First Time Homebuyer Q's

DH and I are planning on purchasing our first home within the next year and we are trying to get all of our ducks in a row. I just have a couple of questions...

What exactly do we need cash for aside from the downpayment and closing costs?

If we were to pay our taxes yearly instead of rolling them into our montly mortgage payment, would the remainder of that year be paid up front at closing or at the end of the year?

Thanks in advance for any info/advice!

First Time Homebuyer Q's

You'd have to check with your mortgage company, I don't know if they allow you to NOT roll your taxes into the monthly mortgage payment... it's also much easier to do that then to have to have $x000 every year (you don't have to worry about sending it in, getting it there late, etc).

I would sit down with a mortgage specialist, let them give you a pre-approval and some ideas of how much the closing costs are going to be... You'll also need cash for the house inspection & termite inspection (you need both) as well as the appraisal. I think once you know all of that you'll have a better idea, and I DEFINITELY recommend having a few extra grand in savings (accessible) for incidentals and anything that might be needed immediately after closing.

Re: First Time Homebuyer Q's

I agree that the best thing to do is to consult with a mortgage loan officer at a local lender. Let me know if you need some recommendations.

But basically, there are different types of loans, and what you can qualify for depends on your individual situation. The type of loan also dictates how much you need for a down payment.

The main types of loans that buyers get are FHA (a federally-backed loan) or conventional. An FHA loan has more forgiving criteria... you can do as little as 3.5% down and you can roll your closing costs into your loan (up to 6% of the purchase price). With a conventional loan, you need as little as 5% down (but debt-to-income ratios and credit really need to be good to do the minimum down here). You can roll in up to 3% for closing costs if you put less than 10% down with a conventional loan and up to 6% if you put 10% or more down. If you qualify for certain specialty loans, there may be other options. For example, if you are eligible for a VA loan, you could do 0% down.

Generally, it is preferable (and less expensive) to get a conventional loan, because of pmi (mortgage insurance) t hat will inflate your monthly payment more with an FHA loan. If you put 20% down with a conventional loan, you don't pay pmi at all, but even with less than 20% down, the pmi amount will be smaller with the conventional loan than with FHA. (Plus, with an FHA loan, pmi can never be removed unless you refinance to a conventional loan.)

Closing costs can be expensive, like $15,000 - $20,000 range for a $300K to $400K home. But again, a mortgage specialist can give you a better idea.

The PP is correct that many mortgage lenders don't allow you to pay taxes separately. Escrowing them is usually a requirement -- but if you have 20% down, some lenders will allow you to pay them on your own. (But I think for most people, paying them per month is better than being slammed with a quarterly bill..)

Really, speaking with a mortgage lender and getting a handle on your financing should be step one for any buyer. It doesn't cost you anything to do that, and you will need a preapproval to make an offer, anyway.

I work with a lot of first-time buyers, so please feel free to contact me if I can help you or if you have questions. [email protected] or (516) 587-7618.

First Time Homebuyer Q's

You may not know this but part of your closing cost is taxes. You are paying for the reminder or up to 50% of the year (depending on when you close). When you pay the mortgage company, part of it gets put into escrow so when taxes are due, they pay them for your.

Closing also involves bank fee's, title fee's etc..

Re: First Time Homebuyer Q's

First Time Homebuyer Q's

Thank you all for your replies! This info is very helpful.

Re: First Time Homebuyer Q's

We put 20% down and we pay the taxes directly. I did not want to escrow. As others mentioned depending on time of year you close taxes can be a large portion of your closing costs.
I essentially set up my own escrow and every month transfer the set amount to a separate account.

Re: First Time Homebuyer Q's