@Skye12329 wrote:So it wont be for a few years but thinking about buying a house. However im confused on how everything works since it will be my first. I see all these posts about FHA loan, i dont know what a FHA loan is...
So if someone could help fill me in on the following:
1. Whats a FHA Loan? A government backed loan - allows consumers to put down as low as 3.5% of the purchase price and have lower credit scores, as low as 620. Carries a monthly PMI (insurance) payment.
2. What are the usual fees when purchasing a home? down payment and closing costs. Closing costs include, credit report fee, loan origination, attorney fees, inspection, discount points, appraisal, survey, title insurance, title search, escrow deposit, recording fee, underwriting fee.
3. Whats refinancing and how does that work? It's taking a new mortgage to replace an existing mortgage. It's normally done to lower the rates/APR on the loan or the term. This requires a loan to value (LTV) of at least 95% (I believe) - basically the value of the home has to be greater than the loan. So an appraisal ($400 - $450) is done during the refinancing process.
4. Whats a home equity line? I hear people talking about taking out some equity on their home, not sure what is, or means? Equity line (HELOC) is taking a loan against the home (collateral) - rates are much higher than a mortgage loan - and are variable.
5. Whats the avg monthly payments say on a $150k home? I know this could be a hard question but if it helps a credit score in the 700's - putting down 3.5%, property taxes at 1.2%, you are looking at about $1,000 a month - including the PMI.
I'm sure the pro's will chime in, but here are my 2 cents.
Starting Score: 600 (Jan 2014)
@StartingOver10 wrote:OP, the last question about average costs for a $150k home is not relevant to you because you have to use your local expenses for real estate taxes, homeowners insurance, flood insurance (if applicable) and HOA fees (if applicable). You are on the right track for estimating financing costs - but the escrows (taxes, insurance) need local info input to be accurate for you.
For example - in my area of S Fl homeowners insurance is a very high expense that could easily add $200 to the estimate topa provided to you above.
Also in my area you can have two homes side by side that are identical and yet have entirely different real estate taxes because one might have a homestead exemption that was put in ten years ago and the other might not have an exemption at all. This can create a huge difference of several thousand dollars per year between the two identical homes.
So check your area for specific real estate taxes and insurance. Real estate is local.
HOAs too. I almost moved to Florida and was shocked by the HOA fees over there - Tampa. The average monthly feed was around $250 a month, so that would increase the estimate as well.