Dear Ms. Lank: I am 22, got my dream job and am now relocating. My parents think, since rent may be high, I should try to buy and have something to show. How do I go about getting pre-qualified, should I use a local bank or larger national bank or my own bank?
Do I have a chance? I have worked for my company one year, saved $10,000 and have excellent credit. Can you help direct me? Where do I go first? Bank? Realtor? What about short sales? -- A. T.
Answer: You don't say what your income is or how much you're spending on monthly debts like a car or student loans. Those figures will determine how much you can borrow on a mortgage.
You can often negotiate for a seller to assist with your closing costs. In addition, FHA mortgages are available with low down payments. Many states also offer attractive loans for first-time buyers. And today's record low interest rates are definitely in your favor.
Any experienced real estate broker can give you a quick financial analysis and it won't obligate you to consult more than once. Visit open houses in the areas that interest you, and if an agent isn't busy, ask for guidance. They'll take it from there, they're used to educating first-timers. You can also explore the matter with lending institutions, starting with your own bank.
Buying a short sale or bank-owned property can be a complicated and drawn-out process, and I wouldn't recommend it for a first-time buyer.
When Daughter Inherits
Dear Ms. Lank: I am almost 90 and have a mortgage on my home. The deed lists my husband, daughter and myself. She is the sole beneficiary in our will. Only my name and that of my husband appear in our negotiations with our mortgage company. Is this all right or is there something I have to do to straighten this out? When she inherits our home, can she just continue the payments in her own name? -- M. B.
Answer: Yes, she can. When a home is inherited by a family member, the mortgage loan usually continues just as it is. And if her name is already on the deed, it's not exactly inheritance anyhow.
Afraid of Freddie
Dear Ms. Lank: My bank sold my loan to another bank almost right away. About a year later, I received a letter that I should continue to send my payment to the new bank, but Freddie Mac was now my lender. I don't know why this bothers me, but it does. Should I refinance to get away from Freddie Mac? I thought Freddie Mac bought bad loans. That is not my case. I don't know why they would buy mine. -- via askedith.com
Answer: You don't have anything to worry about and nothing is wrong. Your mortgage has been packed with a lot of others and sold to an institutional investor on what is known as the secondary market. That happens to most mortgages. If you refinanced, your next loan will probably end up owned by Fannie Mae, Ginnie Mae or Freddy Mac anyhow. Mistakes were made in the past, but these days they all try to buy only good loans.
As for refinancing -- you'd have to stretch your remaining term, because banks are not making nine-year mortgage loans. Might as well just stay right where you are and relax.
Financing the Cabin
Dear Ms. Lank: In 2008 I bought a cabin with a lot of land. I plan to retire there in a few years but am not currently living there. I had an excellent credit score, but at the time I bought, the best interest rate I could get was 5.5 percent, even though rates were running below 4 percent. A few years later I inquired with another bank about refinancing and was told they could do no better. I can't understand this. If the land was bare, to put up even a modular home of similar size, plus the infrastructure that already exists (sand mound, a well and a basement), it would cost at least as much as I borrowed, making the land essentially free. Can you suggest any way I can take advantage of the low rates that are current today? -- R.
Answer: Banks don't base their decisions on how much you have spent on the property, or how much it would cost to replace it. What they care about is -- if you didn't make payments and they ended up taking possession of the place, could they sell it for enough to repay their loan? And in any case, rates may be higher for investment or second-home property these days.
You can always consult a few mortgage brokers, though, to see if they can find what you're looking for.
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