I’m closing tomorrow so I’m SO familiar with this process 🙂
what is a good down payment %
You can put down as little as 3.5% with an FHA loan. For a conventional loan you need at least 5% down to apply. There isn’t a huge difference between the two and if you’re going to stay in the home for less than 8ish years, I wouldn’t spend a whole lot of time debating between them.
If you put less than 20% down on a home, the bank considers you a risky investment and so you need to pay Private Mortgage Insurance (PMI) on your loan. The main difference between FHA and Conventional is that PMI drops off of your loan when you hit 20% equity on a conventional loan and it does not on a FHA loan.
We only put down 10% on our home. We started looking in a price range where we would have had a 20% downpayment, but we didn’t find anything we liked. It’s not the end of the world, and making a couple extra payments a year can dramatically build equity to head towards that 20% mark.
what we could/should be doing to get approved
Start chatting with friends/family to see what realtors they worked with and who they went through for their mortgage. Only get preapproved once because every time you do, it dings your credit score. Just know that you DON’T have to get your mortgage through the bank that preapproved you. We shopped around at three different ones (a bank, a credit union, and a broker) and got wildly different closing costs at each one. We asked our buyer to cover closing costs up to $3500 so we don’t have to pay anything there.
I wouldn’t touch any debts right now if you’re planning to buy soon, because it can take some time to affect your score positively. Just don’t open any new cards or buy a car, don’t move money, basically don’t touch anything. Also, start gathering two months of everything: Paystubs, W-2s, Tax Returns, and Bank Statements.
how much we may be approved for
Fiance and I make a little more than you do (100k combined) but have more student loan debt that you and we got approved for 300k. The bank we used took the middle credit score of the ‘lower’ person which was in the mid-700s for us. There is not a situation in this world we could afford a home at that price, we ended up buying a home for a little more than half of that. Keep in mind that you’ll be approved for WAY more than you could comfortably afford.
any first time buyer deals currently
These vary by state, and so the Google-machine is probably your best bet here.
I would also budget inspections, appraisals, and what I call the ‘hemorragingmoney’ stage into your budgeting. Inspections range $300-500, Appraisals around $400, and think of all the stuff you need for a house that you don’t need for an apartment. It’s INSANE. Lawnmowers are freakin’ expensive.
Also, as far as gifted money — it can be gifted as long as you can legally prove the relationship between the gifter and the giftee. If your Fiance gave you money or the other way around it can’t count as part of your down payment because it legally is not a relationship the bank recognizes. If your parents give you money for example, then PP is right, all you need is a brief statement signed by them that says its a gift. (at least this is what my bank told me.)