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Thanks for all the replies. I figured it was a bit too far out. The thing is, as soon as I get my tax money I want to move ASAP. So, I want to get the home buying process started as early as I possibly could-I couldn't move away from my current situation any faster.
I have a few different problems right now: 1) I really can't save any money, we both work part time and have many expenses (3 kids), which is why we're going with FHA. 2)All of our credit cards are maxed out, negatively affecting our credit scores. 3)I can't even start doing anything until I actually have money in the bank, which isn't until mid February at the earliest.
I almost want to sit down with someone to make sure this whole thing is even possible; we both work part time and have very little down. I would like to be able to look in our price range of houses, which at the moment we kind of guessed at (as cheap as possible).
Also, We're really not sure how how the entire home buying process works, would it be a good idea to go to a first time homebuyers class? Or are those basically a waste?
Thanks for all the replies.
You several issues. First off, you're far from ready. You will need to sit down with a loan officer in 6 months when you think you are ready. They will tell you what you can afford if anything. Working part time unless you're making serious bucks, won't land you a mortgage. If you haven't had your jobs for at least 2 years will also be an issue. We held off on a job change when we bought our house and the bank and our realtor said to wait or else we would be starting all over...ugh....
If you're counting on your tax refund as your downpayment, think again. Banks want to see that you have cash in the bank for several months. You can add to it, but you can't take away from it.
With your credit cards maxed out and part time jobs, you will struggle even to get an FHA loan. Your credit score DOES count and it is a big deal even for FHA. I've had 2 FHA loans and there are VERY strict guidelines from both the government and the bank it's self.
You can ask your local bank where you have your personal checking and savings accounts for help. They WILL schedule an appointment with you to go over your finances. Don't be surprised if they tell you that in 6 months, you still won't be ready. Banks want to see $$$$ in the bank and it has to be there for months.
If you are approved, know that the journey is FAR from over. You will have to submit about 600 million documents and they will be the same thing repeatedly. Don't argue. Don't ask questions. Just do it. This will save your sanity. Yes, they will ask for bank statements every month....sometimes weekly....sometimes daily right before closing. Do NOT spend a penny you don't need to. Do EVERYTHING with a bank card. They HATE HATE HATE cash transactions because they can't see what you're doing with your money.
Good luck. Don't get discouraged. This is a LOOOOOOONG drawn out process. It WILL make you crazy if you let it. If you just give them what the ask for and think nothing of it, it will make your life much easier.
Additional expenses besides the house...
moving costs - tape, tissue paper, bubble wrap, boxes, etc aren't free
moving truck or moving company - moving blanket and dolly rental
turning utilities on - many have deposits and turn on fees...even changing the water to your name has a fee
curtains, curtain rods, blinds/shades
cleaning supplies!!! they can add up quickly
changing the locks --- I NEVER want someone I don't know having a key to my house
closing costs....some you pay as you go like inspections and appraisals and some bank fees
others like the taxes and recording fees are paid at closing....depending on your state they can be over $10K on a $100K house....no exaggeration! I bought a rundown house for $158K and my closing costs were over $17K mostly due to taxes...property taxes aren't all your paying...mortgage, recording, survey, the list is endless.
Oh and if you have an HOA, there's a mountain of paperwork involved with that and you have to pay your dues monthly usually. If the previous owner was behind, it's now your problem unless it's taken care of before closing.
Lawyer fees....
inspections.....structural, termite, radon, etc....all vary based upon where you reside
home owners insurance....your credit WILL affect getting a policy and how much it is....this has to be paid before closing in full for the entire year. Depending where you live, it can be $500 to over $3K a year....flood prone areas are $$$$.....oh and you need to get a flood certificate or the letter stating you're not in a flood plan zone.
Just know that there is a few for everything. And I mean everything! I swear there's a charge for every paperclip used.....
If your local library has a home buying seminar, take it! Many do offer them periodically. Home shows also have them.
You may want to look into a USDA loan. They have special guidelines and lower income qualifications, however the programs are only available in specific areas. If you or your spouse was in the military, look into your VA benefits. There are special programs for military families.
I am currently in the process of buying my first home. I did not have any idea about the home buying process either. I would spend some free time perusing HAR.com, trulia, zillow, etc....pick out homes and plug the numbers into their mortgage calculator. I was happy I could "afford" so much and looked forward to working with a realtor and getting exactly what I wanted (read: dreamt of)
I started the process around the end of June, hoping to be moving in in October (my apt. lease is up Sept. 30, and i'm currently due to close on October 4th). After selecting a realtor and beginning the pre-approval process, she suggested I go to an 8-hour Homebuyer Education class. At first, I was like "uhh..well...ok....ugh", because I didn't want to "waste" an entire Saturday sitting in some classroom. But I took the suggestion and went anyway.
WHAT AN EYE OPENER. This class was amazing (the price of the class was $15, but because i'm a veteran, it was free). The instructor was engaging and very knowledgeable. We received binders containing lots of information to keep, and went through the ENTIRE process step by step. He was stopped numerous times by members of the class asking questions, and he encouraged this. He also explained about homebuyer assistance programs that are available through the City, the County and the State. We reviewed VA (which I got), FHA, Conventional, USDA and the processes concering each.
I walked away from that class with a complete mental mindshift regarding this process.
The most eye-opening part for me though was creating the budget and seeing what I could actually AFFORD. I wasn't factoring in possible repairs, monthly maintenance, taxes, food, car repairs, insurance, etc.....and my "dream" home was cut by half. What a blow to my ego. After recovering from that shock, I was able to come to reality and, using the budget and a fact-finding fact-facing Needs and Wants list, scale down to something I wanted AS WELL as something I could actually afford.
I have read EACH AND EVERY piece of paper/electronic communication that has come my way during this process, thanks to this class. I ask questions also, even if they sound "dumb" to me. I no longer keep my head in the sand and rely on the delusion that the realtor/mortgage company/government/insurance company knows what's best for me (otherwise, why would they offer it to me in the first place????) I am the one that will be living there and using my money to upkeep and pay the bills so I better know what's going on, and strive to make decisions based in reality and not what some Zillow mortgage calculator says.
I plan on attending the post-purchase class as well. I now find myself eager to learn about and be prepared for as much as I can.
I highly suggest attending one of these classes.
/end lifestory
Excellent post!
My first house I had a great loan officer. He told me straight up that just because I am approved for X does NOT mean I can really afford X. You have to add monthly maintenance and the bank doesn't include take out for 5 nights a week or a vacation or a weekend away every other month. They also don't take into account increases in your escrow because your taxes went up by $600 this year. They also don't calculate having a hard winter and your heating bill doubled....yes that DOES happen! I live in Upstate NY so I know all too well how that goes....and they don't think about you needing $600 worth of work done to your car to pass inspection...been there also! UGH
And nobody should be getting a tax refund anyway. You're not claiming the proper exemptions on your W-4. That is your money that the government is holding for you until next year. YOU could be saving it yourselves and SHOULD be. If you don't have the discipline to save money, you should not buy a house.
OP probably gets earned income credit from the feds if he's low income. Like another poster said, since you're now married, your refund this year will likely be lower if you properly file as married filing joint.
OP, you are not ready to buy a house from everything you're saying. Do not rely on your tax refund for your down payment. You probably won't be ready for at least a year unless you or your wife get a full-time job with better pay. You may want to look into low or moderate income housing in your area if it's available. It usually has income limits and sometimes there's a waiting list, but the houses are cheaper. Low/moderate income condos in my area go for around $100k for a 3 bedroom, whereas a 3 bedroom condo in the same area would cost double that (although the "affordable" housing is smaller than the regular housing stock). Good luck!
First thing first is to get your credit score as high as you can within the next few months. Most stores will be hiring extra holiday help soon. I suggest that you get a second job, and use all of the extra money to pay off all of your credit card debt by the end of the year.
Work on your ratio of debt to total credit. For example, if you have a card with a total limit of $1,000 and it is reporting to the credit bureau as you owe $500. Even if you are on time, every month it is going to show that you are using 50% of your available credit. The magic number is to get your amount on any one card to else than 30%. Definitley pay them all down. This is the time of the year where there is money to be made.
Like others have said, you will have a lot of unexpected expenses getting a home.
The FHA rules changed late last year. It used to be that with FHA, you could get out of PMI after you have paid on it for 5 years (with a 30 year loan) and have less than 78% owed on it according to the value. But now, you are stuck with the PMI for the life of the loan.
I suggest that you get your credit together. With a higher credit score, you can possibly look at some conventional financing and avoid some PMI. For example, maybe do a 80/15/5. Where you put down 5%, then take two loans (one for 15% and one for 80%). The rules have changed some. I suggest that you not talk to a realtor right now. They don't finance anyway. Get to a mortgage broker, and tell them the situation. They can help you out.
The big key thing here is....
-get extra jobs while there are jobs to be had
-pay off all credit card debt
-save money
Once again, thank you so much for all the replies. I live in Massachusetts and my wife and I get about $12k back all together, however that was before we were married. We just got married this year so now I don't know how much we'll be getting back, but I would imagine still a decent amount.
We're fairly new to credit cards, due to some bad financial decisions in the past. I didn't have much credit but what I did have was bad, so I started the process on trying to improve my credit...and was amazed at how easily it is accomplished, being approved for a few small C.C.s at $250, $300, etc.
The problems started when we started getting approved for $1,000+. I think it was because we figured we had such a high limit, it couldn't hurt to go out to eat a couple of times or buy things we couldn't really afford...we meant to keep the balances fairly low and pay them off completely (which we DID do with the small cards), but now the higher ones are all maxed out. We're still paying them off and haven't used them since.
The thing I'm not really sure what kind of a budget I have for a house; around my city I'm seeing condos as cheap as $80,000 and homes going for over $1 million in the more prestigious towns. I have been currently looking in the $100,000 - $150,000 range (which is just a guess) in the suburban city I live in and also some of the small towns which surround it, which leads to most homes needing repairs, etc. Some are worse than others but most are pretty decent actually.
In more words than one, I kind of understand that some agents just don't want to work with poor people who don't make a lot and can't afford a lot....however I don't think my situation is as bleak as I think it is. Then again I could be wrong.
Is it possible that a Mortgage broker would be able to use the FICO score that I pull? I don't really want them to pull mine and have it affect my score.
NewYorkifornian that is truly an inspirational post! Thank you to everybody for all of the advice!!
Ok, a few things:
1. I hope you read and follow NewYorkifonianHouston's advice with regards to the New Homebuyer class. It is a real eye-opener for anyone who is financially inexperienced.
2. Two: Do yourself a favor and get rid of the credit cards, etc. While I strongly recommend Dave Ramsey's Financial Peace University (DaveRamsey.com) in terms of learning how destructive credit can be to your life, marriage and finances, and being taught how to look at your finances in a whole new way, just about any well-respected class in learning how to budget and money management will be helpful to you. Check with your local branch of a Consumer Credit Counseling Center (see Credit.org) if Ramsey's program seems too hardcore. BOTH of you need to take it, because BOTH of you need to be on the same page when it comes to financial goals and agreement with budgets. If your wife has an eagle-eye on the budget and you're blowing $50 for a video game, then your values are different. If you have your eye on a goal and your wife would rather have a new Coach purse instead of a $49 purse from TJMax, well, then, your goals are different. Been there. Done that. Have the cut-up credit cards to prove it. :-)
3. Since you probably aren't going to be buying a house anytime soon, go ahead and let your mortgage person pull your credit score. You'll get a 5 point or so hit, which will go away in a month or two assuming all other things being equal.
4. I'm aghast at getting $12,000 BACK as a tax refund!!! Omigod!! Why are you giving the federal government a free loan for that much money!?! You could be using that to pay off your credit cards!! Please, adjust your withholdings and start being able to actually use the money you earn! My husband and I play this little mental game with our taxes -- we'd rather pay $200 than get $200 back. We try to keep our taxes due to under $500, and my husband, in particular, takes it as a personal affront to his estimation abilities if we get more than $200 back as a tax refund unless there was a change in the tax law that we couldn't adjust for in time.
You WILL be able to buy a house when the time is right -- but do yourself a HUGE favor and buy a house only when your credit is cleaned up and you are basically debt free. Buying a house that ends up being a noose around your neck because the financial stretch was too much is mentally and emotionaly draining. There are LOTS of agents out there that love to work with first-time buyers, because there is a special satisfaction in helping someone reach such an important milestone. Don't be in too much of a hurry to take on more debt at this point in your lives.
Great advice on getting your finances in order. Social service agencies like the Salvation Army, Catholic Social Services, Lutheran Social Services, etc. often offer financial planning workshops at no or low cost. Some even offer homebuyers' workshops. Well worth your time and effort to do these.
You and your wife need to go together so you can work as a team in accomplishing your goals. Make a game of seeing how you can minimize expenses.
You also need to look at ways you can increase your income. With three kids to raise, you need more than a part-time job. Go to your local employment office and see if they offer vocational counseling and/or courses. Will training at a local community college enable you to get into a better employment situation?
With two part-time jobs, three kids, and several maxed out credit cards, you are in no position to buy a house. Pay off those credit cards, get some money in the bank, figure out how to get a full-time gig going.
Of course, realtors aren't taking you seriously. You aren't taking yourself seriously.
I just want to once again thank everybody for all of the replies! I am going to look into everything you have said. You've given me some excellent advice and it has been an eye opener! I thought I was going to be ready in 6 months but now I realize I probably won't be.
I'll make sure I post back with any details if anything new comes up.
I just want to once again thank everybody for all of the replies! I am going to look into everything you have said. You've given me some excellent advice and it has been an eye opener! I thought I was going to be ready in 6 months but now I realize I probably won't be.
I'll make sure I post back with any details if anything new comes up.
Thank you!!
-Andy
Good luck! I think most of us would agree that you want your first home to be a pleasant memory, not a catalyst for stress, discord and financial ruin. :-)
I just want to once again thank everybody for all of the replies! I am going to look into everything you have said. You've given me some excellent advice and it has been an eye opener! I thought I was going to be ready in 6 months but now I realize I probably won't be.
I'll make sure I post back with any details if anything new comes up.
Thank you!!
-Andy
The goal of owning your own home is well worth working towards, you just may take a bit longer than you were thinking.
You were smart to reach out for advice. I hope you and your wife take those financial planning and homebuyers education courses and follow through with a plan.
By the way, many communities have community trust type homes available. In the last place we lived, these homes were rehabbed and sold to low-income, prequalified buyers at great prices and low interest rates. They might be just what you're looking for.
Generally, people found out about these community trust homes at homebuyers education workshops.
Good luck, and keep us posted.
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If you don't have the discipline to save money, you should not buy a house.
