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Okay. We're moving across country in September. We have some money saved and our tax refunds will tip the scales in our favor, so we're going for it.
I want to buy a house. Big time. My husband probably doesn't care either way.
We make about 60K combined a year (at our current jobs, this could change with the move) and have nothing saved, but also no student loans, car payments, credit cards or other ugly debt.
I've started really trying to pay attention to this whole 'economy' thing (ha), but it's a lot to soak up. We've rented our whole lives and I know diddly about houses (except what I learn on HGTV) or loans/mortgages (except what I learn from Suze Orman).
So, set me straight. How realistic is it of me to assume I could just walk into a bank with a smile and honest intentions and get a loan for anything at all? How stupid is this dreamy idea? Do you REALLY have to have 20% of the value as a down payment - that seems like such a monstrous amount!
I don't intend to foreclose in six years or die and never finish paying nor would we EVER sign up for something we couldn't afford (that's dumb, dumb, dumb), so don't chastise me about 'that's what got us in this mess!' I'm trying to do better and educate myself, ya see.
I know that's a broad question, so broad answers (I.E. 'You're nuts, go read a book') are okay.
a lot goes into whether you can qualify for a loan. It will depend on where you intend to look for a home, how much you will borrow and many other items. How is your credit? Score? How much will your real estate taxes be? You don't need 20% down. An FHA Loan is an option and you can borrower up to 97% of the purchase price. But with this option, your closing costs can be much higher than a loan where you put 20% down onthe home. A Mortgage person will tellyou that your total mortgage payment and all other monthly debts should not exceed between $2250 - $2500 / month based on your income now.
There are lots of ways to buy a home w/o 20% down. However if you do save up 20% you will get the best rate and no waste of PMI.
If you can save enough for 10% down then you ought to be able to get a second for the remainder to at least avoid PMI, but you will have to pay a higher rate on the 2nd.
If you go FHA with PMI there are programs to put you in a home with only 3% down, but unless you refi you are locked into PMI for them...
No one ever really intends to default (well almost no one -- there are actual criminals that were fraudulently obtaining loans and such) but statistically the data the lenders rely on shows that folks that can save-up (or hit up their parents, or have pile of money from great jobs or whatever) 20% are a better risk, and THAT is way they do not require PMI...
Suze Orman is not the best person to rely on. It is not so much that she is wrong (which she is once in a while) but that her shtick of trying to encourage responibility is too often not in-sync with other thinking.
The best thing to do when you get a hankering to buy a house is NOT to watch HGTV either, they have a heckuva lot to drive them to make it look like owning and improving is ALWAYS the way to go. Often times it DOES make sense to rent. In reality right after moving cross country it probably DOES MAKE A LOT OF SENSE to rent for a year. Find a nice safe cheap house in the best neighborhood you can and use your spare money to build a downpayment. Use your spare time to find the nicest neighborhood you can barely afford and then devote a ton of time to finding a good house that needs work and you can do real real well.
You should budget first before doing anything. For example, house upkeep and property taxes can be expensive depending on location. NJ has property taxes that can approach $10k per year, while other places are less than $1k a year.
Also, when you apply for a loan, they like to see employment history. If you've been at your current employer for 2 years or more, they like that better than less current employment history.
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Quote:
Originally Posted by maxima1966
a lot goes into whether you can qualify for a loan. It will depend on where you intend to look for a home, how much you will borrow and many other items. How is your credit? Score? How much will your real estate taxes be? You don't need 20% down. An FHA Loan is an option and you can borrower up to 97% of the purchase price. But with this option, your closing costs can be much higher than a loan where you put 20% down onthe home. A Mortgage person will tellyou that your total mortgage payment and all other monthly debts should not exceed between $2250 - $2500 / month based on your income now.
Actually as of Jan 1st it is 96.5%. The FHA appraisal costs a little bit more but the main difference in closing costs between an FHA and a conventional is the upfront mortgage insurance premium, which can be rolled into the loan. A 31% front end DTI ratio based on $5000 a month gross income equals a $1550 a month payment. FHA guidelines call for 31/43.
That's true..the housing payment ratio is lower with FHA. It will all depend on the the purchase price and how much of a downpayment that you can put on the home that will determine which is the best program and how much the bank will allow you to lend and how much YOU can afford. Sometimes just because the bank will allow you a larger loan doesn't mean you should borrow that much.
As far as employment goes... when you relocate, you'll obviously have new jobs. People buy homes in this situation all the time. I was told by a mortgage broker that a new job was okay but they prefer it is in the same line of work.
Of course, that was before the bloodbath of job losses in many industries.
I'd say your best bet is to talk to a mortgage broker... try to get referrals to a good one. They can tell you if you qualify and for how much (and then you can calculate the payment on that and decide if you'd like to be lower... there are websites to help you ~do the math~). If you don't qualify, the mortgage broker can tell you specifically what you need to do to reach your goal.
Buying my first home was one of the happiest days of my life, so I remember feeling like you are. I was surprised that I qualified. Good luck!!
of course FHA and FNMA ratios can be exceeded with compensating factors such as credit score, down payment, low debt to income, and/or reserves
Quote:
Originally Posted by maxima1966
That's true..the housing payment ratio is lower with FHA. It will all depend on the the purchase price and how much of a downpayment that you can put on the home that will determine which is the best program and how much the bank will allow you to lend and how much YOU can afford. Sometimes just because the bank will allow you a larger loan doesn't mean you should borrow that much.
Suze Orman is not the best person to rely on. It is not so much that she is wrong (which she is once in a while) but that her shtick of trying to encourage responibility is too often not in-sync with other thinking.
Which is exactly why people don't like her advice. Americans want to continue living a lie. If people had been listening to her, we wouldn't be in this mess. Sorry, but I find the Suze Orman bashing deeply unfounded.
To the OP: I would rent in your new area first, just to make sure you know the surroundings very well. Remember that renting is not an awful thing to do, even if you do it for a long time. You can put down 10 to 20%+ of a downpayment, but with 10% you'd have to pay PMI until 20-22% of the loan is refunded.
Really make sure that you have at least an 8-month emergency fund before you buy anything. People will continue to lose their jobs for a while, better be safe than sorry. Also good for home repairs, car repairs, health care expenses, etc. And plan for closing costs, property taxes, insurance, higher utility bills, etc. Don't go crazy redecorating like HGTV prones for, at least for a while. As long as the house is functional, there's no need to spend thousands at first for cosmetic renovations. Remember that you might have to replace the appliances, get a new roof and change the windows sooner than planned. A fresh coat of paint can do wonder and is much cheaper!!
she's a motivational speak not an intellectual speaker
Quote:
Originally Posted by NYSinger
Which is exactly why people don't like her advice. Americans want to continue living a lie. If people had been listening to her, we wouldn't be in this mess. Sorry, but I find the Suze Orman bashing deeply unfounded.
To the OP: I would rent in your new area first, just to make sure you know the surroundings very well. Remember that renting is not an awful thing to do, even if you do it for a long time. You can put down 10 to 20%+ of a downpayment, but with 10% you'd have to pay PMI until 20-22% of the loan is refunded.
Really make sure that you have at least an 8-month emergency fund before you buy anything. People will continue to lose their jobs for a while, better be safe than sorry. Also good for home repairs, car repairs, health care expenses, etc. And plan for closing costs, property taxes, insurance, higher utility bills, etc. Don't go crazy redecorating like HGTV prones for, at least for a while. As long as the house is functional, there's no need to spend thousands at first for cosmetic renovations. Remember that you might have to replace the appliances, get a new roof and change the windows sooner than planned. A fresh coat of paint can do wonder and is much cheaper!!
Hope this helps.
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