First time home buyer

[Jatindrj]

Hi all,

I am looking to buy a home in the Fall/Winter of 2017 and am looking for advice on mortgages. I joined this site a while back when I was younger to learn about handling credit cards and student loans properly and found it to be very useful. Hoping some of you who have experience in this can provide some advice or reliable resources to follow.

Some information about me:

25 years old

Live in Dutchess County, NY

No Debt (school and auto loans paid off last year)

Only monthly expense is apartment rent at $800/month

Salary is about $55,000 right now. It will increase every year for the next four years to about $100,000 not including overtime or promotional raises.

I do not contribute to a 401/457 because my job does not match and their performance and expense ratios are horrible. I instead max out a Roth IRA every year.

Credit score has ranged from a 795-805 over the past year with no negatives and 2-3 inquiries, two of which will fal off at the end of the year.

My questions:

I am not looking to go over the $200k line for homes. If I have to put 20% down then I will but I would really prefer to do less than that. Will I have a problem doing this?

Also, I understand there are two types of loans (conventional and FHA). Which would be better for my situation?

My salary may be considered low at the moment. Will the lender take into considerationmy future salary or strictly look at my current salary and past tax returns?

Last, how soon before I want to purchase a home should I get started with everything? (Pre-approval, realtor, etc.)

Thanks in advance!

[Anonymous]

If you don't want to put down 20%, then an FHA loan may be what you want.  You're only required to put down 3.5% in most cases and you definitely fit that profile.  I believe there are also conventional loans that don't require 20% down payments.  With your credit profile and current/potential income, I'd say you're in great shape for a great rate on a loan.  As soon as you're ready to start looking, go for the preapproval.  My wife and I just eyeballed the available homes for a few months until I got my credit where I wanted it.  We had about 4 houses that we were crazy about, then one came on the market that we instantly loved.  Talked to a great Loan Officer, he told us we'd be ok for a loan of that size, then we got the process going.  That was April 12.  Looks like we have a very good chance of closing on May 6.

[JayTee1]

They look at your current pay stubs and past tax returns and W2s/1099s.

Potential future income isn't in the equation, as far as I know.  

Maybe some experts here can chime in with different information, but my LO said they look at past income, want to see it stable or increasing.  We didn't even talk about whether I think I'll get a nice raise next January or not.

[Anonymous]

Conventional Loans can be just 5% down. The only reason that they say 20% is because that is where you don't have to pay for PMI (Private Mortgage Insurance). If you go with an FHA - they typically have lower rates and a lower down payment (3.5%), but unless you refinance to a conventional then you will be paying PMI for the life of the loan.

[Anonymous]

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@Jatindrj wrote:

Hi all,

I am looking to buy a home in the Fall/Winter of 2017 and am looking for advice on mortgages. I joined this site a while back when I was younger to learn about handling credit cards and student loans properly and found it to be very useful. Hoping some of you who have experience in this can provide some advice or reliable resources to follow.

Some information about me:

25 years old

Live in Dutchess County, NY

No Debt (school and auto loans paid off last year)

Only monthly expense is apartment rent at $800/month

Salary is about $55,000 right now. It will increase every year for the next four years to about $100,000 not including overtime or promotional raises.

I do not contribute to a 401/457 because my job does not match and their performance and expense ratios are horrible. I instead max out a Roth IRA every year.

Credit score has ranged from a 795-805 over the past year with no negatives and 2-3 inquiries, two of which will fal off at the end of the year.

My questions:

I am not looking to go over the $200k line for homes. If I have to put 20% down then I will but I would really prefer to do less than that. Will I have a problem doing this? Based on your credit score, you are better off going conventional. Some lenders do 3% down conventional, but I'd recommend 5% down conventional as the rate and PMI will be lower.

Also, I understand there are two types of loans (conventional and FHA). Which would be better for my situation? See above.

My salary may be considered low at the moment. Will the lender take into considerationmy future salary or strictly look at my current salary and past tax returns? Your current salary. Unless you have something in writing saying that a pay increase will take effect X day, etc (even then you'd likely have to wait for the new salary to kick in before you can use it to qualify). With your salary, lack of debt, and potential price range... you shouldn't have a problem qualifying as long as you have a two year work history (in the same line) between school and/or work.

Last, how soon before I want to purchase a home should I get started with everything? (Pre-approval, realtor, etc.) For messy files, at least six months in advance. For clean files, 3 months. Your pre-approval is typically good for 90 days, however it doesn't hurt to meet with a lender early just to make sure you will be 100% ready to go when the time is right.

Thanks in advance!

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[Anonymous]

Try to look for the secure and comfortable home. Home which is away from the attacks of hurricanes winds and storms.

[Jatindrj]

Thanks everyone for all of the information! It's very helpful and will keep it in mind going forward.