MortgageFeliz

I would like to contact you to see how to get a home loan for $250,000, what the monthly payments would be and if a 25 year term is available. Would they give me 100%, who pays the appraisal and the other expenses?

At this moment, it is very difficult to borrow 100% of the funds that you need to purchase a home, Not so long ago, you could have taken a loan for 80% of the home's value and then another for 20% of its value. This would have provided you with all of the funds you needed without taking out Private Mortgage Insurance (PMI).  Now, only a few lenders, mainly banks and credit unions will make loans if you have a low downpayment. Most require a full 20% downpayment or at the very least, 10% down and Private Mortgage Insurance (PMI).

As for expenses, you will be ultimately responsible for these types of closing costs. Previously, many of these could be rolled into the loan amount for closing, but the current market requires their payment. Typical lengths for loans are 15 or 30 years, with 30 years being the more common. Using one of the calculators from this page shows that for a 30 year loan at 7% per annum interest rate, the monthly payment would be around $1,665. You may need to add PMI or homeowners insurance or property taxes to that payment. If you paid 20% as a downpayment, you would then have a loan of $200,000 and a monthly payment of $1,331.

Will my loan close?

The market is confused now. Many buyers and sellers are arriving at the closing and discovering that the home loan remains unfunded. In prior years this was unusual. The strong demand kept workloads heavy and papers were misplaced and clients mistreated, but usually at closing, the money arrived, everyone signed their papers and the process occurred.

Now lenders themselves are uncertain if the closing will occur. Basically many lenders do not retain loans in their portfolio: they immediately sell them and retain a commission. This system is broken for nonconforming loans, such as jumbo mortgages and subprime mortgages. If you think you have one of these loans, there is a good chance that you will encounter a problem, particularly if the agreement is not with a bank or credit union that intends to maintain the loan.

However, the good news is that conforming loans are still flowing smoothly and there is more time and effort available for these. So, this means that you need a conforming loan. That means a minimum down payment of 20%, qualifying based on presenting all documents and a loan value not exceeding $417,000.

What Can I Afford?

This mortgage payment  table gives you a rough idea of what your maximum payment could be. It assumes that you have a few other debts and allocates about 36% of your income to the payment.

Try a calculator from one of the ads on the right to do your own calculation for mortgage payments based on your finances.

Annual Income	Monthly Income	Other Monthly Debts	Max Monthly Payment
$25,000	$2,083	$167	$583
$30,000	$2,500	$200	$700
$35,000	$2,917	$233	$817
$40,000	$3,333	$267	$933
$45,000	$3,750	$300	$1,050
$50,000	$4,167	$333	$1,167
$60,000	$5,000	$400	$1,400
$70,000	$5,833	$467	$1,633
$80,000	$6,667	$533	$1,867
$90,000	$7,500	$600	$2,100
$100,000	$8,333	$667	$2,333
$125,000	$10,417	$833	$2,917
$150,000	$12,500	$1,000	$3,500
$175,000	$14,583	$1,167	$4,083
$200,000	$16,667	$1,333	$4,667

Maximum Sales Price for Home Financed at...

Monthly Payment	Down Pay-ment	6%	6.5%	7%
$583	5%	$79,000	$75,000	$71,000
$583	10%	$83,500	$80,000	$75,000
$700	5%	$100,000	$94,000	$90,000
$700	10%	$105,000	$100,000	$95,000
$700	20%	$118,500	$112,500	$106,750
$933	5%	$133,000	$126,000	$120,000
$933	10%	$140,000	$133,000	$126,500
$933	20%	$157,750	$150,000	$142,000
$1,167	10%	$186,000	$176,000	$167,500

Give up on trying to sell your house!

You want to sell your house. You are reasonable about the price. You are dreaming.

The housing market has changed and is undergoing a major correction. But instead of home prices declining, a major correction usually means that houses don't sell. Why? First, the buyers become skittish about buying and believe that there is no rush to buy. Second, the speculators disappear from the market. Third, people don't want to lose money on their house. Fourth, many people can't afford to sell their house at a lower price and so they wait.

A large percentage of current homebuyers have made downpayments of 15% or less. If the price of their home falls by 10% and they pay 6% in real estate agent commissions,  1% in closing fees, and do repairs on the house, the amount they receive is actually less than what they still owe on the mortgage. Since they don't have extra cash, they can't afford to lower the price enough to sell the house in a depressed market.

Those that can't afford the payment, have no savings sometimes are forced to sell at a loss. Many of these situations result in foreclosures. This drives prices down even more.

So hunker down for 3 years or so and try not to read the newspaper. Oh, and you might consider home improvements that make you happy since you will be there awhile.

Say goodbye to Jumbo Loans

A jumbo loan is a mortgage of $417,000 or more. So if you are making a 20% downpayment, that means that you will need a jumbo loan to buy a house that costs more than roughly $520,000. If you live in California or if you just want a relatively nice house somewhere else, this means you.

First, let's say that if you don't have a 20% downpayment, current market conditions mean you probably won't get a loan at all.

Regular loans are packaged and sold to Fannie Mae and Freddie Mac. Jumbo mortgage loans are packaged and sold in the secondary market. Right now, there is no secondary market for these types of loans and little funding for institutions keeping the loans on their own books. Many lenders have decided not to make these loans and others have increased their rates (Wells Fargo jumbed from 6.75% to 8% per annum.)

Most real estate agents and mortgage brokers don't even know about this yet. It is happening at the top of the mortgage companies and borrowers may not learn about it until they are sitting at the closing table and the loan has not yet been funded. Don't be surprised.

Lock in a rate. Lock in funding now. Or better yet, wait to buy that house until the price drops. Oops, then the interest rate and your payments will be higher. Either way, if you want to buy, the cost just went up - if you can get the loan.

Don't buy a House now

Every day you hear agents say that it is a buyers market. Not really. A buyer's market should have a good selection of houses, good deals, motivated sellers and a reward for being on the lucky side of the market.

Right now it is getting harder for you to buy a house - and for everyone else. A credit crunch is occurring that is causing lenders to cut back on the number of loans that they make, qualify fewer buyers (reducing your competition), and to raise rates. Think about it: if rates go up, the cost to you of a house goes up with higher monthly payments. So there is no deal. Housing prices need to fall 10% or more to make up for the current change in rates and even more if rates keep climbing. Has that happened? I don't think so.

Is there a great selection? Not yet. But if houses don't sell and new houses come on the market, the number for sale keeps increasing. This raises the odds that you can find the one you want - and that you can find a better deal on it!

Are sellers motivated? They say that they are, but not like they will be in a few months. Many people become discouraged after a few months and the real estate agents that helped price the house originally start mentioning more and more that the price might be out of line with the market and that maybe it should be lowered to reflect the market. People don't want to hear this and generally react in predictable ways. They wait until the listing has expired and re-list at a lower with another agent (or even the same agent.) Or they decide to wait out the market if they can or if they can't afford to sell the house and pay off the mortgage. Or they lower it a bit and then a bit more and then... Make them wait.

The best option is to postpone buying while  collectively a larger and larger group of sellers reach the same dismal conclusion, their house is worth substantially less than before. Wait for the reward. Remember that you will pay 8% on a mortgage plus maybe save 10% on the house. This is an 18 % return in one year on a large amount of money.

Thirty-Year Mortgage

Compare these mortgage payment amounts with the 15 year rates in the other table. It really isn't much more, but that can make a big difference if you have a tight budget or if you are stretching to qualify for a loan or if you live in an area like California with high housing prices. The main reason for the loan terms being so different is that the extra amount that you pay goes directly against mortgage principal and so the amount that you owe reduces much faster.

Try one of the calculators in the ads at the right to get a personalized comparison.

Mortgage Amount	6.5%	7.0%	7.5%	8.0%
$50,000	$317	$333	$350	$367
$60,000	$380	$399	$420	$440
$70,000	$443	$466	$489	$514
$80,000	$506	$532	$559	$587
$90,000	$570	$599	$629	$660
$100,000	$633	$665	$699	$734
$120,000	$759	$798	$839	$881
$140,000	$885	$932	$979	$1,027
$160,000	$1,011	$1,065	$1,110	$1,174
$180,000	$1,137	$1,198	$1,259	$1,320
$200,000	$1,264	$1,330	$1,398	$1,468
$220,000	$1,391	$1,464	$1,538	$1,614
$240,000	$1,517	$1,597	$1,678	$1,761
$260,000	$1,643	$1,710	$1,818	$1,908
$280,000	$1,770	$1,863	$1,959	$2,055

Fifteen-Year Mortgage

If you can handle the mortgage payments and the interest rate is similar, a fifteen year mortgage can be a good idea. Here is a table to give you an idea of what payments would be on different amounts at different interest rates.

I recommend that you use a calculator from one of the ads on the right to do your own calculation for mortgage payments based on your finances.

Mortgage Amount	6.5%	7.0%	7.5%	8.0%
$50,000	$436	$450	$464	$478
$60,000	$523	$539	$556	$574
$70,000	$610	$629	$649	$669
$80,000	$697	$719	$741	$765
$90,000	$784	$809	$834	$860
$100,000	$871	$899	$927	$956
$120,000	$1,045	$1,079	$1,112	$1,147
$140,000	$1,219	$1,259	$1,298	$1,338
$160,000	$1,394	$1,438	$1,483	$1,530
$180,000	$1,568	$1,618	$1,669	$1,721
$200,000	$1,742	$1,798	$1,854	$1,912
$220,000	$1,916	$1,979	$2,039	$2,103
$240,000	$2,090	$2,158	$2,225	$2,294
$260,000	$2,265	$2,337	$2,410	$2,486
$280,000	$2,439	$2,517	$2,596	$2,677

Will my property taxes go up?

Property taxes depend on 2 items: the value of your house and the property tax rate for your county and municipality. Generally, the tax rate increases infrequently unless there is a bond issue and an increase is voted in. So the main reason your taxes go up will depend on the property value.

How is this amount determined? In some places like California, the amount changes whenever the property is sold and then by 2% every year thereafter. So if you stay in the same place for a while, your increases will be limited. In other places, the county tax assessors will evaluate the value of your property at specified intervals based on what other comparable properties have sold for.

The major component of this will be based on square footage and what price other houses have sold for per square foot. Therefore, always make sure that your square footage is not registered too high.

Are your mortgage payments more than just interest?

Most mortgages are made for 30 years and during the first years you make payments that cover the interest, but do very little to reduce the actual amount that you owe. The table below shows some rough figures showing the amount of mortgage payments and what amount of those payments that is interest and principal. These calculations are based on a $200,000 mortgage at 7% per annum for 30 years.

Year	Total  Payments Made	Total Principal Paid	Total Interest Paid on Loan	Total Balance still due on Mortgage
1	$15,967	$2,032	$13,936	$200,000
3	$47,901	$6,546	$41,356	$191,422
5	$79,836	$11,737	$68,099	$188,687
10	$159,672	$27,375	$131,297	$172,820
15	$238,005	$49,434	$190,074	$150,566

Notice that after 15 years or half of your loan's life, your payments of $238,005 on a loan of $200,000 have reduced the principal by less than $50,000 and you still would owe more than $150,000 in principle.

How can you pay less? Make extra payments as early and as often as you can. Making extra payments of $2,700 in the first year could reduce your total payments by over $15,000. Other ideas are to make the biggest downpament that you can or buying a less expensive house.