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What is the general opinion these days on affordability? What pre-requisites are considered for financial prudence when purchasing a home?
In past decades it used to be 20% down, 6+ months of seasoned reserves, no more than 35% of gross spent to service housing costs PLUS all debts and no more than 25% of gross to service all housing costs (PITI/HOA/Misc. taxes/Maintenance).
Is all that out the window in today's environment of super high home prices? What are the standards today?
In todays market you can put down as little as 3% on some conventional loans or 3.5% with a FHA mortgage. I have seen FHA approvals go to a max back end dti of 57%. Conventional financing generally caps you at 45% dti.
I never thought it would be possible to get into a home without $20,000 to $40,000 + in the bank, but DH and I are doing a USDA loan... we are putting nothing down and the sellers are paying our closing costs. Our up-front out of pocket cost for getting into a $150,000 move-in ready home will be about $1500. The money we currently have in savings will go into a joint account and be kept as our emergency reserves (two month's worth of mortgage and utilities) We do have very good credit scores and almost no debt. Our bank's max DTI is 41% I believe.
Congrats, though I'm shocked there are still loan programs out there that can get people into houses for nothing down. Nothing personal against you, but that just seems like a bad idea, and something I thought we fixed after 2008.
the only way to get 100% financing are USDA loans and VA loans. USDA loans are designed for people buying in more rural locations, so you cannot get a USDA loan anywhere. VA loans are just for veterans.
Besides VA and USDA, most states have their own first time homebuyer programs funded by tax-free bonds. In the State of VA, these loans have the ability to go to 105% ltv. And why is "funded by tax-free bonds" important? The investments (the mortgage loans) are subject to IRS Code, which means there are certain restrictions on these loans. This includes the buyers can't run a business out of the home, must be owner occupied, and certain capital gain penalties may apply. It's a great tool for buyers, but I prefer the other alternatives, as the bond programs have proven to be the strictest of the options (at least w/ Virginia loans) for buyers.
No offense taken Snow. My thoughts are, if it's there, might as well use it But I see your point.
I live in WY and almost the entire state qualifies for the USDA Rural Development loan program. The other thing about the USDA loan (aside from the rural location requirement), is that a property must be in move-in ready condition. It must have good plumbing, electrical, roof, foundation, siding, paint, flooring ect. There is a fee for a USDA loan, but you do not have to pay PMI. I believe the income limit is around $70,000 a year or so.
Gab you are correct. USDA and VA are not the only ways to get into a house without a down payment- there are state programs out there that will help cover down payment and closing costs.
There is a state program here in WY called WCDA. WCDA is an association that helps first time homebuyers with low to mid incomes and slightly lower credit scores. They have a handful of different loan programs, and one of the options they offer will get a buyer into a house without anything down. They provide an FHA mortgage loan, and then they will give the buyer a "second mortgage" for up to $10,000 to cover downpayment and closing costs. The second mortgage has a slightly higher interest rate and it must be paid back in a much shorter ammount of time... 5-10 years if I remember correctly.
All of these special programs require the buyer to actually live in the house, using it as their primary residance.
**I guess I was still typing when you posted Smart Money. The WCDA here in WY is a bond program.
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But I see your point. 
