First time home-buyer doesn't know where to start

[Anonymous]

I've never bought a home and had originally planned to buy in 2010, giving me more time to look for the right house and to save up for the downpayment and closing costs. However, with the tax credit and the current market, it seems like now would be a great time to buy.

I had a bankruptcy in 2003. I graduated college in 2008 and only have 14 months of work history in my current field. My annual income is currently $50,000. My Equifax score is 681. I don't know what my TU score is. I'm looking for a house between $100,000 and $140,000.

I have enough for a 5% down payment on a $140,000 house if closing costs are very low, but after researching it, it appears closing costs are much higher than I'd imagined. I had thought about borrowing more down payment money from family and then paying it back with the tax credit a few months down the road, but I hear that borrowing money for that is a no-no?

I don't want to lower my credit score with multiple hard pulls on my credit in order to find my lender, but I'm having trouble figuring out what sort of loan I would qualify for and who with...or even if I'd be better off just waiting in my situation.

Any advice is appreciated

edited to add extra info:

bk discharge was actually feb '04 now that I checked
The 50,000 is from hourly wage income
Monthly debt payments: $430
Location: greater charlotte area, NC
Occupancy: primary residence

Message Edited by climbing on 09-03-2009 05:38 AM

[Anonymous]

You should look into FHA or USDA. FHA will require 3.5% down and there really aren't any limits on where you can purchase, i'm sure you meet the income and purchase price requirements. USDA is tougher because you have to buy a property in an approved Rural area and a lot of people say the paperwork is taking a long time because they're back up (might prevent a closing by 11/30). However, USDA is 102% financing so no downpayment and they cover a large chunk (if not all) closing costs.

At this point you probably want to avoid short sales if possible because they can take months and months just to get a response from the bank and you're on a deadline to close by 11/30. It will probably increase your chances of getting sellers to pay some closing costs if it's not a short sale too.

Your employment history shouldn't be a problem as long as your job is in the same field as your degree and you can provide transcipts or a copy of your degree. (they consider school years as employment years if they're in the same field)

BK should be old enough not to be a problem, typically 2 or 3 years for FHA i believe. Unfortunately you cannot borrow money (they will make you provide documentation for any large deposits in the last few months) but you can have it "gifted" to you which essentially requires a letter from the gifter saying you do not need to pay it back.

Do you know the average property taxes for the area you're looking to purchase? My father lives near there and i believe his are pretty cheap, about $2k on a $150k property, but you'll want to have an idea. Does the $430 monthly debt include your student loans (all loans, even if deferred)?

[rockymtngrl]

However, USDA is 102% financing so no downpayment and they cover a large chunk (if not all) closing costs.

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I just wanted to clarify this statement. USDA has exactly the same closing costs as FHA, except no upfront MIP.

The guaranteed version does'nt "cover" any of the closing costs but you can roll them into the loan as long as the house appraises high enough to allow it.

Also the extra 2% allowed for the mortgage is to cover the guarantee fee-which is 2%.

[Anonymous]

I'm not sure what the average property taxes are in this area. I'm looking specifically for home in Union County.

That's good news about the school years being considered employment years. I work in the same field I went to college for.

The $430 monthly debt includes my student loan and my car payment. Those are my only two debts. I have credit cards, but all have $0 balances at this time.

Thank you both for your help!  Now my next question is...how does the interest rate for an FHA loan compare to a conventional one? 

[Anonymous]

FHA rates are pretty good right now, there's basically one rate regardless of score although it can vary a little by lender. Conventional depends on your score, the higher your score, the lower your rate. I think i've heard you'd want 720+ to get a good rate conventional.

[Anonymous]

oh wow. I just applied with Amerisave (by the way, I heard that all applications within a 15 day period count as one hard pull. Is that correct?) and the scores they got back on me were so different. TU 783, Experian 686, Equifax 712. Is that normal?

Anyway, I also applied with a mortgage broker, but haven't been contacted by them yet. Amerisave gave me several offers, though. The FHA 30 year fixed rate was 4.750 and APR 5.499 if I pay discount points. Is that decent? I heard discount points are tax-deductible. Does that mean the entire amount is tax-deductible or only a portion of the points you paid?

I'm also considering going with a 5/1 ARM because I'd like to refinance in a few years when my credit improves more, but I don't want to bother if my interest rate isn't likely to go down enough to save me much money in the future. 

[Jazzzy]

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@Anonymous wrote:

oh wow. I just applied with Amerisave (by the way, I heard that all applications within a 15 day period count as one hard pull. Is that correct?) and the scores they got back on me were so different. TU 783, Experian 686, Equifax 712. Is that normal?

Anyway, I also applied with a mortgage broker, but haven't been contacted by them yet. Amerisave gave me several offers, though. The FHA 30 year fixed rate was 4.750 and APR 5.499 if I pay discount points. Is that decent? I heard discount points are tax-deductible. Does that mean the entire amount is tax-deductible or only a portion of the points you paid?

I'm also considering going with a 5/1 ARM because I'd like to refinance in a few years when my credit improves more, but I don't want to bother if my interest rate isn't likely to go down enough to save me much money in the future. 

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Please be careful of ARMs. Do an informal survey of those you know, love, work with, etc. Ask them where they think interest rates are heading: up or down?

You can still refinance in a few years if you feel the need...even if you chose a fixed rate now.

[Lel]

Long-term interest rates are still close to their all-time lows.  Even though the economy is not quite on a clear path to recovery, it will recover eventually.  Once that happens, deflationary pressures will ease, and long-term interest rates will go up.  If you can qualify for a good interest rate now (and your scores are good enough for FHA), then a 30 year fixed-rate loan is probably the better move right now than an ARM.  The odds of your being able to get a similar or lower rate in a couple years is very low.

[Anonymous]

Thanks, you guys. Good point about the rates being near their lowest. I'll stick with the 30 year FHA fixed.

I went to look at houses today and fell in love with only about 10 of them that I now need to schedule showings for. It takes me ten minutes to choose a brand of peanut butter at the store. This is gonna drive me insane, but I'm excited about it.