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.