(Closed) FIRST TIME HOME BUYERS, any tips?!????!

posted 7 years ago in Home
Post # 2
Member
518 posts
Busy bee
  • Wedding: March 2016

You’ll need at least 10% for a down payment, but ideally at least 20% (there’s hoops to jump through including having to buy private mortgage insurance if the down payment is less than 20%). You’ll also need extra to pay the closing costs (another several thousand dollars).

It sounds like you’re not in a position to buy right now. Right now I would focus on building up your credit as much as possible. Make sure your student loan payments are on time; put a small amount on your credit card and pay it off each month. Also ramp up your savings as much as you can.

 

Post # 4
Member
76 posts
Worker bee

I would actually urge you to talk to a realtor to learn about downpayment options. We bought a home with very little down and recieved a grant for our down payment and some of our closings (no need to repay) and it has been the best decision we ever made! You’d be surprised at the resources that are out there – and not just for “low income” families. Google first time homebuyer and then where you live and you’ll probably find the city’s homebuying resources.

I think you will hear people who say you must have 20% to put down, but in some areas (like ours) renting is just a huge waste when you can buy a home, build equity, and pay less monthly in mortgage. Especially with interest rates so low.

We also made the decision to buy a home based on only one of our incomes rather than being house poor or stressed out. What if someone got sick/hated their job/anything!? BEST. DECISION. EVER.

If you aren’t in a rush, it will help you to find those resources and to truly decide on areas that you are open to as well as not willing to live in. Really decide if you want a starter home or potentially your forever home.

And then on the financial side, don’t open a credit card, and do NOT move money into any account that can not be accounted for from your pay check – it’s a big thing that mortgage companies look for. 

This is just my experience and I am sure that others have not had the same because they live in a different city, have different circumstances, etc… but buying a home when some said it was not “the right time” has made our life a lot less stressful.

Good luck! Be patient!

 

Post # 5
Member
76 posts
Worker bee

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cls9q:  You can use gifted money but your gifter must write a letter stating that this is a gift and will never have to be repaid.

Post # 6
Member
104 posts
Blushing bee

The 3.5% down is only if it’s FHA approved. I think you should work on your debt right now. You also have to keep in mind that you’ll have a monthly mortgage to pay.

Post # 7
Member
518 posts
Busy bee
  • Wedding: March 2016

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cls9q:  I used gift money from my mom for the down payment on my house. The giver just has to sign a form letter that the money is a gift and not a loan. That part, at least, is easy peasy. πŸ™‚

You definitely don’t have to put 20% down, but there are all sorts of hoops to jump through with those first time buyer loan programs. They actually have to approve the house with their own inspection, among other things.

Post # 8
Member
1481 posts
Bumble bee
  • Wedding: March 2014

Find a bank/home loan servicer and get preapproved. They will answer all the questions you just asked and it will be from a professional And specific to your area! Seriously they will help you with any questions you have. 

Post # 9
Member
806 posts
Busy bee
  • Wedding: October 2017

You don’t HAVE to have that much down. You can sellers assist (at least we could) where the seller pays part of the costs.  You have a decent amount saved.  We literslly paid like $1,300 at closing.. Honestly call a lender and call a realtor in your area.  They can take basic information and give you a ton of help.. I bought our house when I was 20.. I didn’t know anything either.  

My biggest tips. DON’T go with the cheapest home inspector. Spend the money. If we would have bit the bullet and spent a little more we would have known about the skylight that had been drywalled over, caught the gas leak before closing, had the plumbing fixed, etc. Our inspector was a moron. 

Also, bite the bullet and BUY THE WARRANTY of the house you’re purchasing doesn’t come with it, buy it.  Would have saved us a ton of money in the first year and a lot of headaches 

have fun!! House hunting was my favorite! πŸ™‚ 

Post # 10
Member
806 posts
Busy bee
  • Wedding: October 2017

View original reply
cls9q:  also, Fiance had a credit issue and couldn’t be on the loan initially. He “gifted” me $3,000 for the inspection, appraisal, repairs, etc. The realtor sent us a form for us both to sign. 

Another tip is to not do a single thing involving your credit from start to finish. Don’t use credit cards, open new lines of credit, try to get a car loan, nothing. If you do anything it can change your credit rating and your preapproval will no longer apply. 

Post # 11
Member
639 posts
Busy bee

View original reply
cls9q:  

I’m closing tomorrow so I’m SO familiar with this process πŸ™‚

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.

Other:

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.)

  • This reply was modified 6 years, 7 months ago by beeintraining.
Post # 12
Member
509 posts
Busy bee
  • Wedding: September 2014

I think if you have less than 20% you have to get a special insurance policy, which will just add to the cost.  If I were you, I would take advantage of the free living for a year or two and just save like crazy. Is the $6k your only savings?  You should have at least 6 months (a year is better) of living expenses, including rent/mortgage and utilities, in an emergency account. 

And it’s not just the down payment.  Closing costs can be very high depending on how much your house is.  Home insurance and property taxes have to be paid in order to get financing approved.  Home repairs or improvements you may need to do.  All these things can really add up. 

Do you know where you want to live for sure?  Homes are generally only a good investment given the fees if you plan to stay at least 5 years so make sure it’s an area you really like (good school zone, etc.). 

Post # 13
Member
169 posts
Blushing bee

View original reply
artsyadventurer:  buy a home based on only one of our incomes rather than being house poor or stressed out. What if someone got sick/hated their job/anything!? BEST. DECISION. EVER.

+1,000 to this! A low mortgage payment offers tremendous peace of mind when it’s time for major house repairs/maintenance, if one of you has an unexpected career change, or if you just want to splurge on a big trip! 

It  also makes it easy to pay the mortgage off early and live in a paid-for, free and clear home, and you can use the extra money to set up a strong early-retirement plan …. that is what hubby and I did and we don’t regret it for one minute. 

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