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First time home buyer question...FHA loan, how much can I get, how long does it take, etc...?

prozac4312 2,038 November 9, 2011 at 03:36 PM
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So my wife finally got a teaching job, and as such, we're looking to buy our first house. Our monthly income is around $5k, I'm 24 and she's 25. She has great credit, has multiple cards that she's always paid on time, a car loan that's never been late in the 3 years since she's had it, and a checking account that she's had since she was 16. I have little to no credit history--I had a single credit card when I was 18-19 that I let charge off, but other than that, nothing else is on my credit report as far as I know (unless cell phones/utilities go on there, but my understanding is that they don't). We've been renting the house we live in now for 2 years, and never been late on rent (although my landlord doesn't have my social, so I'm sure it's not on our credit...but he'd be a good reference if that's something that is necessary). I've had the same job going on 6 years. We live in Akron, Ohio. A friend of mine is a Realtor, so he's been explaining it to me a bit, but he doesn't deal with the financial side of it--just the properties, so he couldn't really answer the questions I had. I want to know things like how much should we expect to be approved for? Based on that, how much will our mortgage payments be? How long does the loan take to go through? Once that's done, how long before we can move into the new place?

Edit: We should be able to put ~$5k down.

Edit 2: Just found out that in Ohio, you can get a grant of 2.5% of the cost of the house if you've graduated college in the last 24 months, which my wife has. Schwing!

If any other information is needed, I'll gladly provide it. Thanks in advance.

13 Comments

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#2
You can purchase a house via FHA loan for around 3% down payment, you'll be paying an upfront mortgage insurance of 1.5% of the loan amount @ closing, and is refundable within 7 years if you refinance or sell the property. After 7 years, it's gone. Your monthly payment will also include a mortgage insurance payment as well.

You can borrow up to around $417k I believe. But given that you have about $5k down, I'm guessing you're looking for properties around $100k?

Don't forget to factor in closing costs, which will be about 2-3% of the loan amount as well. If your loan officer is good, you can close within 30-45 days. Also, make sure the property you're buying is FHA approved. Some condos aren't. What type of property are you planning on buying?
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Master Jedi
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#3
Quote from fortiskevin View Post :
You can purchase a house via FHA loan for around 3% down payment, you'll be paying an upfront mortgage insurance of 1.5% of the loan amount @ closing, and is refundable within 7 years if you refinance or sell the property. After 7 years, it's gone. Your monthly payment will also include a mortgage insurance payment as well.

You can borrow up to around $417k I believe. But given that you have about $5k down, I'm guessing you're looking for properties around $100k?

Don't forget to factor in closing costs, which will be about 2-3% of the loan amount as well. If your loan officer is good, you can close within 30-45 days. Also, make sure the property you're buying is FHA approved. Some condos aren't. What type of property are you planning on buying?
Yeah, $100k would be the absolute max we're looking to spend. We don't want a condo or split level...anything else is fine if it's nice.

I'm mainly concerned with how much we'll be able to get approved for. Houses in the area are pretty cheap, but anything cheaper than like $75k in the area is pretty ratty...I'm mostly worried that we won't be able to get approved for that much. As far as closing costs...my friend told me that most of the time, the seller covers that...is that not the case?
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#4
you can negotiate a closing cost credit from the seller in the purchase agreement.
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#5
You should get a (free) copy of your and your wife's credit reports (www.annualcreditreport.com), and make sure nothing is amiss there. Scores might not hurt either, especially if you've never checked em before (they aren't free, but are only ~$10 each). If something is wrong, get it corrected before you start the whole process.

I've heard as a rule of thumb, estimate a $7 monthly payment for every $1000 borrowed (so, you're $100k loan would come in at around $700 per month). Not sure exactly what that includes (insurance, property taxes, etc), but it should be a good starting point.
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#6
I think you shoul wait til you can put at less twenty percent down and have all of your other debts paid off first.
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Master Jedi
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#7
Quote from vaultaddict View Post :
I think you shoul wait til you can put at less twenty percent down and have all of your other debts paid off first.
...thought the whole point of an FHA loan was to put as little down as possible...?
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#8
you will also need to buy things when you move, so if you only have $5k liquid then keep saving. I think I spent around $2k when i moved unless you have nice relatives/friends that have garbage cans, mower, furniture, etc...
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#9
Quote from prozac4312 View Post :
...thought the whole point of an FHA loan was to put as little down as possible...?
The whole point of becoming wealthy is not to pay for things you don't need and can't afford.

Like PMI.

You'll regret buying this house if you jump before you're ready.

We saved and lived in a one br apt til we had twenty percent down and no other payments.

These decisions you make now will set your future.
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#10
Plus, with the time you spend working on getting that 20%, you can improve your credit, pay down debt, and educate yourself on both the finance side and the home hunting side of things. Don't be in a rush to buy a home, it is a huge investment in both money and time, and screwing it up will create misery for years.

Quote :
So my wife finally got a teaching job . . .
Yet another reason to hold off on buying a home so fast. Lots of new teachers get a year or two into it and quit the teaching gig. Not saying yours will, but the last thing you want is a mortgage looming over your heads and the wife working at a job she hates just to pay the bills. Doesn't make for happy fun time at home.
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#11
I bought my first house 3 years ago and had waited until I could avoid PMI (20% down) and I was able to get a first time home buyer rate through my state (I have stellar credit but had to fight to get this). Might check to see what your state offers. I also found a credit union that offered money off my closing costs for attending a seminar on house buying. The only thing I would caution is be firm and ask for ALL closing documents ahead of the closing date to review closely. You will need to keep asking for this as for some reason most people don't want to do this. I did this and it was less pressure at closing BUT the title company still messed up some fee name not amount so just proceed with caution and do not rush. Getting the right house for the right price is great but you only get first time home buyers credits once Smilie Just my 2 cents!
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#12
You can look around banks or credit unions local to you and ask them to do a pre-approval. They will be more than happy to do that for you and your wife. I believe work history will play a part on the house loan as well. I believe in current jobs for atleast 6 months or more (hopefully some one with more knowledge will confirm this).

My wife and I decided just to put my wife on the home loan and her income is $38K/yr and she was able to get a $197K FHA loan. That was exactly the price range that we wanted. In that range, it was the same as us paying rent so we figure might as well buy a house. Time frame is different from banks to banks. You really have to push those damn people. They took FOREVER to get our pre-approval and during closing....we really, really had to push those people to get it done.

FHA loans will have restrictions on the condition of the house so you have to make sure the house you want to buy will be able to get pass the loan criteria. For my wife and I in California, there was a lot of short-sale and forclosed houses for sale and not in the best shape or condition. They required that the house have a stove (yeah...like people can't buy their own damn stove), windows must not be broken, and other repairs was required to be fix before loan goes through. These are just some of the examples. A short-sale owner won't give a damn about wasting anymore money so it was a head ache.

Make sure you have money left over to do repairs and updates. You would not believe how much money I blew through just doing minor touch up, paint, and change a few fixtures. I did most of the labor myself. I ran out of money before I can even start renovation projects. LOL. I don't know how those people on tv do complete renovations for pennies on the dollars.
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#13
Quote from calnbs View Post :
Make sure you have money left over to do repairs and updates. You would not believe how much money I blew through just doing minor touch up, paint, and change a few fixtures.
Plus a plumbers wrench, ladder, multimeter, lawnmower, snow shovel, etc etc. All the crap you never need renting that you'll need to get after you own a home. Adds up very, very fast.

The purchase price of a home does not equal the cost of ownership of a home.
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#14
I will disagree with most, the time to buy is when prices are low and mortgage rates are rock bottom. Last Thursday, rates hit an all time low. With so many foreclosures dragging prices down, even new home prices have fallen.

Will you have to pay PMI, yes, but by the time you save up 20% down, rates may have skyrocketed. I say get in now while rates are low. And PMI on purchase loans is tax deductible.
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