Buying a House

[MikeT14]

15 hours ago, navysaintsfan said:

North Chesterfield, I won't be too far from your area.

Nice. That's where my in-laws live.

[TENINCH]

Was going to fire realtor tomorrow. Imagine that we got a good offer on the house. Going to accept tomorrow.

[holt_bruce81]

Not ready to move yet, but kind of started looking myself and want to get all my ducks in a row before I officially start the process. Want to move next year, but I guess if I had To wait an additional year I’d be ok with it. School districts around us right now are Garbage and my daughter starts kindergarten in 2 years. I really Want to be in a good school district. 

I have a few “elementary” questions, and I’m the first to admit I dont Know much of anything about home buying, so please bare with me here...

1. As a first time home buyer what type of loan do I want? 

2. My GF and I make a bit over 70k a year but our credit scores are pretty weak. I think We’re both in the 630-650 range. Would we need to significantly boost our credit before realistically looking to purchase a home? We also have a total of around 60k in debt. 

4. I have a handful of friends who are Realtors. Would you recommend using a friend or is that not always a good idea? 

5. I’ve heard a good rule of thumb is that your monthly house payment shouldn’t be anymore than 1 weeks pay. Is this a good rule to follow? Does that include everything? 

Thanks for any help and/or Advice you can give! 

[Forge]

44 minutes ago, holt_bruce81 said:

Not ready to move yet, but kind of started looking myself and want to get all my ducks in a row before I officially start the process. Want to move next year, but I guess if I had To wait an additional year I’d be ok with it. School districts around us right now are Garbage and my daughter starts kindergarten in 2 years. I really Want to be in a good school district. 

I have a few “elementary” questions, and I’m the first to admit I dont Know much of anything about home buying, so please bare with me here...

1. As a first time home buyer what type of loan do I want? 

2. My GF and I make a bit over 70k a year but our credit scores are pretty weak. I think We’re both in the 630-650 range. Would we need to significantly boost our credit before realistically looking to purchase a home? We also have a total of around 60k in debt. 

4. I have a handful of friends who are Realtors. Would you recommend using a friend or is that not always a good idea? 

5. I’ve heard a good rule of thumb is that your monthly house payment shouldn’t be anymore than 1 weeks pay. Is this a good rule to follow? Does that include everything? 

Thanks for any help and/or Advice you can give! 

1. I tend to stick with Conventional, mainly because I know them pretty much inside and out, but lots of people do FHA loans. Just seems like a lot more paperwork nonsense and some restrictions (you really should not have horrific paperwork situations on a conventional loan unless you have a truly anal lender or underwriter, or they happen to be selling to an anal invest, ie, not agency). 

2. 620 is the minimum required credit score for a conventional loan salable to agency, so technically, you would be fine (for a single family residence). That being said, higher credit scores may help finesse your way through some rough spots of the underwrite if possible it needs to be put in a portfolio, and obviously they will certainly improve your loan terms with regards to the rate. 

2(b) - Depends on how your debt is structured, what they are, etc. Maximum debt to income ratio is 50%, but I don't recommend that if you can help it (standard used to be 45% and even that can be tricky). If a lot of that debt is deferred student loans, then obviously it is not a big deal (in terms of qualifying). Fannie typically requires 1% of the current outstanding balance to be used as the monthly payment on a deferred student loan, while Freddie allows for .5%. These are very low payments in that situation. There are also programs through various lenders that may allow for student loan debt to be excluded all together, particularly if you're in a particular profession (medical, dental are the most common, though sometimes working in the education system and things like that can be as well).  If your student loans are in repayment, typically the reported payment on the credit report is used (though there are scenarios where this is not the case), though if you're on an IBR, those payments can be used as well (even if they are only good for a year before being required to be renewed). Credit card payments used in qualifying are simply the minimum required payments that report on the credit report, so this can vary with several factors.

The total debt really isn't looked at so much as the monthly payments- you can have 60k in debt and have it all be student loans and that wouldn't be atypical in the least. You could have 30k owed on a car, 15k in student loans and two credit cards at 9 and 6k. It really all depends on what you are paying out. Looking at the type of credit utilization (such as high revolving balances / maxed out credit cards, etc) is really more of a deep dive underwrite for compensating factors if an exception is needed or if excessive risk stacking is noted. 

4? I typically do not mix business and personal friendships like that. I also would not recommend using the first nice realtor you run into at an open house. I would do my research. If you know what you're doing, it can diminish the need for a quality realtor just a little bit (you can stay on top of them), but its still a bit of a hassle. Having a good realtor can make the process almost easy.

5. Eh...I mean....eh. I think of it in  percentages, have never really thought about it in that manner. Also, really depends on what the rest of your monthly obligations look like.  It's not as big of a deal any more, but back in the day the preferred front end ratio (housing expense ratio) was typically best if it was no higher than like 28-33%. So your housing payment shouldn't account for more than a third of your gross pay. This is largely irrelevant for conventional loans now (though I suppose some lenders could kick in that overlay on their own). I see loans all the time where the front and back end ratios are like 47/47% (borrower has no other debt). I do believe that FHA still has a front end requirement, though (31, maybe?). I can't remember what my salary is right now, but I can tell you that my monthly housing payment is probably more than one weeks' check (though I do have additional bonus income that I didn't use in qualifying and poker income that is unreported). If I had to make an estimate, I'd say that when I bought the house I have now, the monthly payment was probably right around a third of my gross pay at the time while being slightly lower now (though still right around 30/31% based on rough estimates in my head)  

[theJ]

7 hours ago, holt_bruce81 said:

Not ready to move yet, but kind of started looking myself and want to get all my ducks in a row before I officially start the process. Want to move next year, but I guess if I had To wait an additional year I’d be ok with it. School districts around us right now are Garbage and my daughter starts kindergarten in 2 years. I really Want to be in a good school district. 

I have a few “elementary” questions, and I’m the first to admit I dont Know much of anything about home buying, so please bare with me here...

1. As a first time home buyer what type of loan do I want? 

2. My GF and I make a bit over 70k a year but our credit scores are pretty weak. I think We’re both in the 630-650 range. Would we need to significantly boost our credit before realistically looking to purchase a home? We also have a total of around 60k in debt. 

4. I have a handful of friends who are Realtors. Would you recommend using a friend or is that not always a good idea? 

5. I’ve heard a good rule of thumb is that your monthly house payment shouldn’t be anymore than 1 weeks pay. Is this a good rule to follow? Does that include everything? 

Thanks for any help and/or Advice you can give! 

My opinions:

1. Conventional or FHA.  Though FHA has a negative connotation with some sellers.  You'll look like a stronger buyer with a conventional loan.
2. It wouldn't hurt, though like @Forge mentioned you meet the minimums.  What concerns me more is - why is your credit score so low?  Is it predictive of your ability to pay a mortgage?  You need to be absolutely sure you're on good financial standing.  If you default on a car loan you lose a car.  Ok, that can be dealt with.  If you default on your home, you lose your freaking home.  You have no where to live.  That's a big deal.
3. ...
4. I wouldn't.  Get a few recommendations from friends who have bought successfully and had good experiences.  Then set up interviews with those realtors (yes, interview them!  they're working for you!).  Ask them lots of questions, get comfortable with them, etc.  Then make a decision on who you'll use.  
5. I go by a 25% of a month's take home pay.  Including taxes, insurance, and maybe even utilities if you expect them to be significant.  But...YMMV.  If you don't already, put together a typical monthly budget.  The formula is simple:
   1. (take home pay) - (expenses [sans mortgage/rent]) = disposable income
   2. It needs to fit within what's left, and you should be somewhat cautious to make sure you have a little float money in case you have to buy new tires, have a medical bill, etc.

 

[Shanedorf]

Great advice above and I'll echo the comment on not using your Realtor friends.

Its not uncommon for a first-time buyer to burn through more than one Realtor because the Realtors are often focused on closing a deal, while you are focused on finding the perfect home. For some its just another transaction, for you its much much more. Don't get railroaded

As a first-timer, look at lots of homes, even ones above/below your original budget. You can go to open houses on your own, I'd advise you to start going to them soon. Its free education.

Decide if you are willing and able to do renovations ahead of time, that can help narrow your focus. One strategy for first time buyers is to find a 2BR home instead of the 3 BR home that everybody else wants. And then add a Master Bedroom. Or convert a garage, or expand a deck.
But you have to know your limitations both financially and from a skillset POV.  Give that some thought

Some buyers want a turnkey home, others are willing to invest sweat equity and only you know that answer.
Being willing to make some changes opens up a larger set of options and sometimes allows you to get into your preferred location, cheaper.

Schools - even if you don't have kids and aren't planning on having them, better school systems add value at re-sale time.

Be prepared to show documentation of everything, repeatedly.
You will really have to open your books and its going to feel a bit invasive, but that's the way things are now post- housing bubble.

Its a fair guess you will end up buying something a little different than you originally planned -  no worries,  that's all part of the education process.

Good luck

 

[holt_bruce81]

Thanks for the advice everyone! It is much appreciated. @theJ you asked about my credit score. 

It’s low for both of us because of a few missed payments and one of my things went to Collections. It was all a few years ago when I was barely making any money. I was Legit making around 15k a year with a baby on the way. I just Couldn’t afford to make my monthly payments. I make Around 3x more than that now. 

Of the 60k we have combined in debt, I would Say around 50k of it is in Student loans. 

Edited July 11, 2019 by holt_bruce81

[theJ]

8 minutes ago, holt_bruce81 said:

Thanks for the advice everyone! It is much appreciated. @theJ you asked about my credit score. 

It’s low for both of us because of a few missed payments and one of my things went to Collections. It was all a few years ago when I was barely making any money. I was Legit making around 15k a year with a baby on the way. I just Couldn’t afford to make my monthly payments. I make Around 3x more than that now. 

Of the 60k we have combined in debt, I would Say around 50k of it is in Student loans. 

Good.  Being able to show a clean history for the last 2-3 years should help during the underwriting process.  Just keep the new loan at a reasonable level and you should be fine.

My calculator says that your house payment shouldn't be more than around $1K/mo (again, with taxes/insurance).  With a baby at home and your wife working, you might have daycare expenses.  You also have those loans.  Because of those expenses, you should probably lower your limit.

Again, YMMV and you should write out your income - expenses and truly figure out how much you can afford.

For example, when we bought earlier this year my math said i couldn't really go above 15%.  That was because we currently have $250/week in daycare expenses.  When our 2 year old is out of daycare, that number can go way up.  Everyone's situations are different.

[TENINCH]

4 hours ago, holt_bruce81 said:

Thanks for the advice everyone! It is much appreciated. @theJ you asked about my credit score. 

It’s low for both of us because of a few missed payments and one of my things went to Collections. It was all a few years ago when I was barely making any money. I was Legit making around 15k a year with a baby on the way. I just Couldn’t afford to make my monthly payments. I make Around 3x more than that now. 

Of the 60k we have combined in debt, I would Say around 50k of it is in Student loans. 

https://ovationcredit.com/

I used this company to clean up my credit score a few years ago so I could buy my house. They made my credit score improve dramatically. They even negotiated with companies that I owed money to. Worth a shot if you're ever interested. 

[theJ]

14 hours ago, TENINCH said:

https://ovationcredit.com/

I used this company to clean up my credit score a few years ago so I could buy my house. They made my credit score improve dramatically. They even negotiated with companies that I owed money to. Worth a shot if you're ever interested. 

Before going that route, get a report yourself though.  If what @holt_bruce81 is saying is correct, his credit score doesn't have errors.  In that case, this company won't be able to do anything for him.  The only way to boost that score now is to continue to pay things on time.

[theJ]

Also, came in to say that we finally close on our old house Monday.  Took almost 45 days to close.  I had a much different appraisal issue than @MWil23 had - there just weren't any comps for our house.  Any house with our acreage was bigger and went for much more.  Any house our size had much less acreage.  So while it breezed through appraisal, the underwriters flagged and wanted a second review.  

But i'm glad it's finally over.  Keeping up with two lawns sucks.  I think i'll cut it for the last time tonight or tomorrow.

[vike daddy]

12 minutes ago, theJ said:

But i'm glad it's finally over.  Keeping up with two lawns sucks.  I think i'll cut it for the last time tonight or tomorrow.

cut some sort of pattern or message in to the lawn...

[ramssuperbowl99]

On 7/12/2019 at 7:43 AM, vike daddy said:

cut some sort of pattern or message in to the lawn...

If you're not doing a diamond cut as a standard, you're a psychopath.

[LETSGOBROWNIES]

1 hour ago, ramssuperbowl99 said:

If you're not doing a diamond cut as a standard, you're a psychopath.

You’ll have to forward instructions on how to do this to my kid.

[ramssuperbowl99]

6 minutes ago, LETSGOBROWNIES said:

1 hour ago, ramssuperbowl99 said:

If you're not doing a diamond cut as a standard, you're a psychopath.

You’ll have to forward instructions on how to do this to my kid.

All kids are psychopaths. I rest my case.