I’m a teacher, too.
My husband and I are recently in the process of buying our first house… we’re currently waiting for our loan to go through underwriting (after already being pre-approved). It’s a painful, nerve-wracking wait…
Anyway, we attended a free first time home buyer seminar before we started looking at houses. This helped us get a good idea of what types of loans were out there, and also what we could really afford. Plus, we got some deals on closing costs, etc.
We have a conventional loan, but we only put down 4%. I think for us, saving up to 20% would have taken us YEARS.. especially since we were paying rent at the same time. We can afford the monthly payments without trouble… but trying to come up with that big chunk of money up front is intimidating.
With anything less than 20% down, however, you need to pay Private Mortgage Insurance (PMI)… which is basically this useless (to the buyer) insurance that protects the bank should you default. Depending on the price of your house, it can range anywhere from $50-$300 per month. You have to keep paying it until you get 20% equity on your house (so… it could be for 8-10 years).
I think the thing that Darling Husband and I were so unaware of and that has caused the most stress during this process is the amount of money you have to account for with the bank. You need to show where every penny of your downpayment is coming from, where your money for closing costs are (in my area, this is an additional $5000), and for PMI approval, you need to show that you have an additional two months worth of your full monthly mortgage payment in “reserves” after accounting for down payment/closing costs. This basically added up to $20,000 we had to show the bank we had.
Also- if you go with borrowing money from family… you need to word it as in they gave you a “gift” of the money. If you’re saying you’re borrowing it, then banks will note it as a “loan”, and therefore, less money you have available each month. Your family would have to sign a gift letter (stating that you don’t have to pay it back), and they may even have to provide a bank statement showing where they have the money. This isn’t to say you can’t have an “under the table” deal with your family that you WILL pay them back… just don’t tell the bank.
I’m sorry to overload you with so much information. I just happen to be going through all of this right now, and if anyone can learn something from my experience- all the better!