Post # 1
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 😛
Post # 3
FHA Loans, you only need 3.5% down
Post # 4
- Wedding: October 2011 - Tre Bella, Mesa, AZ
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.
Post # 5
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’.
Post # 6
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..
Post # 7
@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.
Post # 8
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.
Post # 9
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.
Post # 10
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. =(
Post # 11
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.
Post # 12
@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!
Post # 13
@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.
Post # 14
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.
Post # 15
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.
Post # 16
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.