First Time Home Buyer

[rtw]

Hi Folks,

I'm not new the forum but I am new to the mortgage loans board. I've spent the last year working hard to reestablish my credit and I have finally gotten my scores to a respectable place. I'm looking to purchase my first home next spring. I'm wondering what first steps I should be taking besides continuing to save, not opening any new accounts, and reducing my current debt load. Should I be aiming for a convential or FHA loan? I really want to avoid paying PMI but may not be able to put 20% down. Thanks for any advice. 

[rtw]

Bump.

[In-A-Limbo]

HI rtw,

Did you file for BK in the past couple of years? Only ask because your starting scores were kind of low. Ayway, I got out ob Bk 2.5 years ago and right off the bat I was rebuilding my credit. I make sure that everything on all 3 credit reports are accurate. Even after the discharged BofA wouldn't acknowlege my chapter 7 and continue to report negative activities on my 4 cc accounts. I have to hire an attorney to get them to stop and remove all the negatives after the discharged date. Then i dispute all collections. I was told that some collection agencies only keep records for 2-3 yeras. i was able to remove some completely. (Do allow time wen disputing anything on your credit report. You do not want a dispute note to show as current when the lender pull your credit report. It can cause delay with the underwriter.) I then applied for 2 cards and only use 10% of the available credit each month and pay in full every month. I currently only have $100 a month student loans debt. Car was reaffirmed and paid off.

I was told that I only qualify for FHA. I would have to wait until 4 years after the discharge to refinanace into conventional loan. Our broker said that he can possibly find a conventional loan for us but the rate and upfront fees wouldn't make sense and we will be better of with FHA. 2 banks pre-approved me for $250k with my $60k income (my spouse doesn't work).  I'm not sure how they came up with that $$$ because there is no way that I can afford the monthly payment.

[boomhower]

You'll have to run the numbers and see which is better for you FHA or conventional.  By next year the new FHA rules that require PMI for the life of the loan will be in effect which will seriously be a big negative for those.  At some point your going to have to refi to get rid of the PMI.  I'd do conventional if you can.  

[In-A-Limbo]

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@boomhower wrote:

You'll have to run the numbers and see which is better for you FHA or conventional.  By next year the new FHA rules that require PMI for the life of the loan will be in effect which will seriously be a big negative for those.  At some point your going to have to refi to get rid of the PMI.  I'd do conventional if you can.  

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Yes, this will kick in June of this year. Also, PMI rate will go up also. FHA will be less attractive and cost more.

We're not sure yet if we will refinance down the road or just sell our house. We're buying a house in a decent area with good schools now (8 out of 19 rating) but eventually we will aim for a 10 out of 10 schools district. Our kids are only 2 now but I really hope to send them the best school district that I could afford and be closer to work.

[rtw]

Thanks for the responses folks! I never have file for bk. I just had really crappy scores. I took this past year to clean up my reports. Only baddies left are 4 late payments. The most recent being 3 years ago.

[In-A-Limbo]

It wouldn't hurt you that much. The underwriter may ask for a letter of explanation for those late payments.

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