Mortgage Test

I went to my local 5/3 branch in Tremont yes­ter­day and sat down with a very nice woman who agreed to help me learn about house-buy­ing pro­ce­dures and hoop-jump­ing, the var­i­ous pro­grams that 5/3 has avail­able and how much I could get a home loan for at my present salary. I learned about orig­i­na­tion fees [fees charged by lenders for pro­cess­ing the loan paper­work], clos­ing costs [appraisal, title work, coun­ty record­ing fees, cred­it check, etc] and pre-paids [inter­est, prop­er­ty tax­es, homeowner’s insur­ance] which are all rolled-in to the mort­gage on top of the cost of the house. I learned that prop­er­ty tax­es are paid in arrears and that all inter­est on loans is tax deductible. Since I only have a stu­dent loan I thought only that inter­est was tax deductible because I was a stu­dent. I learned about var­i­ous meth­ods of mort­gage pay­ment, includ­ing a biweek­ly half-pay­ment sys­tem that results in an extra house-pay­ment per year and can save up to $30k and 6 years of pay­ments on the life of a 30-year mort­gage. I learned that with most mort­gages you end up pay­ing almost twice the val­ue of the home over the length of the mort­gage. I learned how apprais­ers come up with the val­ue of a home. I learned that if you’re pur­chas­ing a home from a real­tor, it is wise to bring your own real­tor to the table to rep­re­sent your best inter­ests. As an indus­try cour­tesy real­tors will split the com­mis­sion on a home and since this com­mis­sion is paid by the sell­er, I would be get­ting some cash for my real­tor with­out pay­ing for it myself.

Then we did the num­ber-crunch­ing. I learned about Dinky­town, a site where you can cal­cu­late mort­gage pay­ments and just about any oth­er type of finan­cial cal­cu­la­tion. Even at my pay-lev­el, under $29k a year, I could get a loan from 5/3 with zero down and 100% financ­ing with no mort­gage insur­ance for $110k. This is cal­cu­lat­ed from my gross year­ly income. Cal­cu­lat­ing from my net income, I could get at $70k loan. The $70k loan makes much more sense to me than stretch­ing myself as thin as I would have to do for the $110k ver­sion. Good luck find­ing a house in Tremont for either of those prices. But then, I’m going to do my research on that as well. I rode my bike around the neigh­bor­hood today and made a list of the address­es of all the homes that are for sale. Then I can go to the Cuya­hoga Coun­ty Auditor’s site and look up the trans­ac­tion infor­ma­tion for the address­es of the hous­es for sale. Once I get the par­cel num­ber, I can then go to the Coun­ty Recorder’s site and see the actu­al mort­gage infor­ma­tion on the home. From this I can esti­mate how much they’ll be ask­ing for the house, and can deter­mine whether or not it’ll be worth my time to call them. Of course, it would be faster to just call up all the places, but I wouldn’t learn as much.

As it stands I don’t think I can afford a house right now any­way. But by the time I get a bet­ter job, I’ll be for­mi­da­bly informed.

3 Replies

  • Good luck with the house hunt­ing. We took 3–4 months to find our house. One of the things I learned in the whole thing is that you can like the out­side of a house, you can like the loca­tion, but if you hate the lay­out or any­thing else about the inside, don’t both­er.

    My only regret in the whole thing was not get­ting a house with a garage. It seems our van has become tar­get prac­tice for every bird in the neigh­bor­hood.

  • It looks like I’m not going to be able to afford a damn thing in Tremont. Some of the prop­er­ties have appre­ci­at­ed $120k [×10 the orig­i­nal val­ue] in the last decade.

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