Getting Financed

Down Payment

If you are a first time home buyer, chances are you have plenty of questions about the kind of down payment you’ll need, becoming qualified, and different loan options. Although I’m not a loan officer, I’d like to answer some of the questions you may have, and give you a very general idea of some things to consider before you make an offer on a home.

The two most common loans are Conventional, and FHA.

1) Conventional Loans: This type of loan is probably the one used most. The biggest difference between a conventional loan and an FHA loan is that a conventional loan requires a larger down payment. This ends up being as low as  5% for an owner occupant conventional loan, or 20%-25% on an investment that you don’t intend to owner occupy. With a 20% down payment, mortgage insurance isn’t necessary.  Mortgage insurance is usually around $100 a month and protects the lender.  It’s a ripoff in my opinion.

2) FHA Loans: Federal Housing Administration loans are government insured loans that were created to help lower income families get into homes without having to pay a huge down payment. Generally, the down payment on an FHA loan is 3.5%. There are several conditions that must be met in order to obtain an FHA loan.  First, they need to be owner occupied.  When buying an investment,  parents many times add a son/daughter that will be occupying the property, and take advantage of the low down payment.  FHA loans must also get an FHA appraisal, which is more extensive than a conventional appraisal, and includes an inspection.  There are also limits to the amount you can borrow.

Finding a lender: It’s important to find a local lender who has relationships with local appraisers and local title people.   A lender who will return calls, works hard, and is honest.  I can recommend several that I know will do  good job.   Interest rates can vary depending on which loan programs the lender has access to, so you should check around.  I would call Andy Larsen at Axiom Home Loans first.  801-636-7200.   Please give me a call for other recommendations.

Inspectors:  If you’re buying an older home, or if you’re getting a conventional loan, you will want to get an inspection.  The cost is not included in the closing costs and a buyers approval of the inspection is a condition of the real estate purchase contract.  I’m must say, I’m partial to one inspector in particular, because I’ve been using him for years.  He’s honest and hard working and everyone loves Clark, but and he’s getting old and just had surgery on his knees, so I hope he can still do it.  Clark Palfreyman:  801-372-1277

3)  Closing costs:

Seller: you are responsible for paying the real estate commissions, and around 1% that the title folks charge to get things closed.  

Buyer: you can also expect to pay  2% of the purchase price, which includes title work charges and the origination fee that the lender charges.

4)  Interest Rates: Another thing to consider when purchasing a home is the current interest rate. The interest rate is the percentage that a lender charges on the principle balance of the loan. Interest rates can drastically influence your mortgage payment every month.