Buying a home in about six months...basic questions

[Just Kate]

Dh and I have been home owners in the past, but we were very naive when we bought our first home and also when we sold. Since that time (10 years) we have been renters and working to get our finances back in shape. We hope to finally have a decent down payment ready by this summer and would like to be smarter about purchasing our next home. 
 

At what point should we start talking to lenders? I check our credit regularly and we both have good credit scores. However, one thing that hurts us (I just noticed this!) is that we put most of our purchases each month on our Amazon Chase card. That is our credit card with the best rewards and while we could certainly qualify for better ones, I know that now is not the time to be opening up new lines or credit. Even though we pay the card off in full each month (sometimes multiple times per month), it still can hurt our credit as the limit is only $9,000. So I didn’t know if talking with a lender now could maybe give us direction on things like this? Or if lenders even do this. 
 

What else should we be doing as we prepare to buy, other than saving as much as we can? Any websites worth looking at? Experiences that you’ve had and learned from? 
 

I’m super excited, yet nervous. 

[Carrie12345]

As someone who obsesses over credit score specifically because of potential home buying, I agree with you not opening a new card this close to when you hope to buy.  I’d chill on trying to maximize rewards stuff for the time being, because you could make up for it by a LOT with a lower interest rate.  If your system is working for you, go back to it after you’re settled.

A lender *will see that you’re paying it off every month. If you’re working with a terrific lender, they can account for that, but there’s always going to be some degree of impact from the score your outstanding:available ratio factor that varies depending on the day its updated.  

If your available credit is $9,000, keep the top balance below about $800.  I make multiple payments every month, but my card won’t let me pay on “pending” charges, so it kind of makes me crazy to wait for the charge and then the payment to clear!

Once we get a new mortgage, I won’t really care about our scores.

[Just Kate]

1 minute ago, Carrie12345 said:

As someone who obsesses over credit score specifically because of potential home buying, I agree with you not opening a new card this close to when you hope to buy.  I’d chill on trying to maximize rewards stuff for the time being, because you could make up for it by a LOT with a lower interest rate.  If your system is working for you, go back to it after you’re settled.

A lender *will see that you’re paying it off every month. If you’re working with a terrific lender, they can account for that, but there’s always going to be some degree of impact from the score your outstanding:available ratio factor that varies depending on the day its updated.  

If your available credit is $9,000, keep the top balance below about $800.  I make multiple payments every month, but my card won’t let me pay on “pending” charges, so it kind of makes me crazy to wait for the charge and then the payment to clear!

Once we get a new mortgage, I won’t really care about our scores.

Good point and I think you’re right. Well maybe I will use my debit card some too over the next six months to keep our credit utilization low. 

[Just Kate]

3 minutes ago, Æthelthryth the Texan said:

I’d go talk to a broker now. Be honest you think you are six months out- you are just wanting to get your ducks in a row. You can’t lock a rate now but they might have you go ahead and fill out an app. Then you’d just update it when the time comes.
 

We opened a couple of new credit cards right before we just refi’d for the rewards and it didn’t hurt us a bit. As long as you are over 740 on your scores  I think it is, it doesn’t matter. You’ll get a top rate. That’s why I think you need to talk to a broker/lender. Or a few. Watch rates and track who tends to be lower/higher. Think about things like if you want to waive escrow etc. But I say just go to a lender ASAP. Their advice is what matters more than ours. 

Thanks! Does it make sense to talk with multiple lenders? When we purchased our first house, we only talked to one. And he was young, new, and a friend. Stupid of us, but we didn’t know it at the time. 
 

What are we looking for in a lender? What questions do we ask? Not sure about waiving escrow...thoughts on that?

Our credit scores are over 750. Sometimes they are close to 800. 

Edited January 6, 2020 by Just Kate

[vonfirmath]

Just now, Just Kate said:

Thanks! Does it make sense to talk with multiple lenders? When we purchased our first house, we only talked to one. And he was young, new, and a friend. Stupid of us, but we didn’t know it at the time. 
 

What are we looking for in a lender? I hat questions do we ask? Not sure about waiving escrow...thoughts on that?

Our credit scores are over 750. Sometimes they are close to 800. 

 

I'd look for someone who is very responsive and answers your questions and your emails.

My lender was recommended by our realtor and we *loved* her. We did everything by email and phone (Except for she sent me the final documents by post and we signed and brought them to signing).  She answered our questions and gave us a very detailed list of what she would need so I could gather it all and send to her.  And when I left messages she got back to me.  When there were changes, she let us know.  BAsically the ease of communication was the best thing. I'm sure I wasn't her only client but I knew I was important to her and she would get back to me so I didn't stress there.

 

[Just Kate]

6 minutes ago, Æthelthryth the Texan said:

I would call several brokers- they are usually better for inexperienced buyers to go through than dealing with a large bank. For instance, Chase is a great loan servicer. They are HORRIBLE to deal with for closing though. They are who you want to buy your loan, but not who you want to go through, if that makes sense. Brokers tend to be more responsive. You want to pay attention to who gets back to you in a timely manner. That is worth more than a rock bottom rate imo, because it's stressful buying a house, no matter how great people are you are working with and a shitty broker is only going to make it worse. 

Ask what Title Company they typically work through. There are some Title Companies I'd avoid like the plague- you can try and make your pick of Title company be part of the buy contract. 

So if you have the time/patience, just start calling local mortgage brokers. Say "we aren't sure we're ready to pull the trigger quite yet, but we wanted to ask some questions." See how responsive they are- if they rush you off the phone. You'll get a feel and you'll think about more questions as you talk. They should be able to get you Projected Fee sheet ASAP. The rates are going to change over 6 months of course, but that will give you info of what you can afford and what all the fee breakdowns are. Because of CFPB (federal deal that overly complicated an already overcomplicated thing) it now takes longer than it used to to typically close. You will notice many changes on the forms from when you last purchased. 

Ask about their fees. Ask about different types of mortgages they offer. Do you want to do a straight 30? Do you want to do an 80-10-10, where you put 10% down, then finance two separate loans where one is usually a Balloon type 15 year note at a higher interest, but say you expect you or your dh to get a bonus, or a large salary jump, you can then pay that smaller loan off and get more house. They also have 80-15-5. They have floating loans, the options are endless. 

If your credit score is close to 800, you have no outstanding debts, you pay your card on time, you have nothing to worry about on that Amazon card. Just use it and pay it off. It might fluctuate a few points, but it's hardly going to fluctuate enough to bring you down to a low interest rate. 

Anyway, we've bought and sold many a house over the years. To me the broker is more important than the realtor. I think realtors are becoming less necessary with the internet, but if you have a bad broker, you're going to have a bad closing. 

Great advice. Thank you so much!!

[vonfirmath]

Just now, happysmileylady said:

When we bought our old house, our mortgage was sold like 5 times in the first year.  It didn't matter who the original lender sold it to, it still ended up at Chase eventually (which we HATED, they screwed up SO MUCH STUFF, and they were horrifically awful to work with when the house flooded.)

 

We hated the way our main loan got sold so much we eventually refinanced the entire thing into a 20 years with the local bank that was the 10 on our original 80-10-10 loan.

 

(We wanted to put 20 down and avoid the PMI insurance -- and had the money to do it. But it would have drained our savings. Our broker encouraged us to do this instead and put the 10 with a local bank that has the reputation for NOT SELLING ITS LOANS -- and we liked it so much we eventually refinanced the whole thing with them. (And we had enough equity we still didn't need PMI)

 

[vonfirmath]

Just now, Æthelthryth the Texan said:

If you want to get ahead on paperwork, start a folder now. It’s tax time so copy your new tax return for this year Once you get it and last year, make copies of the W2’s for this year and last.  When time comes you need at least 2-3 months bank statements and copies of last 2 paystubs. Since you aren’t selling you’ll have less paperwork on that end. But you will be ahead of the game if you have those docs ready to go. 

I had a binder I put together and carried with me. We have more than one bank account so statements were  abit more complicated. And we needed a specific scan of a end of year bonus because it led to a suspicious deposit that needed to be sourced.  But carrying the binder with me meant I could answer questions when she called. (I also put dividers in to easily find things)

 

You also need a complete list of current debt commitments.

 

[vonfirmath]

2 minutes ago, Æthelthryth the Texan said:

Avoid PMI if you can. It’s pissing money down the drain. 🙂 I also always waive escrow because I’d prefer to earn money on my money all year and then pay it at the end. It can also save some headaches or fluctuating payments because people get ugly surprises from their banks at times with escrow. Without it you know your payment. Exactly. But I do get some people aren’t comfortable with it. 

 

I decided not to push for the escrow thing because I'm not sure how good we'd be at getting property tax paid without it. SOmetimes I don't even see the letter in my mailbox!

[vonfirmath]

Just now, Æthelthryth the Texan said:

the binder is a great idea  

They usually can pull current debts off the credit report so they don’t ask everything like they used to. At least when we refi’d last month. Everything was electronic (until close).  They just wanted bank statements and asset statements and since those are all electronic now I could just PDF and shoot them over. It’s so much easier than 20 years ago- I was trying to tell my dd how bad it was when I bought my first house! Phone scanners make for Easy life ! 

 

We bought our house 8 years ago and yes, I did a lot of PDFs. But they still wanted the list of debts (probably to match to the credit report? See if there was something owed a relative, etc?)

 

 

[Carrie12345]

1 minute ago, vonfirmath said:

 

I decided not to push for the escrow thing because I'm not sure how good we'd be at getting property tax paid without it. SOmetimes I don't even see the letter in my mailbox!

Tax collection in our area is such a wreck that I’m thrilled to have an escrow account!  I might feel different in some other scenario, but this is the one I’m in, lol.
The largest fluctuation I’ve had over 14 years is about $50/mo, and I’m pretty sure that was simply because our taxes did go up that year. So I would have needed that $50/mo to pay the bill anyway!

[vonfirmath]

4 minutes ago, Carrie12345 said:

Tax collection in our area is such a wreck that I’m thrilled to have an escrow account!  I might feel different in some other scenario, but this is the one I’m in, lol.
The largest fluctuation I’ve had over 14 years is about $50/mo, and I’m pretty sure that was simply because our taxes did go up that year. So I would have needed that $50/mo to pay the bill anyway!

 

We've had larger fluctuations but we're in a area where our house is rapidly increasing in value, so the property taxes are as well. (we got "Capped out" at the 10% increase at least one year and came close another)

 

[vonfirmath]

A website I found useful to learn in general about loans and such was Searchlight Crusade; http://searchlightcrusade.net/

 

[Scarlett]

I encourage you to ask your friends who have purchased a home recently. A good Loan officer is valuable AND a good Title company person is as well. We recently bought and I was able to choose my own title company. 

I much prefer to go through a bank that won’t sell my loan. Also things have really changed. There was a world of difference between this purchase and one I did 9 1/2 years years ago. This time  I never even saw any of the loan officers in person. Every single signature was Esigned. They did not even send anyone from the bank to the closing. however it did seem like they asked for more paperwork/documentation. 10 years  I don’t remember having to send in three years worth of tax returns AND 3 years worth of w2s. 

Avoid PMI. 

Buy less house than you can afford if reasonable. I like a house payment (including taxes and insurance) to be no more than 25% of net income. 
 

 

[Annie G]

It’s worth it to talk to lenders now and see if your area/income qualifies you for any special loan programs such as USDA. 
Also, it’s a good time to talk about closing costs. When we bought our last house they told us to choose the closing attorney and we called around and the prices varied a LOT.  Easier to do that now rather than when you’re in a time crunch.  We paid our homeowner’s insurance in advance instead of at closing because that gave us the paid in full discount, which was about $60. 
 

It’s not too early to start looking online at house listings and seeing what;s available in your price range, checking out neighborhoods, looking to see how long houses stay on the market before they sell, and then following up to see how much they sold for vs how much they listed it at.  In other words, learn your market. 
 

Congrats- hope it goes smoothly for you!!!!

[Tree Frog]

8 hours ago, happysmileylady said:

Yeah, one thing I do know about when we buy is that I would prefer to set up the original loan with a bank that doesn't sell them.  

We specifically choose a credit union that doesn't sell loans when we purchased our current house. With previous houses, every time the loan was sold, something would happen that caused us problems, from inaccurate record keeping to incorrect information about our loan. We also found the credit union had competitive mortgage rates and was easier to deal with than the large banks.

[Ottakee]

I was going to suggest at least talking to a credit union as well.  

I would also try as much as possible to stand with a realistic budget....with taxes, insurance, maintenance, etc figured in.  So many lenders want to qualify you for much more than is a comfortable amount.