answers about the mortgage...?

Question

OK so I found a condo I want to buy and I received two seperate pre approvals, one at $140,000 and the other at $170,000. Both loans however were the same monthly payment of $1300. What I can realistically afford per month is $1000. I am sort of confused how each lender came about the monthly payment and need to know if I can get the payment down to $1000? Also, my realtor spoke about giving $500. when we bid for good faith. What does this mean? Can I get it back or does it go towards something? Any and all help or knowledge you can provide will be a big help. Thanks so much!!! Oh and I am a first home buyer not looking to put anything down.

Answer 1

1. Well the reason you may have two different approval amounts is because banks use different criteria. The amount one bank may be willing to give you may be based upon a credit report they're using versus a credit report from another credit bureau. Check your credit from all 3 and make sure there are no discrepencies that would lower your score.
2. Interest rates is another thing that can cause your estimated monthly payments to be different. The bank willing to give you 140K may be charging you a higer interest rate than the bank giving youthe 170K. Again, they use credit scores to determine your interest rate. If they're giving you less money with a a higher interst rate that's a bit of a red flag that you need to check your own credi report.Just for refernece it does not harm you in any way to pull your own credit report, and you're entitled to one free credit report from all 3 bureaus once a year for free (transunion, equifax, and experian) I suggest you know what's in them.
3. There are three things that go into a mortgage payment (and sometime 4 for condos). You'll frequently hear the term PITI (principle, interest, tax, insurance) that is the principle mortgage payment which goes directly to lowering how much you've borrowed, the intersest which the bank is charging, your property taxes, and your mortgage insurance. In most cases if you put down at least 20% of the cost of the condo you will not have to pay mortgage insurance (don't confuse this with homeowners insurance). Also with condos you may have a monthly assessment that covers things like lawn mowing, snow shoveling, or sometimes utilties. Condos/co-ops can charge just about whatever they want and include what they want just read the agreement for the building.

But some estimates only include the principle and the interest. So it looks like you can get a 140k home for 1300/month. When actually if you add in the taxes and insurance that may tack on another 2-3% of the cost of the mortgage.

Since you're not putting any money down expect to pay the mortgage insurance which is about 2% of the cost of the loan.

My first advice is check all 3 credit reports, and know what you're paying (i.e. can you afford $1000 in just principle or does the $1000 include taxes which can go up yearly, and insurance)

Hope this helps. Good luck. Homeownership is a great step!

Answer 2

What rate were you quoted??? How is your credit?? A 140,000 1 loan at 7 percent would be 931.42 P/I (not including taxes and home owners insurance) Did you get your Good Faith Estimate yet, from both places? If you did, compare the closing cost associated with your loan.

The 500.00 is earnest money put down at the day of signing the purchase agreement with the realator. This money will be applied toward your closing costs. You can get it back, if your loan does not get approved. A pre-approval is not the same as an approval. Your file would need to go to underwriting to get the approval. 2 years job time, income, debits etc is all considered into your DTI (debit to income ratio) that lenders look at. I hope you went thru a Mortgage Broker, one that underwrites for other companies ( I underwrite for 150 companies) so lenders go off my credit report. If you already have 2 pre-quals, that means you had your credit pulled x 2. Becareful ok - If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down

By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). This will tell you the up-front closing cost (etc) associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

It greatly depends if you need help with closing cost, (The seller could do Seller Help toward your closing cost). If that is the case, I normally tell my clients NOT to hackle over the price, since you are asking for closing cost help - especially if the home is thru a realtor, and the seller has to pay the realtor their fee which runs from 2-6 percent of the selling price, and you ask for 4-5 percent toward closing cost -assistance) Follow me so far??

Good luck to you.

Answer 3

Feel free to use my mortgage calculators on my mortgage website (no, I won't be soliciting you for a loan) http://www.losethearm.com . Or you can search keyword "mortgage calculators" on the Internet and find someone else's to use. I want you to fill out the basic fields and determine what your monthly payment is going to be. Let's assume your credit is perfect and you can get a loan for 5.875% (today's par rate--give or take). Don't forget to take into account insurance (renters since it is a condo), taxes, and PMI if you will be using 100% financing.

I think you will quickly realize that $1,000/mo is unrealistic at the $170K level. Unlike people, numbers don't lie. Find a payment you are happy with (using an interest rate that is realistic). Use that to "qualify" yourself for a loan.

These are the things I wish I could say to my clients... not because I can't, just because no one wants to hear it. Everyone wants to over extend themselves, it seems.

It looks like the earnest money question was answered previously and well. Hopefully this has been helpful.

Best of luck.

Answer 4

The $500 is to show you are serious when you make an offer. It will go towards closing if you get that far. As far as the loans being the same monthly payment, look at the numbers more closely, something isn't jiving. Does one show a down payment? Get a good faith estimate from each lender on closing costs (they must give one if you ask).

Answer 5

Usually, your credit rating will determine whether or not you have to make a downpayment. When I bought my condo, I did not have to make a downpayment. Actually, I couldn't. I didn't have the money. The length of the mortgage may also be the reason why the 2 have the same payments. Talk to you realtor, if you cannot afford the $1300, you need to start looking at a less expensive condo. Be realistic in what you can comfortably afford. If you can't afford it, you can't afford it.