- Blog
- Bios
- Boards
- Classifieds
- DIY
- Gallery
- Vendor Reviews
- Shop Weddingbee
Weddingbee boards
So I've read on some personal blogs and various topics on (non WB) message boards about buying a house. But what I don't understand is these posters/bloggers talk about how they have student loans or are fresh out of school and how they hardly have anything in savings but plan to house hunt in the next year. How is this possible that the bank is giving them a loan? My SIL who lives in the Twin Cities had to wait one year after she got her new job before the bank even gave her money despite having a 20% down payment ready and she has good credit.
My DH and I were looking to see if we were ready to start looking for loans after he gets his Master's this May(we are 100% debt free and have excellent credit and enough for a 15% down payment) but I don't feel we can do it until we have enough for a 20% down payment plus money to do any fixes plus buy furniture (we live in an apartment right now).
I guess I don't see how people who can only pay a low down payment are getting approved for loans with what happened in 2007. I do realize that maybe these people have family helping them with a down payment but that can't be everyones case. Can someone please enlighten me? Perhaps I'm way too conservative when it comes to finances :P
Maybe it depends on their location and the bank they are going through? The price of the house and who is selling (bank/foreclosure vs. owner). I know in my area, you can get a decent house right now for 50K (which is ridic. considering these houses were 200K in 2008). It could also depend on their credit score - which could be pretty high even with student loans. I guess I'm assuming it has to do with the details.
Well, there are many factors that can go into that.
A lot of banks are doing a 3.5% down payment, and they charge a 'mortgage insurance'..which is pricy. So in order to have a lower down payment, you would have to pay a hefty fee each month. Friends of ours just did that, and it works for them. They didn't have to save as much, and they don't mind paying a premium for not having the 20%.
Also, it depends on where you live. If you live in an area where real estate sales is not an issue, then banks are going to be picky. If you live in an area where people are not buying homes, and the economy is a little worse, the bank will be a little more lenient.
There's also the VA loan for veterans. That's what FI and I will do once we're settled after the wedding. This only requires a low down payment and gets a lower interest rate. Perks of serving the country!
There's also pure luck. Some people have greedy loan officers who will lie about their client to get the loan.
It's not always set in stone with the '20% down and tons of credit'.
FI did an FHA loan and he only paid like 3.5% down! But there are terms to it..I'm not sure what they are though..
@hrev2010: Also, just because someone is right out of school or has some student loan debt, doesn't necessarily mean they are struggling to make ends meet.
They may have a good paying job, but just not have all the money up front to put down on the house. They may have no problem paying their loans off as well as a mortgage payment every month.
Also, interest rates are SO low right now people are trying to lock in their mortgages at a low rate. Maybe they are putting less down then they'd ideally like to, but it is worth it to lock in this kind of low rate.
It depends so much on the area and the person's situation. Example: It will be a while before FI and I buy a house because of where we live (ie one of the most ridiculously overpriced housing markets in the country), and because we don't have family helping us. Of the homeowners we know:
-1 lives in this immediate area. It's a condo bought before the crash that they have been trying to sell for years.
-5 live about 1hr away, in an area with a much more normal housing market. Of them, 2 have had parents front down payment cash, 1 for a TH that is worth 1/2 of what it was when he bought it; 2 did short sale; and 1 inherited from a grandparent.
I would say that aside from the inheritance (that would be awesome!!), none of these are the same route I would have chosen. Not to say they are bad or wrong, just different.
It really depends on the cost of the house too. If they are paying less for a house payment then they were paying for rent on an apartment, it is quite easy to qualify if they have good credit. Some debt is actually a good thing. I used to work as a mortgage loan processor and you'd be surprised about the wonky rules of credit. In many cases, if someone can only put 3.5% down (FHA loan) on a house, they are not buying a crazy expensive (and way out of their price range) home. You have to find something in your price range. It does show a lot of financial stability and responsiblity to put 20% down on a house, but keep in mind that the job market is also incredibly unstable. I would rather give a loan to a young couple who make a lesser amount each year and have a better chance of getting another equally paying job to continue making their house payment, than by giving a loan to a person who makes a ton of money, gets a huge house loan and then loses their job and can't find as good of one to make the payments.
I really don't have anything else to say other then I wonder the same thing.
A girl I graduated highschool with is still in college. Her husband who just graduated last year just started his new job. She is not working. Within 2 months of him getting a new job they bought a brand new SUV and a brand new house. I'm sitting here wondering "What ever happened to young, married poor couples? Or "starter homes" for that matter?!?" Oh did I mention they are around 21 and 22 years old???
Its a little irriatating because we are not planning on buying the home we want to stay in for a good 5-8 years. I feel like I will be behind everyone if I wait that long though. =(
FHA loans require 3.5% down as others have said. Yes, you have to pay PMI, but we'll be doing an FHA and our mortgage will be what our apartment is now, even with PMI. It's a really good market for buyers right now and 20% does not always have to be put down. The money that we don't spend on a downpayment can go towards furniture :)
Also, DH and I have student loans yet we both have VERY high credit scores because we pay our bills on time and have enough money coming in to where our debt to income ratio works.
@MsJeep23: We have a friend in Chicago who inherited his grandmother's house. Talk about lucky especially since Chicago is uber expensive!
I forgot about the FHA loans, but I've read in financial magazines (yes I'm a nerd!) that they could be going away due to what happened in 2007 but I guess until that's the case nothing is off limits!
@hrev2010: Think of it this way. Do you currently pay rent? How much a month are you paying? That money is getting you nothing in the way of a potential "return" other than a place to live for another month.
If your mortgage payment is similar to your rent payment, why WOULDN'T you buy a house? That way your monthly payments are going towards ownership of something rather than just into a landlord's pockets.
Also, having a history of paying loans, rents, bills, etc on time (even if you HAVE student loan debt) builds your case to be an attractive individual to offer a loan to since you have a good history of paying on time.
I'm probably the odd ball, but I bought my condo when I was 19 and had no real problem getting the loan. I had good credit, although my credit history was short since I only had 1 year that I had a credit card,and I put 33% down. Also, it made much more sense financially to buy the condo because the mortgage, taxes, and condo fees added up to a few hundred less than what I was paying for rent in a smaller apartment.
The majority of people I know who recently purchased homes got the down payment from parents. Honestly even at 30 years old it's almost impossible to save the required 20% down, it requires a high salary with almost no expenses which no one has lets be honest.
Before WB, I had never heard of an FHA loan. I don't even know if they exist where I live because I don't know anyone who has one and it wasn't even an option for DH and I when we went to get our mortgage. But everyones financial situation is different, so it's hard to make generalizations on what just a couple people say. Maybe they're lying or maybe someone lied to them about what they will actually get approved for. You just never know.
We did an FHA loan and put 3.5% down. We had good credit (not great) and I have student loans. I don't know about the housing market where you live, but in MA it's outrageous. For us to save 20% down would have taken such a long time-probably 10 years. Our mortgage (including taxes, PMI, and insurance) is exactly the same as our rent was so for us, it made sense to buy. The process to be approved for an FHA loan is still quite difficult-we had to prove a solid work history (2+ years), show taxes for the last 3 years, provide bank statements for all accounts and explain any large credits or deposits, and there is a minimum credit score. Our house is a starter home and we plan to be here 7-10 years before we can buy our forever home.
I think the difference was that in 2007, people were being approved for mortgages that were wayyy more than they could ever afford based on their debt/income ratio. And on top of that, many of those same people lost their jobs when the market fell apart.
@Bostongrl25: Yeah this was our situation. About 1.5 years ago, FI and I put 3.5% down on a condo in our area. Even with PMI, condo fees, etc, we are paying almost the exact same amount as we did in rent, due to the fact that our area is DC kills you with rent.
My FI has student loans, but the kind of crazy thing is that sometimes, for credit purposes, having that much debt can IMPROVE your credit score. We knew we wanted to live in the city for the next 4-6 years, and we bought in an area that retains value, and our place was selling at a fantastic price.
Our finances were not negatively impacted by purchasing a home. Additionally, since live in a condo, we don't have to worry about structural costs and upkeep as much. We have a good amount of savings, and will continue to save. It was just the right time for us to buy. Plus the tax benefits are pretty sweet.
We bought our home (in a suburb of St. Paul, MN) almost two years ago. We went the FHA route, but put down about 7%. We do have to pay PMI, but it isn't a crazy amount at all. Both of us have student loans, but we both have excellent credit and savings. We have no problems making ends meet and are still able to save money monthly. When we were approved for our mortgage, we had both been in our current jobs for about a year and a half.
ETA: We paid the down payment ourselves and were not gifted any money whatsoever.
@sorens: Sounds similar to our friends up there! btw cute kitty pic!
There are a lot of bees that live in places where $150,000-200,000 will buy you a decent house. Especially if they are getting an FHA loan, that equates to very little money up front. That, however, would not even buy a parking space where I live (literally), so it's a whole other ballgame. I wouldn't dare purchase a $450,000 house with 3.5% down. That would be a horrible financial move for us! (plus all that extra interest and the insurance - the mortgage companies are already leeches. No need to give them all that extra income!)
Although FHA loans only require 3.5% down, it all comes down to your debt to income ratio.
Does anyone else watch House Hunters on HGTV and get amazed at the prices of some homes out there?!? My husband and I love to watch House Hunters and House Hunters International and sometimes you can find a condo on the beach down on some island for cheaper then a tiny house in a big city!
I have a a hard time with this because I have always felt like owning a home was almost like a luxury. I feel that those that work hard, save, and keep a good credit rating should be the only one's to own a home. (I am sure to be bashed over my opinion) However, now there are loans that are 100%, this means NOTHING DOWN!!! Also, if we were like other countries that REQUIRED 20% down and only allowed for 15 year financing terms we would't have such a housing mess as it is. Sorry for the vent!
I did a FHA loan with 3.5% down.
Since I was 18 (gawd that was 14yrs ago) I've worked very hard to keep my credit score high. All my hard work finally paid off and I got a super low fixed rate on my house.
My monthly mortgage payment (including insurance and taxes) is less than what I was paying for rent.
My boyfriend and I are in the beginning phases of house hunting. Our lease ends in July so we are hoping to have a house of our own by then. We are going to go the FHA with 3.5 % down route because it will even out to being the same as our current rent (including insurance, taxes, PMI, etc). I really can't stand moving from apartment to apartment and with my dog barking situation it would be amazing to have a house so I don't have to worry about getting evicted if I have to leave for 5 minutes and my pooch barks nonstop. I am really excited to start the process so if anyone has any insight at all, it'd be great! We have really good credit so I'm crossing my fingers it all works out.
Don't even get me started on HH or My First Place. Those shows drive me crazy. Newlywed couples that end up with mortgages of $2300 a month and one is a student and the other is a teacher. WTH? I will never understand that. My DH and I make a great combined salary, have little debt (other than our cars and my house) and I couldn't imagine paying a mortgage payment over like $1300. I'd consider myself house poor!
I also couldn't imagine needing $100k for a downpayment. I live in Pittsburgh, where $180k will get you a nice house. Thank gosh!
We'll be going the FHA route the 2nd time around, because it makes the most sense.
Best of luck @candycorn ! You'll have to give updates!
Well said @snuggielove ! Some of those shows drive me and my DH crazy.I too am lucky to live in an area where $180,000 will get you a nice house or if you live in a small town like where I grew up $75,000. But I feel fortunate that our rent is low too, plus we only pay eletric for utilities. I count my blessings...believe me!
We got an FHA loan and put 3.5% down. We were comfortable doing this because even though we don't have a ton of money right now, we have good jobs and we get a tax break for all the interest we are paying.
We got an FHA loan. For fi and I buying a house was much less expensive then paying rent (even with the mortgage insurance required with an FHA loan). And like PPs have mentioned, not only are we literally saving money, but at the end of the day we own the house, we aren't just dishing out cash for rent.
It's not an over the top house by any means, but it was the best decision we ever made. And fi has a car payment, and I have student loans...we had no trouble getting a mortgage!
If you are getting an FHA loan they will look at your student loans and factor that into your debt to income ratio if your deferrment is coming to an end. I don't start paying on mine for almost 2 years and they're factore in to my debt to income ratio now.
We just got approved for our mortgage this month through the State Credit Union. It is 100% of the price of the home and has a few more perks, including an excellent interest rate. We had a small down payment ready to put down (about 2%) but the bank actually recommended that we keep it in savings in case something came up at closing to inflate closing costs, or some other emergency. I have student loans, but we both have great credit. And we don't have to have PMI since it is through the credit union.
Our mortgage will end up being $20 more than our rent for our townhouse, and we were approved for a lot more than we are comfortable paying.
Oops- I forgot to add- I just graduated in May and have been employed with my job since graduation (9 months) and he recently switched jobs last July. That didn't affect our loan at all since we had both been with previous jobs for a least 3 years.
I'm definitely not in that boat. We have student loans, other debt and don't have much in our savings. That's why we can't afford to look or buy a home at this point. I would like to pay down our debt and have at least 10K in the bank plus have at least 3% for the down payment. (I would prefer to put 10% down.)
Oh, and I'm in Seattle where it's pretty pricey right now to own a home. Yeah, I don't mind renting an apartment for now... maybe upgrade to renting a home for the next couple years.
@snuggielove: We watched House Hunters, My first home last night and were shocked to see a couple put 0% down on a $439K condo that had bugs in it and was smaller than our apartment (I think the total square footage was like 1100 feet!) Yet, their mortage payment was 3x what we pay for our apartment/could get a nice house for here! Crazy!
Something worth mentioning about Mortgage insurance...yes, you usually are required to pay it if you don't have 20% down, but you are only required to pay it until your equity reaches 20%. So, for a lot of people, paying $50-100 per month for a number of years is still more financially feasible than saving $40,000 (20% of of a $200,000 house).
I know of only 2 people who came up with a 20% down payment on their own (not gifted, not from the sale of a previous house). Both people lived at home until they were 25 and socked away all their money, and then were able to write checks for $25,000+. That is great if you are able to do that, but for most people, even with a good salary regular bills preclude you from being able to save tens, or in some cases 100s of thousands of dollars.
There are also first-time homebuyer programs in many areas that help people clean up their credit and buy homes.
For us, it would be much cheaper to buy than to rent. The rent our city is double my dad's mortgage, so we are considering that and trying to find a way to make it work.
I'm just jumping in to share our story.
I bought our house last year. We paid under $200 for a 3 bedroom 2,000 sq ft house built in 1985.
When I applied, I qualified for a conventional loan with only 10% down. I had to prove that less than half of my down payment came as a gift. My fiance at the time gave me about 4% of that. I also had to prove that although I had only worked full time for about 1.5 years, I had been in the same line of work for a total of three years or more. Luckily I had a part time job when I was a student that qualified (it was in an office, not just flipping burgers or something).
So I did qualify but it was close. We did not want to take my husbands income into account because he is self employed.
It can be done. We lived with my IL's for about 6 months to save on rent in order to save the money we needed. We qualified for the first time home buyer tax credit so that gave us $8k to use for repairs and stuff.
I love hearing everyone's different stories and advice! Please keep them coming, because we've only just started researching how to buy a home.
But just like watching HGTV, you guys are making me sad....where we live, a 2,000 square foot 3 bedroom house in the suburbs goes for over $1 million (the house we currently rent would go for $1.2m-1.3m). And our rent is over $2500 a month.
Sad face. 20% down by the time I'm 40 maybe? Or we just need to move to one of the awesome housing markets you guys are buying in!
ETA: just like some of you in the pricier markets, the only people our age that we know who own homes or condos have gotten help from their families. So none of them had any advice for us either!
We're going to purchase with an FHA loan. We'd contemplated saving the 20% but with interest rates rising it will actually end up costing us more in the end to wait till we have that much. We're looking to spend $300K, which will buy us a tiny 3Br/2Ba in southern California. We've been saving since August and have $20K saved thus far, without any help from family. Our only debts are our student loans and my husband's will be deferred for the next three years.
We're working with a mortgage broker to get pre-approved (should know tomorrow) and we'll start shopping then. Hopefully we'll find a decent bank-owned property, short sale, or foreclosure that we can actually afford. We'd love to put 10% down but we wouldn't be able to do that for another three or four months, so we may put a little less down.
Neither of us wants to jump in without fully understanding the ins and outs of the FHA loan, but we don't want to miss out on these low interest rates.
You must log in to post.
| Visit our sister sites | eHarmony Online Dating |
eHarmony Advice Dating Advice |
Project Wedding Wedding Songs |
JustMommies Pregnancy Calendar |
Create the honeymoon of your dreams.
| User | Posts Today |
|---|---|
| rachgirl82 | 39 |
| pengoala | 33 |
| kate02121 | 12 |
| ndreighton | 11 |
| Sunfire | 11 |
| couawilou | 10 |
| Indecisivebride2012 | 10 |
| louiseW | 10 |
| MilksMom | 9 |
| Lyndzo | 9 |
| User | Posts Today |
|---|---|
| MissBoPeep | 3 |
| slicey19 | 1 |
| pinkshoes | 1 |
| ccranetobe | 1 |
| Bostongrl25 | 1 |
| o0olibelulao0o | 1 |
| namarie | 1 |
| rachgirl82 | 1 |
| pengoala | 1 |
| kala_way | 1 |
