First Home Buy?

Question

I am currently looking into buying my first home. I make about 55k a year and pretty much have perfect credit. However I'm having a hard time trying to figure out how much I can afford. I was also wondering how much is a good downpayment? I can see it taking me really long to come up with a really good one. Any advice?

Answer 1

trust me on this one-----wait

the market has leveled off in many markets, and some are dropping....this will continue i promise. over the past 5 years 75% of new mortgages were interest only loans, which are good for 5 years. that means the owners pay only the interest on the loan, nothing towards the balance. so, after 5 years they still have the same loan amount, and they either reup for another interest only loan, or they refinance for todays interest rates. buyers did this during the hot real estate markets because everyone was getting rich, and they didnt want to miss out. now they are screwed. many of them are forced to sell their homes because they cannot afford todays interest rates. this is why the market is coming down, more houses are for sale, and it will only increase.

i would wait at least another year before buying. if you buy now, you'll watch that investment drop for another year, and unless you plan to keep the house ten years minimum,,,you probably wont enjoy it.

save for that down payment.

Answer 2

Rule of thumb, most lenders want no more than 35%-40% of your total gross income to go towards debt (which would be about $1800/mo. in your case). So, if you have other loans (college, car, etc) or a large credit card balance you are carrying, those will count against that 40%. This number doesn't really have anything to do with your down payment (although, 20% of the price is traditional, and will usually keep you from having to pay mortgage insurance). there are lots of different kinds of loans out there, depending on your situation.
Get with a mortgage specialist to discuss your options (if you have friends or family who can recommend someone, all the better). Just a a bit of advice, buy a little less than the most you can afford, so you have a "cushion" for home repairs, unexpected bills, or even a night out once in a while.
Good luck.

Answer 3

A good down payment is anything greater than 20% of the cost of the house. The reason that this is a good rule for defining what a good down payment is is that if you put less than 20% down, you end up paying what is called PMI....or Private Mortgage Insurance. This is extra insurance that you pay each month that is really insurance for the lender incase you default on your loan. So, your lender benefits from this...not you. I'm not sure what the rule is on what this costs you each month, but I had a 230k mortgage and was paying just under $150 a month for PMI. That is a lot of money being thrown away not to your benefit every year. If you pay more than 20% down, you don't have to pay this.

You can get rid of it after you buy your home by being able to prove that you have 20% or more equity in your home.

I called a mortgage broker and told them I would refinance if they could get help me get rid of my PMI. They had an appraiser come in and appraised my house at just over 20% equity, thus helping me to reach my goal.

As for how much you can afford...there are lots of calculators out there. I have heard that your mortgage balance shouldn't be more than 2.5 times your annual salary.

Answer 4

Figure you can afford about 3x your salary with a 20% downpayment. Your other option is to finance the entire amount, pay PMI, or get a 20/80 (that's 2 loans) Its always a good idea to put down 20% if you can, but there are many options out there for 1st time buyers. AND shop around for the best rate.

Answer 5

After reading all the feedback - You must be totally confused.

A 100 percent loan - is not totally out of your reach - There are FHA programs, payment assistant programs to help you. Look at your middle credit score, if you do not know your credit scores - have your lender tell you, or pull your credit from the 3 credit reporting agencies - BUT the person you are working with should tell YOU.

Lenders look at the middle score to qualify a person - With a 580 or higher you can get a 100 percent 1 loan. If your credit is low, than you will be going SUB-Prime, and any amount over 80 percent does not have MI - There are alot of companies I underwrite for that does NOT charge MI - normally the rate is slightly higher.

If you go with a FHA loan, FHA has MI included. (With a 580 + you will be going sub-prime the rates are higher by about a 1 percent, but you have no MI. (MI is mortgage insurance in case you default on the loan, it is a way for lenders to have added insurance. It is not the same as Home Owners insurance, ok) VA loans do not have MI insurance.

Conforming A+ borrower's loans have MI included, but the rates are better starting in the mid to high 6's (with rates going up.) The more money you borrow - the higher the rate normally. There are a lot of factors involved.

With a government loan - collections and judgements will have to be paid (most ppl do not know that) but for FHA it is true....


Go to these websites

http://www.nehemiahcorp.org

http://www.fanniemaefoundation.org/...

http://www.fha-home-loans.com/

http://www.freddiemac.com/

http://www.thewinproject.org/links.htm...


ALSO -
When you Decide to buy, decide on how much you want to spend, if you want to escrow the taxes and insurance. Say the taxes are 1200 a YR and insurance 800 a year (just an estimate, ok) That is 2,000 a year divided by 12 = 166.66 If you paid 1,000 a month now - (166.66) your P/I Principle and Interest would be 833.34. Now you decided on the price range you are looking into. If you have great credit, a 1 loan at 130,000 at a rate of 7 percent over a 30 year time would be 864.89 - This is just a estimate - ok - To answer your question on how much you can afford, lenders look at your DTI (Debit to income ratio). without knowing what your monthy debit is (credit cards, auto loan, etc) Do not have to put cell phone, utilities. I would say on a estimate you could qualify for a payment of 2,000 with property taxes and home owners insurance included into your payment. so a 1,500 P/I would be a good estimate. A 200,000 home at a 7 percent fixed for 30 years would be 1,330.61 a month P/I. Remember this is just an estimate - depends on what property taxes are, etc. Take your income of 55,000 x45 percent divide by 12 = 2062.50 Less other debit from that monthly amount. Idf you go subprime, than the DTI can go up to 55 percent or lower. Some people like doing interest only for 5 years (so they can afford a home with a higher value, and they know they are not going to be in the home 30 years. There are also payment options available. Where you pick the payment from 4 payment options: 30 yr fixed, 15 yr fixed, interest only, and partial payment. This is good if your income is up and down (self-employed ppl like this one).

It greatly depends if you need help with closing cost, (The seller could do Seller Help toward your closing cost). If that is the case, I normally tell my clients NOT to hackle over the price, since you are asking for closing cost help - especially if the home is thru a realitor, and the seller has to pay the realitor their fee which runs from 3-6 percent of the selling price, and you ask for 3-5 percent toward closing cost -assistance) Follow me so far??

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.


Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

Good Luck, and if I can help in any way check out my web site, for links to all the credit reporting agency's and other useful information. This is not an advertisement - just helpful information for you...

Answer 6

I would try to keep your mortgage under a $1000 a month. You have to remember you will have other expenses. Phone, electric, gas, car payment, water, garbage, repairs, emergencies not to mention some money for fun. I make the same as you and I am happy that I don't have some of the mortgages that people I work with have. I am the only one in my department that has money to go have fun and it is all because I purchased a house I could afford. Over the years I have fixed it up nicely.

Answer 7

You can probably get 100% percent financing with credit as good as you claim.. but if you relly want to give a down payment you should shoot for 10% of the purchase price. As for monthly payment they shouldn't be more the 1/3 of your monthly take home in order to keep your budget from getting out of control. There are several mortage calculators out there that can help you get an estimated loan amount.

Answer 8

Congrats on your first home purchase. My first suggestion to you is to NOT purchase anything lavish or outrageous until you have closed escrow on your first home purchase.
To find out how much of a home you can afford, you should first find yourself a lender to give you an idea. Shop 2 or 3 lenders to give you an idea of what kind of loan programs you qualify for and what is best for you. A lender will look at your credit rating and give you an 'average' of your score and let you know what you what you are pre-qualified for (we often refer to this as a pre-qual letter). This is not a binding figure or contract in any way, nor is it a pre-approval of a loan, it's worth about the same as the paper it is made on, however it does give you an idea of what your price range is, based on your credit, salary and liquidity you have in the bank.
Next, is the fun part...finding the home. It's best to have that pre-qual letter with you, so you aren't wasting your time or your Realtor's time by looking at homes outside your budget.
Once you know what you can afford, you can narrow your search down based on price range, size of home, location...etc. Once you have narrowed your search down to about 3 homes you can afford and are interested in, you can have your real estate agent run a 'net sheet' for you, to give you an idea of what total costs to purchase one of the homes you have chosen.
Depending on the loan you are approved for and what sort of program your lender finds for you, will determine what your downpayment will be. The average is 20%, however I have seen loans that are 80/20s, which is two loans in one (called a first and second loan), this means there is a 100% funding with no money down. Obviously, the more you put down the less your monthly payment may be.
I wish you lots of luck with your first purchase, start at the basics with a lender who can educate you more on financing, and may you find the perfect home at the best price!
PS...
And, if you are in Vegas and looking for a home there...don't hesitate to email me, I would be happy to find you one! ;-)

Answer 9

I don't know about advice but I can sure give you some homework. Here check these links out from our research department:
HUD’s Local Home Buying Programs in each state. From State Governments:
http://www.hud.gov/buying/localbuying.cfm
Fair Housing brochure: http://www.hud.gov/offices/fheo/FHLaws/FairHousingJan2002.pdf
The HUD-1 Closing costs form explained: http://www.alta.org/consumer/hud1.cfm
HUD Private Mortgage Insurance (PMI) Information: http://www.hud.gov/offices/hsg/sfh/res/respapmi.cfm
EPA’s Required Lead Disclosure from Sellers and brokers:
http://www.epa.gov/lead/pubs/leadbase.htm
Federal Reserve, pamphlet on acquiring the best mortgage: http://www.federalreserve.gov/pubs/mortgage/mortb_1.htm
US GOVERNMENT CONSUMER TIPS ON HOMES: http://www.consumer.gov/yourhome.htm
Real Estate Settlement Procedures Act (RESPA) [about closing costs & settlement procedures]: http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm
Predatory Lending information from ABA: http://www.aba.com/Consumer+Connection/CNC_pred1.htm
Mortgage Calculators – Includes finding if you will qualify for a mortgage:
http://www.mortgage-x.com/calculators/Pre-Qualifier.htm
Once per year free credit report from all three Credit reporting agencies:
http://www.annualcreditreport.com/cra/index.jsp
Calculator to compute an estimate of the total cost of closing: http://www.myfico.com/LoanCenter/Mortgage/Calculators/ClosingCosts.aspx
IRS publication on Home interest deduction: http://www.irs.gov/publications/p936/ar02.html#d0e1835 and or: http://www.irs.gov/faqs/faq3-6.html
IRS: Tax information when buying a home: http://www.irs.gov/publications/p530/ix01.html
IRS: Deductible costs when purchasing real property:
http://www.irs.gov/publications/p551/ar02.html#d0e2000
I can send you some more but then you'd go blind from the research and you'll want government assistance sites.
Happy Research
Buena Suerte

Answer 10

Talk to a lender and get a buyers rep. They will help you thru the entire process.