Advice on first time home buyer

Anonymous · ‎04-29-2009

I was recently approved for a $200,000 FHA loan. I have approximately $26,000 saved up. My coworker who makes less than me, was preapproved for a $235,000 FHA loan. The credit union I'm dealing with is very stingent about their loans but offer very good rates. I finally found a house that I liked a lot which was on the market for $214,900. The house was only on the market for a short time until they got their first offer. My realtor told me this and I decided to also put an offer in. It's a nice starter house in a great neighborhood in a desirable town, so I (and my realtor) thought that the previous offer could have been relatively high ($205-$210k).

My credit score is very good. 760+ everywhere and thing I checked.

So, I put my offer in for $210,500. Today, they counter offered for $212,700, which is exaclty half between my price and the asking price. Now I thought my offer was relatively high to begin with, but really, its only $2200 more. Currently, I have no furniture except a bed and a tv, so I will need a lot for the house. After closing costs and down payment, that extra $2200 cash is worth a LOT to me.

Here's where my questions come in. I could either A) shop around and get a higher preapproval quickly, and put the minimal 3% down. I have 3 weeks to get a mortgage B) Keep my offer firm C) Accept theirs and lose out on the extra money

My other question is (because I cant get a clear answer for it) What is really the difference between a conventional and FHA loan and what you recommend? All I can find is that FHA only requires 3%, but a conventional requires typically between 5-10%. Someone else told me that FHA loans typically have higher closing cost. If I could get a conventional with a 5% down payment, which is about what I'm already going to pay, are there reasons why FHA is better?

Thanks

Mike

Anonymous · ‎04-29-2009

@Anonymous wrote:
I was recently approved for a $200,000 FHA loan. I have approximately $26,000 saved up. My coworker who makes less than me, was preapproved for a $235,000 FHA loan. The credit union I'm dealing with is very stingent about their loans but offer very good rates. I finally found a house that I liked a lot which was on the market for $214,900. The house was only on the market for a short time until they got their first offer. My realtor told me this and I decided to also put an offer in. It's a nice starter house in a great neighborhood in a desirable town, so I (and my realtor) thought that the previous offer could have been relatively high ($205-$210k).
My credit score is very good. 760+ everywhere and thing I checked.
So, I put my offer in for $210,500. Today, they counter offered for $212,700, which is exaclty half between my price and the asking price. Now I thought my offer was relatively high to begin with, but really, its only $2200 more. Currently, I have no furniture except a bed and a tv, so I will need a lot for the house. After closing costs and down payment, that extra $2200 cash is worth a LOT to me.

Here's where my questions come in. I could either A) shop around and get a higher preapproval quickly, and put the minimal 3% down. I have 3 weeks to get a mortgage B) Keep my offer firm C) Accept theirs and lose out on the extra money

My other question is (because I cant get a clear answer for it) What is really the difference between a conventional and FHA loan and what you recommend? All I can find is that FHA only requires 3%, but a conventional requires typically between 5-10%. Someone else told me that FHA loans typically have higher closing cost. If I could get a conventional with a 5% down payment, which is about what I'm already going to pay, are there reasons why FHA is better?

Thanks

Mike

From what I understand, FHA can have slightly higher rates than a conventional, but the PMI is lower because the government insures the FHA loans. And FHA is 3.5% down. So it's possible that between the lower PMI and the slightly higher interest rate you may actually save money by going FHA versus conventional, but that would determine on the rates of both.

You could also accept the seller's counter amount and then ask them to pay some of your closing costs, which would help you, because really $2200 more for a house, is not that much. On a 30 year loan, no considering interest you're looking at an extra $6.11.

So you need to decide if that extra $6.11 in principle only is worth losing that house.

Anonymous · ‎04-29-2009

From what I understand, FHA can have slightly higher rates than a conventional, but the PMI is lower because the government insures the FHA loans. And FHA is 3.5% down. So it's possible that between the lower PMI and the slightly higher interest rate you may actually save money by going FHA versus conventional, but that would determine on the rates of both.

You could also accept the seller's counter amount and then ask them to pay some of your closing costs, which would help you, because really $2200 more for a house, is not that much. On a 30 year loan, no considering interest you're looking at an extra $6.11.

So you need to decide if that extra $6.11 in principle only is worth losing that house.

_____________________________________________________________________________

FHA is a BETTER interest rate than conventional IF you have less than 20% down and/or 720 or less FICO score. The only difference is that FHA rolls in MIP at (I think 1.75%) of the loan, into the loan AND require monthly PMI payments. If you have 20% down and 720+ then you will get basically the same rate without the roll in of MIP.

I put down around 5%, locked in at 5% for 30 years, paid $200 in discount points on 3/18.

I speculated $5K in furniture costs..... I am at $9,500 and I still haven't purchased my bedroom set (that I alloted $2.5K of that money) It is the little things that add up and you don't even know it (the cleaners, mops, brooms, lawn mowers, etc.....)

Every extra penny counts after you close. Go FHA !!!!

Good Luck! Being a homeowner is GREAT!!!!

SonorityGenius · ‎04-29-2009

My advice is to not just cave in to their counter offer. Tell your Realtor you are firm on your offer and see their response. You said its only $2200 difference but to them if they truly want to SELL their house, they will eat that much in a nanosecond..

Now, if they dont, dont fret! you didn't lose the house; just wait 2-3 days and tell your Realtor - OK if they pay 3k towards closing cost, you will accept their counter offer or something similar..

I would advice you to shop around for a lender in your scenario as well, there ARE lenders that offer par FHA rates other than credit unions out there!

Anonymous · ‎04-29-2009

@Anonymous wrote:

I speculated $5K in furniture costs..... I am at $9,500 and I still haven't purchased my bedroom set (that I alloted $2.5K of that money) It is the little things that add up and you don't even know it (the cleaners, mops, brooms, lawn mowers, etc.....)

You don't HAVE to buy brand new furniture and fill every room of your house at the same time. Yes, I would love to complete my bedroom set, but I can get by with just my bed. And 2 hand me down couches, or 2 couches from a used store will work just as well as 2 brand new couches.

And those who are renting have cleaning supplies from their last residence, so that's not a new cost.

My point was, if it was a house that I really loved and really wanted, I wouldn't let a measly 2200 get in my way.

Message Edited by woopah on 04-29-2009 10:45 PM