Buying a property in NJ!

[Anonymous]

Hello All,

I am looking to buy a single family house in NJ (Bergen County). I am working with a realtor and looking to get FHA. I have a pre-qual from TD bank and their closing costs seem to very low and the rate is 5%. The seller is asking for 280k and I really dont want to go over 250k. I will put in an offer for 232k on Monday (225k offer plus 7k back in closings costs) adn hoping to negotiate from there. It is not a short sale or anything - the owners bought another house because this was too small - its 950 sqft on 5000 sqft lot. Does anyone know any method of correctly predicting the appraisal? (Zestimate is not accurate). TD bank also told me that when they appraise, the appraisor will also do a full inspection of the house so I shouldnt get my own inspector - does this sound right?

The taxes are much higher in NJ than anywhere else, do I get some of this money back? Like per se, during taxes or rebate etc? TD bank told me that they dont do pre approvals, only pre quals, I have to have an accepted offer and a contract to apply for a mortgage with them. Does anyone else know of any FI's that will pre approve us? I am looking to stay 5% or under on a 30 yr fixed FHA with closing costs that are reasonable... any recommendations would be greatly appreciated...

After having an accepted offer, am I bound by anything? Lets say that property does not appraise or inspection doesnt come in okay? Between the two of us we make around 88K and both of us have all 3 scores in 700's. You think there will be issues in getting approved? The agent works for Century 21 and she would like a check for $1000 as a Good faith Deposit, which I would get back if I ever to walk from the deal... does this sound normal? This would than be adjusted on the purchase price..

Is there any other incentive in NJ from the state for first time home buyers? I am hoping I can close by 06/01/2010 because this is when my lease at the apartment expires. The house is small 2br, 1 bath, small LR and kitchen with a fully finished basement. Would the value of the house increase if I added a badroom and a half bath a year down the line from the equity? Any other advice for this novice FHA first time home buyer? Will be greatly appreciated..

The realtor also sent me the comps for the area, recently sold, ones currently undercontract and the ones that recently got on the market. I wish I could know the true value in current market so I can make an informed choice..

Thanks... Please advice and let me know your thoughts.

[ShanetheMortgageMan]

TD Banks appraisal will only tell you if the home meets FHA minimum property requirements, as well as give a value to the home.  The FHA appraiser will not do a full home inspection.  HUD, which insures FHA, as well as I, strongly recommend you get your own home inspection.  The home inspection is for you, and will point out minor defects in the home that you may want to be aware of.  FHA appraisal will likely not mention any of the items the home inspection mentions.

Interest and property taxes you pay may be able to be written off on your income taxes, so it'll help you not pay as much income tax as in the past.  You could realize that savings immediately if you adjust your withholdings on your paycheck (to less withholdings) rather than wait for a larger tax refund.

The offer will spell out under what circumstances you are able to withdraw from the contract and still get your earnest money back - items that your contract is "contingent" upon.  The three big contingencies most purchase contracts have are an inspection, appraisal & financing.  After you do the home inspection, if it doesn't meet you own requirements/standards, you can back out of the transaction.  If the home doesn't appraise at the sales price, you can back out of the transaction.  If your loan isn't approved, you can back out of the transaction.  Each contingency usually has a deadline that it must be removed by, some are removed during the process and some aren't removed until closing, it just depends on what you and the seller negotiate.

Would need to know what debt payments you have to determine if your income is sufficient to qualify for $232k, but if those payments are $1,200/mo or less then you should have a very easy time qualifying for FHA.  A lot of lenders are offering 5% interest rates for FHA mortgages with low closing costs, so if you do not get a good feeling about your bank or loan officer, you are free to switch.  It's also good for you to talk to at least 2-3 places so you can get different mortgage professionals opinions and also compare rates/fees.

In order to use any equity that you gain, you must refinance your mortgage into a new mortgage.  Refinancing costs money, and I never suggest people assume they'll be able to refinance (particularly in this down market), so while it may be possible for you to refinance and pull out equity, if you find that an additional bathroom would be nice, you should look into an FHA 203k loan which can finance the purchase price + repairs/improvements.

[Anonymous]

In terms of incentives, I think you get a $8000 credit to your taxes is u are incontract by april  and close by june.

[Anonymous]

Shane,

Thank you so much for your response. I was thinking about the 203K loan, however, I am thinking, adding an extra room and a half bath would take time isnt it? Obviously, I want to try and close by 6/30 to ensure I get the FTHBC. I have a client at work whose husband is a contractor so I may be able to get the work done at decent price. I also dont know how much it would cost for adding an extra room and half bath in the backyard and also new carpeting and paint - anything over 20k and I will be way over my head and I dont want that. If anyone has knowledge of this please share...

With the equity, I would most probably take out a HELOC if I dont do the 203K loan for now. The debt and obligations are below 1200 and after speaking with a couple of mortgage officers, I would qualify for upto 300K for a house under FHA, however I would really like to stay under 250K. Shane do you know how I can estimate the value of the house?

Furthermore, I went to see the house again yesterday, I noticed that there was a stove but no refrigarator. Will this be a problem with the FHA loan? Obviously I would buy a fridge after I move in, I just dont want to buy one before closing, ofcourse pertinent on an accepted offer.

In regards to a home inspection, my realtor recommended that I wait until an offer has been accepted and my loan approved to do an inspection. However, if inspection turns up something that would give me negotiating ground on the price further, would I just let the agent and the seller know and if they dont lower the price than walk away? Isnt the contract binding? Or would I include a clause where I am allowed to walk if the inspection is not pristine?

What else do I need to find out about the house? life of the roof? Boiler? What else?

Thanks in advance guys, Shane!

[jbee]

Shane, how did you get the amount that she would probably be approved ($230,000)?  I noticed that their income was 88,000, is it normally 2 1/2 times your salary?

[Anonymous]

I put in an offer today for 232K total price - 225K offer plus 7K closing costs concession. The seller came back with a counter - 265K plus the 7K closing cost concession = total of 272K. I really want to stay below 250K and I am planning to do atleast 15-20K 203K loan rolled into the FHA mortgage for carpeting, paint, fridge, dish washer and a half bathroom on the second floor... I dont know what to do?

The house has been on the market for almost 4 months now and there are currently no offers or interests apart from me... do you guys think maybe I should walk? or should I come back with a total offer of 237K - 230K selling price and 7K closing costs... please advice me - it is nerve wrecking.

[ShanetheMortgageMan]

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@jbee wrote:

Shane, how did you get the amount that she would probably be approved ($230,000)?  I noticed that their income was 88,000, is it normally 2 1/2 times your salary?

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No, it was just the price of the home that the OP listed, so I was re-assuring him/her that they'd be OK as long as their consumer debts (the big ? in the equation) don't exceed a certain amount.  What one can qualify for depends on the mortgage payment, consumer debts, and gross qualifying income.  The percentage of the housing payment vs. gross income is preferred to be around 31%, and if you add in consumer debts, 43%.  Over those levels can certainly qualify if there are compensating factors (decent credit, having reserves leftover after purchasing the home, more than the minimum required down payment), and routinely do.

[ShanetheMortgageMan]

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@Anonymous wrote:

Shane,

Thank you so much for your response. I was thinking about the 203K loan, however, I am thinking, adding an extra room and a half bath would take time isnt it? Obviously, I want to try and close by 6/30 to ensure I get the FTHBC. I have a client at work whose husband is a contractor so I may be able to get the work done at decent price. I also dont know how much it would cost for adding an extra room and half bath in the backyard and also new carpeting and paint - anything over 20k and I will be way over my head and I dont want that. If anyone has knowledge of this please share...

With the equity, I would most probably take out a HELOC if I dont do the 203K loan for now. The debt and obligations are below 1200 and after speaking with a couple of mortgage officers, I would qualify for upto 300K for a house under FHA, however I would really like to stay under 250K. Shane do you know how I can estimate the value of the house?

Furthermore, I went to see the house again yesterday, I noticed that there was a stove but no refrigarator. Will this be a problem with the FHA loan? Obviously I would buy a fridge after I move in, I just dont want to buy one before closing, ofcourse pertinent on an accepted offer.

In regards to a home inspection, my realtor recommended that I wait until an offer has been accepted and my loan approved to do an inspection. However, if inspection turns up something that would give me negotiating ground on the price further, would I just let the agent and the seller know and if they dont lower the price than walk away? Isnt the contract binding? Or would I include a clause where I am allowed to walk if the inspection is not pristine?

What else do I need to find out about the house? life of the roof? Boiler? What else?

Thanks in advance guys, Shane!

.....

I put in an offer today for 232K total price - 225K offer plus 7K closing costs concession. The seller came back with a counter - 265K plus the 7K closing cost concession = total of 272K. I really want to stay below 250K and I am planning to do atleast 15-20K 203K loan rolled into the FHA mortgage for carpeting, paint, fridge, dish washer and a half bathroom on the second floor... I dont know what to do?

The house has been on the market for almost 4 months now and there are currently no offers or interests apart from me... do you guys think maybe I should walk? or should I come back with a total offer of 237K - 230K selling price and 7K closing costs... please advice me - it is nerve wrecking

---

You would close (buy the home) before any of the improvements on a 203k loan would be done, so it doesn't jeopardize the closing date by the amount of time it'd take to do the repairs.  Basically you close on the home, usually 50% of the repair costs are disbursed to the contractor(s), the repairs are done, lender requires original appraiser or a qualified inspector to go out to confirm that the repairs were complete, a title search is done to make sure no mechanic's liens are on the property, and if there aren't then they disburse the final 50% of the repairs.

Adding extra rooms/bath's can be expensive, I don't pretend to know how much it'd cost but whenever you are adding square footage to a home it requires removing/replacing some external walls, and when building a home the more "corners" you have usually increase the cost quite a bit, so I just assume it'd also be expensive after a home is built to add as well.  It's easy to get contractor's bids though, not as much construction going on so usually they are eager.

FHA does not require ANY appliances in the home, just a "space to prepare food", so the stove, kitchen, dishwasher, etc. could all be missing and unless the lender has a silly overlay guideline, it shouldn't impact the home meeting minimum required property standards.

Contracts almost always have an inspection contingency, I know in NJ there isn't really a standard contract form, as I've seen many different forms/lengths used (even saw a PA purchase agreement scratched out and "New Jersey" written in), but a good agent would certainly put it in.  If something turns up in the home inspection that you don't like, you can either back out of the transaction (assuming you hadn't removed your inspection contingency) and get your deposit/earnest money back, ask the seller to fix it, or renegotiate contract terms (such as price).  One such buyer of mine discovered an extensive amount of mold/mildew after their inspection, got the sales price reduced by $30k because of it because they are going to fix it themselves/seller has no money.  And yes, do not spend any money on a home until you have an accepted offer, no home inspection.  No need to spend $ on a home you the seller may not even be willing to sell to you.

Like I mentioned before, HUD/FHA has minimum property requirements that must be met in order for the home to be acceptable.  Complete list can be found at http://www.hud.gov/offices/hsg/sfh/ref/chap1.cfm and http://www.nls.gov/offices/adm/hudclips/handbooks/hsgh/4910.1/index.cfm (not sure why that doesn't hyperlink), and http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502c3HSGH.pdf is a more condensed version.  If there are properties which you are interested in that are not "turn key", it is good to work with an agent who has had experience working with FHA financing.  You can also hire a 203k consultant, or a HUD qualified inspector, as your home inspector, and ask them to note anything that would prevent it from meeting minimum property requirements.  http://www.hud.gov/offices/hsg/sfh/insp/inspectr.cfm is the link where you can find those.

Sounds like the seller wants $265k and you want $225k, that is a $40k/15% swing, pretty big.  Does the seller have to sell for a certain price in order not to short sale?  It's very tough to advise someone over the internet on a home & seller that very little is known about.  That is where real estate agents come into the picture to feel out the other party and what they really need/want.  

[Anonymous]

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@ShanetheMortgageMan wrote:

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@Anonymous wrote:

Shane,

Thank you so much for your response. I was thinking about the 203K loan, however, I am thinking, adding an extra room and a half bath would take time isnt it? Obviously, I want to try and close by 6/30 to ensure I get the FTHBC. I have a client at work whose husband is a contractor so I may be able to get the work done at decent price. I also dont know how much it would cost for adding an extra room and half bath in the backyard and also new carpeting and paint - anything over 20k and I will be way over my head and I dont want that. If anyone has knowledge of this please share...

With the equity, I would most probably take out a HELOC if I dont do the 203K loan for now. The debt and obligations are below 1200 and after speaking with a couple of mortgage officers, I would qualify for upto 300K for a house under FHA, however I would really like to stay under 250K. Shane do you know how I can estimate the value of the house?

Furthermore, I went to see the house again yesterday, I noticed that there was a stove but no refrigarator. Will this be a problem with the FHA loan? Obviously I would buy a fridge after I move in, I just dont want to buy one before closing, ofcourse pertinent on an accepted offer.

In regards to a home inspection, my realtor recommended that I wait until an offer has been accepted and my loan approved to do an inspection. However, if inspection turns up something that would give me negotiating ground on the price further, would I just let the agent and the seller know and if they dont lower the price than walk away? Isnt the contract binding? Or would I include a clause where I am allowed to walk if the inspection is not pristine?

What else do I need to find out about the house? life of the roof? Boiler? What else?

Thanks in advance guys, Shane!

.....

I put in an offer today for 232K total price - 225K offer plus 7K closing costs concession. The seller came back with a counter - 265K plus the 7K closing cost concession = total of 272K. I really want to stay below 250K and I am planning to do atleast 15-20K 203K loan rolled into the FHA mortgage for carpeting, paint, fridge, dish washer and a half bathroom on the second floor... I dont know what to do?

The house has been on the market for almost 4 months now and there are currently no offers or interests apart from me... do you guys think maybe I should walk? or should I come back with a total offer of 237K - 230K selling price and 7K closing costs... please advice me - it is nerve wrecking

---

You would close (buy the home) before any of the improvements on a 203k loan would be done, so it doesn't jeopardize the closing date by the amount of time it'd take to do the repairs.  Basically you close on the home, usually 50% of the repair costs are disbursed to the contractor(s), the repairs are done, lender requires original appraiser or a qualified inspector to go out to confirm that the repairs were complete, a title search is done to make sure no mechanic's liens are on the property, and if there aren't then they disburse the final 50% of the repairs.

Adding extra rooms/bath's can be expensive, I don't pretend to know how much it'd cost but whenever you are adding square footage to a home it requires removing/replacing some external walls, and when building a home the more "corners" you have usually increase the cost quite a bit, so I just assume it'd also be expensive after a home is built to add as well.  It's easy to get contractor's bids though, not as much construction going on so usually they are eager.

FHA does not require ANY appliances in the home, just a "space to prepare food", so the stove, kitchen, dishwasher, etc. could all be missing and unless the lender has a silly overlay guideline, it shouldn't impact the home meeting minimum required property standards.

Contracts almost always have an inspection contingency, I know in NJ there isn't really a standard contract form, as I've seen many different forms/lengths used (even saw a PA purchase agreement scratched out and "New Jersey" written in), but a good agent would certainly put it in.  If something turns up in the home inspection that you don't like, you can either back out of the transaction (assuming you hadn't removed your inspection contingency) and get your deposit/earnest money back, ask the seller to fix it, or renegotiate contract terms (such as price).  One such buyer of mine discovered an extensive amount of mold/mildew after their inspection, got the sales price reduced by $30k because of it because they are going to fix it themselves/seller has no money.  And yes, do not spend any money on a home until you have an accepted offer, no home inspection.  No need to spend $ on a home you the seller may not even be willing to sell to you.

Like I mentioned before, HUD/FHA has minimum property requirements that must be met in order for the home to be acceptable.  Complete list can be found at http://www.hud.gov/offices/hsg/sfh/ref/chap1.cfm and http://www.nls.gov/offices/adm/hudclips/handbooks/hsgh/4910.1/index.cfm (not sure why that doesn't hyperlink), and http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502c3HSGH.pdf is a more condensed version.  If there are properties which you are interested in that are not "turn key", it is good to work with an agent who has had experience working with FHA financing.  You can also hire a 203k consultant, or a HUD qualified inspector, as your home inspector, and ask them to note anything that would prevent it from meeting minimum property requirements.  http://www.hud.gov/offices/hsg/sfh/insp/inspectr.cfm is the link where you can find those.

Sounds like the seller wants $265k and you want $225k, that is a $40k/15% swing, pretty big.  Does the seller have to sell for a certain price in order not to short sale?  It's very tough to advise someone over the internet on a home & seller that very little is known about.  That is where real estate agents come into the picture to feel out the other party and what they really need/want.  

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Hello Shane,

Thank you so much for your response. I and everybody else appreciate the advice and feedback we get from here and appreciate the value of members like yourself. As per your advice, I have decided to go see three lenders for the mortgage: TD bank, Old dominion - who will also do the 203K and Wells Fargo. Could you tell me if the 203K loan is a separate loan or is the amount roled into the mortgage? One of the lenders recommended meeting a HUD consultant once we have an accepted offer at the house and run by the scenario of what we want to do to the house and than is it true that the house is appraised at after improved value?

With the house itself, I decided to stay put at 225K and 7K back in closing costs after the counter and told the realtor to communicate that to the sellers agent. The sellers agent talked to my agent and my realtor told her that the house was small, needs some work, no bathroom upstairs etc. I thought that that was it, however to my surprise they came back at 240K and my agent recommended I go to 235K, however, I countered with 233K plus 7K CC = 240K total. I have a feeling that this will be accepted.

There are 2 bedrooms on the 2nd FL and a little space for like a huge walk in closet - this I want to convert into a half bath. I will pass on the addition for a bedroom downstairs (tear down back wall and extend to backyard) until maybe after a year. I also have an inspection contigency in the offer contract will be sure to put in the contract as well where I can do an inspection at any point before closing and if there is an issue than seller to fix, regoniate price or I walk - it would be in my best interest to do so.

I will keep you posted on the outcome. How much can I expect to pay for the closing cost? Also, the 7K in CC from the seller - is this cash disbursed to me or?

Thanks.

[Anonymous]

Just got a call from realtor - she spoke to the seller's realtor - and the lady selling the house is adamant on 245K as the lowest she can go. My last offer was 233K - this is 12K and me realtor suggests we split it and come to 239-240K to make the deal. I really want to be under 235K - what do you think I should do? Maybe get back to the lady in 2-3 days and let her sweat it a bit? And then counter back with 235K? or remain standing at 233k? This house has been on the market for 4-5 months and no offers on it at this point and I am the only interested buyer...

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