Final Design Meeting

On Monday went went back to Studio M, the design studio, to finalize all of our design options! The design studio is down the street from the Echelon building, which was struck by a plane last week.  It was very strange to drive by the building and see the huge hole in person.

First, we met with Sable Electric regarding all things electrical in our home.  After our initial meeting, we had determined that we need to have Cat5 wiring installed in our home in addition to cable.  While we plan on using wireless internet, we want to ensure that our house can transition as technology changes over time.  To further provide flexibility, we are also getting an On-Q box, which allows us to determine the functionality of all the wiring.  Beyond that, we added a bunch of cable outlets (one in every room), some under-cabinet lights, security system, an exterior outlet for Christmas lights, porch lights, and pre-wiring for landscape lighting.  

Then, we met with Rachel, our consultant, regarding all the fun stuff.  We confirmed our selection for the exterior colors.  

In the kitchen we will have golden light granite, espresso cabinets, and 18x18 pebble beach colored tile (the darker tile in the photo below). 

The backsplash will be made wit tumbled travertine laid in a herringbone pattern.

The tile will extend from the entry way to the powder room, utility room, through the kitchen and into the breakfast room.  In the rest of the house we will have winter garden colored carpet.

The bathrooms will have matte cultured marble countertops, and the lighter tile (color: canvas) on the floors and in the showers.  The walls will be a  lulled beige, and the trim is windmill.

Waiting on a Price Request

When we went to the design studio we got to pick out all the amazing things that will make up the living space of our home.  We determined where the lights will go, how many TV outlets we will have, the color of the carpet, the cabinets, the counter tops, if we will have under mounted sinks.... really everything.

However, for some of the items she could not tell us how much these luxuries would cost.  So, we had to submit price requests.  Unfortunately, we have been waiting for a week without any word.  Consequently, everything is on hold.  After we get the price requests, we will be in a better position to determine what we want in relation to what we can afford.  Until then, we can only dream and hope that we will not be experience sticker shock.

The true downside is that until we get a price request, our home is not moving forward.

Design Elements - Elevation

Who knew, the term "elevation" does not just mean the height above sea level, but also a scale drawing of the exterior of a building.  Well, it does and we have been charged with the task of coloring in that scale drawing to resemble what the real thing will look like.  But, instead of showing you my stellar coloring skills, I will show you photos of the brick, stone, and trim color we selected.  The brick is called Adobe X.L. by Claymex, the stone is nicotine limestone, and I do not know the name of the trim, but it is a mustardy  color.  We also opted for the dark brown shutters.

Update: The trip color is called "Applesauce Cake".  What a horrible name!  The shutters are "Canyon Brown", the stone is "Nicotine Limestone" and the brick is Claymex Adobe K.S. (king size). 

Truth In Lending Disclosure Statement

The Truth In Lending Act was promulgated by Congress to provide consumers with an easier method of comparing loans and strengthen the informed use of credit and to protect the consumer from inaccurate and unfair use of credit.  This disclosure statement is highlights the key information a consumer needs when comparing loans.  Lenders are required to provide a borrower with this information in a timely manner.  In turn, the lender must sign a copy  as evidence that they received it.

The annual percentage rate is the cost of your credit as a yearly rate.  Depending on rates and other fees, this APR is often higher than the interest rate on your loan.  For example, our interest rate on our loan is 5.00%, but our APR is 5.723%.

The finance charge is the total amount of interest you will pay for the term of the loan, including interest paid at closing, origination fee and other charges paid to the lender.  This is the total cost of acquiring the loan.

The amount financed is the amount of credit provided on your behalf.  This number is calculated by subtracting the prepaid finance charges (loan origination fees, points, adjusted interest and initial mortgage insurance premium) from the mortgage amount.

The total payments is the amount you would pay if you made the minimum payments for the entire term of the loan.

Next, the amount of money the lender will pay for each payment during the course of the loan is outlined.  If the monthly payments change during the course of the loan, this section tells you how many months you will be paying each amount.

Then there are a list of check the box type statements.  Including the amount you will pay for recording legal documents, whether or not you must pay a penalty if you pay off the loan early (none for us), and whether or not you may be entitled to a refund of part of the finance charge (we are not, but I have found no evidence that anyone ever is).  This simply means we are not entitled to get a refund on the portion of our payments that went towards interest, since a large chuck of the early payments is interest. Also, whether or not someone buying your property can assume your loan.  Because we are getting an FHA loan, a buyer can assume our loan, of course subject to certain restrictions.

Nuts and Bolts of an FHA Loan

The Federal Housing Administration (FHA) runs programs to promote home ownership.  To meet that end, the FHA guarantees that a lender will not have to write off a loan if the borrower defaults.  Consequently, lenders are willing to make the loans.  

Almost anyone can get the loan.  There are no income limits like other first time home buyer programs (great if, like us, you are self-employed).  To qualify a borrower just needs decent credit.  Additionally, a borrower can put down as little at 3%, unlike a conventional loan.

One major downside to FHA loans is that a borrower is limited to borrowing a relatively small amount.  The loan limits vary from county to county, ranging from $271,050 to 332,500 for a single family home.  The loan limit in Travis County is $288,750.

Additionally, the FHA requires a buyer to purchase an upfront mortgage insurance premium (MIP) of 1.5% and a small ongoing monthly fee.

Good Faith Estimate

The lender provided us with a Good Faith Estimate.  This is a standardized form promulgated by the US Department of Housing and Urban Development.  This is a 4 page document lenders are required to provide loan applicants. 

The purpose of this document is to give "you an estimate of your settlement charges and loan terms if you are approved for this loan."  Since all lenders provide you with this form, it makes it easier to shop for the best loan for you.*

Important Dates: The top portion of the first page contains a summary of important dates relating to your quote.  These dates include:

• The date the interest rate is available through (ours was the same day it was provided to us).  After this time, then interest rate, some of the Origination Charges, and monthly payments can change until an interest rate is locked in.
• The date the other settlement charges is available through (our was two weeks from the date the document was provided).
• The date you must go to settlement to lock in your interest rate.  Traditionally, this is 30-60 days out.  Since we are building our home, we are not able to lock in our interest rate yet.
• The number of days you must lock in your interest rate before settlement.  (15 days for us).

Summary of your loan: Next is the most important part of the document: the summary of the loans.  This section attempts to cut through all the fluff and provide you will the core numbers. 

The FHA limits the amount that can be borrowed based on where the property is located. In Texas the limit ranges from $271,050 to $288,750 and corresponds with the cost of housing in each county.  The limit in Travis County is $288,750.

The loan terms is the length of time you will have to pay off the loan.  Traditional terms are 15, 20, 30, or possibly even 40 years.  However, 30 years is the standard.  The longer terms result in lower monthly payments.  However, the borrower will end up paying more interest than they would with a shorter term loan with the same interest rate.

The initial monthly amount owed, it what you can expect to pay each month.  This number includes principal, interest and mortgage insurance.  However, don't be fooled.  This number does not include taxes, HOAs, or escrow payments the lender may require.

Then there are a series of yes and no questions. These questions outline what will happen in the future.  (1) Can you interest rate rise? Currently, interest rates are historically low, so if your interest rate can rise (you have an adjustable rate mortgage (ARM)), then it will. (2) Even if you make payments on time, can your loan balance rise?  (3) Even if you make payments on time, can your month amount owed for principal, interset and any mortgage insurance rise? (4) Does your loan have a prepayment penalty? The advantage to paying off your loan early is that you are paying less interest.  But, if there is a penalty for prepayment, you may be worse off if you try to pay it off early.  (5) Does your loan have a balloon payment?  A balloon payment is a large lump sum due at the end of the loan -- yuck!

Escrow Account Information:  An escrow account is an account held by a neutral third party.  For mortgages, an escrow account is typically used to hold funds for paying property taxes or other property-related charges.  This gives the lender some assurance that the property taxes on the property will be paid.  If you have an escrow account (and most likely you do), you will be required to pay additional money each month which is held in escrow.

Summary of your Settlement Charges:  At the very bottom of the first page, there is a summary of your settlement charges.  Adjusted Origination Charges + All Other Settlement Services = Total Settlement Charges.  These charges are broken down on page 2 as follows:

Adjusted Origination Charges:  This is the cost of getting the loan, plus any points you may choose to purchase (see below).

• Loan Company's origination charge:  this is the charge for doing the work to get the loan for the borrower.
• Points for a specific interest rate:  There are two types of points you can purchase: Discount Points and Origination Points
• Discount Points reduces your interest rate.  Typically, you pay 1% of the total loan in exchange for a .25% lower interest rate.  So, if the loan amount is $1,000, then one point would cost $1,000.  This translates into lower monthly payments., but higher settlement costs. Also, depending on the length of time you intend to live in the house, you may actually spend more money when you purchase points.  If you wanted to reduce a 5.25% loan to a 5.00% on a $100,000 fixed rate loan, then it would take you 63 months (5.4 years) to break even.  Your monthly payments would decrease by $15.28 per month.  So if you are only planning on living in the house for 5.4 years, you should not buy the points.  However, if you plan on living in the house longer than 5.4 years, the points are worthwhile. Here is a quick and dirty calculator as well as one that is more detailed.  Discount points are also tax deductible.
• Origination Points reduce the amount of cash required at closing, but it increases your interest rate.  This rate is not set in stone and is negotiable.  Origination points are not tax deductible.

Charges for All Other Settlement Services: These are charges (both required and optional) associated with purchasing your home. Some of these charges will ultimately be paid by the seller, but that generally depends on the terms of your contract.

• Required Services Loan Company Selects:  These are charges that you must purchase to complete the settlement and you do not get to choose who provides them.  I have listed the prices we are being charged for your information:
• Appraisal: $400.00
• Credit Report: $60.00
• Flood Certification: $15.00
• Up-Front Mortgage Insurance: $6,496.85  (this is charged unless you put down 20%)
• Tax Services Fee: $120.00
• Survey: $385.00
• Final Inspection: $100.00
• Title Services and Lender's Title Insurance: $793.00
• Owner's Title Insurance (optional): $2,034.59
• Required Services that you can shop for:  Pest Inspection
• Government Recording Charges: $124.00
• Transfer taxes: $0
• Initial Deposit in Escrow Account: $1,742.31
• Daily interest charges: $40.4445 for 10 days = $404.44 (this is the daily interest rate for our loan from the day of our settlement until the first day of the next month or the first day of our normal mortgage payment cycle)
• Homeowner's Insurance: we are currently price shopping, but the price quotes range from $450 to $1,067)

Charges that can change:  Until you lock in your loan, some, but not all, of your settlement charges can change.  Here is the breakdown:

Tradeoff Table and Shopping Cart:  At the bottom of the third page there is a tradeoff table that outlines the same loan with either lower settlement charges or the same loan with a lower interest rates (due to points).  Additionally, there is a blank for you to write in for a side-by-side comparison to compare GFEs from different loan originators.

* We have only applied for a loan from one lender.  In our contract with the builder, the builder agreed to pay our closing costs, up to 4% of our purchase price, if we used the lender they have partnered with.  Typically, the buyer's closing costs are approximately 4% of the purchase price, but everything, and I mean everything, is negotiable.  Our builder typically agrees to pay closing costs up to 2% of the purchase price.  However, since they could not guarantee the house would be completed in time for use to get the $8,000 first time home buyer tax credit, we negotiated an additional 2%.

Needs List

As I previously mentioned, when we received the news that we have been pre-approved for our mortgage, the underwriter requested a plethora of documents.  Here is the list:

Floorplans

The exterior of our home with be a combination of brick and stone.  There is a cute little patio, in which one day I hope to sit in and enjoy the company of our neighbors and watch the neighborhood kids play.  Kind of like they do on Desperate Housewives - sans the drama.

As for the interior, we opted for the fireplace, covered patio in the back, and 3rd car garage.  Between the extra garage space and the workspace, Husband might never enter the actual living space.

Pre-Approved!

We received an email informing us that we have been pre-qualified for an FHA loan.  Along with the news, we received several documents:  

1. Truth in Lending:  This document is supposed to make it easier for the lay person to understand what the heck all these numbers represent.  To be honest, it clarified a few things, but ultimately made me realize I understand the process less than I originally thought.
2. Good Faith Estimate: Here we are told how much cash we must have on signing day.  This number includes your down payment, settlement charges, initial monthly payment, origination charges, etc.
3. FHA Closing Worksheet:  An itemized list of all the fees and closing costs.  Additionally, there is a table outlining how much the seller and buyer are bringing to the closing table.  Most importantly, there is a table calculating the total amount we will be required to pay each month inclusive of taxes, insurance, etc.
4. Needs List: This unassuming document is the biggest pain of them all.  It essentially requests all our personal and financial information.  Including: identification, 2 years worth of tax returns and W-2/1099s, 2 months of statements for all bank accounts, IRAs, Stock Accounts, landlord information, name of homeowners' insurance provider, and of course a check for $400.

I will outline each of the above documents in a separate post.  In the meantime, we are excitedly awaiting our first design meeting on Friday.  At that point we will be expected to make final decisions on all exterior and electrical elements of our home.