Buying a home - experiences?

Hey, people.

My wife and I are thinking about entering the home buying market and I was wondering what others experiences have been and what factors played into the ease or difficulty of getting a mortgage loan. Some of our particulars:

* DTI ratio of about 14 percent without the house, probably about 26 percent or so with the house (so pretty good, in other words).

* FICO score right now of about 695-700 for me, but all because of high debt to credit available ratio, which is about to improve as I've been pouring money into paying off credit debt. (I'm trying to get down to below 50 percent so I can start saving for a down payment.)

* No down payment as of yet, and if/when I do have it, it'll be pretty small.

* No car payment.

* Both have owned a home, once just her and then us together, which we are about to hand over in a sale in January to my long-time renter.

Essentially, we want to get into a house as quickly as possible at this point, because we want to start my oldest child in kindergarten at the school district we plan to stay in.

Thoughts? Experiences? One question I have is whether you get approved for an amount first or find a house and then seek approval. Last time I did the latter. This time, I'd like to do the former, though I don't know how that goes.

Thanks! Looking forward to the responses.

 

I would argue to get pre-approved for a loan first. It shows the realtor that you mean business. But I don't know what kind of loan you can get with no down payment.

Interest rates are at the lowest levels any of us will ever see-they are practically giving money away with rates Under 4 percent.

There are FHA loans available (that's what we have), but you will be locked in and won't be able to refi for at least five years.

If the town you are looki g at has a really good school system, watch out for overpricing. It took us almost a year before we settled on something In our proce range.

 

Definitely in a good school system. That's the main focus for us - and I'm willing to pay a little more, obviously, for that.

But as far as a down payment goes, I guess I didn't realize how vital it is. I just figured it was a way to get qualified for a bigger house and, essentially, save some interest you'd pay on it. Let's say I can get qualified for a $150,000 house, with a down payment of $10,000. It seems odd to me that I couldn't then get qualified for a $140,000 house with NO down payment. Isn't that the same mortgage amount? But that seems to be what the lenders do, regardless of what I think of it.

Anyway, it looks like I'll really focus on saving for the down payment, even more than eliminating all of the credit card debt, as long as I can get those to 50 percent or so.

This was a lot easier when I did it before 2008!

 

Technically, you're right.

But lenders don't really cherish the idea of handing over $140,000 to someone living paycheck to paycheck.

Having a down payment of $10,000 tells the lender that this guy is able to put away some money and won't default at the first setback he faces.

Also, lenders like the owner to have a stake in the property. If you have already put money into it, you will be more likely to take care of it than someone with no stake in it.

 

Don't be afraid to make a lowball offer, especially if a house has been on the market for awhile or if they owner has already vacated. Your realtor will advise you against this, but don't listen to them. They work for you.

 

While you should put down as much as you can, there are still loans going out there with little or no down payments. You probably need to be super qualified though. While saving, don't discount getting some of your debt taken care of. It will make your credit score jump pretty quickly if it's knocked down enough. Your score, while not bad, probably needs to be in the healthy 700s to get what you want. There's proably no harm in at least seeing if there is a loan you can get right now.

 

My wife and I just went the FHA route on our first house, which we bought over the summer. The down payment was 3.5%, which worked out to about $5K in our case. The key is to find a good loan officer and realtor who will help you weigh your options. BB is right, interest rates are really, really low and if you can get a fixed-rate mortgage at a good rate you won't need to refinance. In the end we bought less house than we qualified for, but the payments are more comfortable. I could easily see the temptation to spend up to your loan limit and become "house poor."

Just be prepared though: getting a home loan is like getting a financial proctological exam. Tax returns, bank statements, etc. are all scrutinized like crazy. Be ready to write letters explaining ANYTHING the underwriter doesn't like.

 

Avoid a short sale for sure. I'm going through that now and hopefully I will close on Nov. 30. Made my offer last week of April.
Get pre-approval first because you can always get another loan approval letter if the amount increases. I did a couple of times. FHA loans are nice because you get a very low rate and only need 3.5% down. In some cases, if you can afford it, you do not need a down.
Have all your financial statements (bank, stocks, bonds, 401k, etc.) ready to go. Also, check with your lender if there are any state or federal programs that will assist with your down payment, or that may match your down.
Like Mizzou said, go low first because a lot people just want out. If they counter, so be it.

 

Check and see if there are any government programs in your locality or your state that can give you a grant. Most, from what I've seen are for first-time buyers, so you may not qualify, but it doesn't hurt to look around.

I ended up finding out about a program that would have essentially paid for most of my down payment (which was like $3K), but I discovered it too late, after I'd already bought the house. I was kicking myself afterwards.

 

My FHA loan says I can't refi or move for 10 years or I owe the full amount of the downpayment assistance I received as part of that, PLUS a percentage of any profit. Not a big deal now, obviously. But it's 90 percent of the profit for years 1-2, 80 percent in year 3, etc. I think it's 50 percent at 5 years and then down to 10 percent in years 8-10.

Seemed like a good deal at the time, but that was two months before I found out I'd be out of work. Thankfully I found another job, but it's contract, so who knows where I'll end up?

 

Negotiate on the assorted mortgage fees, many of which are pure profit for the lender. Or, if you know someone who works for a bank, see if they can refer you to the mortgage department and get a break on those fees.

 

Do not fall in love with any home until your offer is accepted.

Its tough, you don't want to make an offer on something you don't love but the market is getting better and there is always the chance that the seller will take someone else's offer, so I advise not getting to emotionally attached to a potential home; just understand it might fall through.

Take heart that there will be others available just as good a fit.

Good luck.