HELP..First time buyer needs advice!!

[butterflygirlinluv]

Hi everyone!

I am about to start the process of contacting a lender today to see how much my fiance and I can get pre-approved for. I have no idea what escrow means, conventional morgage, FHA.etc...please can someone guide me with this process? I have the slightest idea what I am doing!!

[Anonymous]

FHA is a government (HUD) backed loan. It's not just for first time buyers, nor is it a low income program. The minimum down payment for an FHA loan is 3.5%. Minimum FICO score requirement is 620. (They use the middle of the three scores. If there are two borrowers they use the lower of the two individual middle scores.)

Conventional just means an ordinary mortgage obtained from a bank or mortgage company. They generally want to see FICO scores in the mid 700s and a downpayment of 20%.

If you put down less than 20% you'll be required to pay monthly mortgage insurance, or PMI. This doesn't protect you in any way, but provides the lender with some protection in the event that you default on the loan.

Escrow is basically money that is being held. It may be used with regard to funds dispersed at closing. You will also have an escrow account with your lender. Each month a certain amount of your payment is designated for your escrow account. When the property taxes and homeowner's insurance comes due, the bank pays them with those funds. They evaluate the fund from time to time and may adjust the amount of your montly payment if it appears that you won't have a sufficient buffer to cover the costs.

Message Edited by deemac on 05-28-2009 07:40 AM

[butterflygirlinluv]

Great information!! Thank you!! What about First time buyers, could you tell me the guidelines for that, please?

We would most likely wouldn't have anything to put down, maybe a couple of thousand, but not much than that.

Also how does getting a mortgage work since we are both relocating to a diff state. My fiance just left his job of 11 years, and is starting his own business in the same field. Will this be ok? Also I haven't worked in 6 months, I was laid off then completed my Student Teaching and just graduated with a degree in elem ed. Since I haven't had any income coming in, I wouldn't be able to qualify with him for a mortgage, would I?

[Anonymous]

You're going to be renting for awhile

There may be programs for first time buyers in your area. You'll have to ask, as that's a local thing. 

If your fiance is self employed, they're going to want to see a full two years worth of tax returns and probably other documentation as well. Also, be aware - one of the benefits of being self employed is being able to deduct a lot of expenses. However, your ability to qualify for a loan will be based on the income on your tax return. It wasn't a problem in the past, but it's a big deal now. A lot of would-be buyers are finding out that the low adjusted income they were able to report to keep their taxes low is insufficient for buying a home.

If you start teaching in the fall and were a full time student before, your income should be considered right away without having to have a two year history. In that case, if that income is enough to qualify for a home in your area you would be able to buy. Just keep in mind that you'll need to save at least 3.5% of the purchase price, plus should have the equivalent of a couple house payments in savings. Also, closing costs can be several thousand dollars and upward, depending on the house and your location. You may be able to negotiate to have the seller pay those.