Mortgage Loans

[pittsburghrenter]

I'm 24 years old, and want to stop throwing my money away in rent.  I've been in the same field for about 2 years now, 2 different jobs.  I would like to buy a house in the near future under $100k.  I don't really have much saved (about $3K) that could go toward the purchase.  Here's what I've got to work with:

Credit Scores:  TU - 630, EQ - 642, EX - 630

Income:  $58,000/year (before taxes, insurance, & 401K) ~ $2,900 take-home / month

Current Debt:  Car Payment - $457/month, Student Loans - $120/month

Revolving:  I have one credit card with a $300 limit, $0 current balance

Dings on my Credit Report: 

• 2 collections that have since been paid, mos recent one paid in Oct
• Some late payments in the past, but all payments have been on-time in the last 24 months
• in the past, I have let credit cards go a while without paying them, thus how I got the collections

Summary:

Total past due 0, Late payments No, accounts past due 6 Years 0, Total balance of Your revolving accounts $0, Your mortgages None, Your installment loans $43,099, Total number of Accounts 14, Accounts with balances 3, Accounts opened in past year 1, Recent inquiries 4, Collections 2, Public Records 0

Is this even something I should be thinking about right now?  If so, what should my next steps be to get the ball rolling?  What kind of loan should I expect to be able to get?  Is a 100% 30-year fixed a possibility?  What about a 15-year?  Should I have more saved before moving forward?

Message Edited by pittsburghrenter on 01-04-2008 09:48 PM

Message Edited by pittsburghrenter on 01-05-2008 08:43 AM

Message Edited by pittsburghrenter on 01-05-2008 08:50 AM

Message Edited by pittsburghrenter on 01-05-2008 09:29 AM

[ShanetheMortgageMan]

Your "bad credit" is far enough in the past to not really affect you in qualifying for a new mortgage.  Since you have lower scores, I'd suggest you look into an FHA mortgage.  Your debt to income ratio is looking really good for FHA, and FHA does require a down payment of no more than 3%, but you can get assistance with that by using www.getdownpayment.com & working with the seller.  FHA rates are very good right now, in the low 6's, and they come in 30-year fixed variety, so you don't have to deal with that adjustable rate stuff.  Payment on a $100k home in Pittsburgh (assuming that is where you are) would be in the low $800 range with taxes, insurance, & mortgage insurance... you could even qualify for a 15-year fixed if you'd like, payments would be closed to $1,050/mo.

[pittsburghrenter]

Thank you Shane!  Your advice seems to be valuable to people on this forum!

Let me ask you...

What is the difference between being pre-approved and pre-qualified?  Should I be pre-approved or pre-qualified even before beginning to look at houses?

What would you recommend my next steps be?  I have not yet picked out a house, hardly even a neighborhood.

[ShanetheMortgageMan]

Welcome.

Being pre-qualified is just when a loan officer looks over your situation and uses their past experience to say you'd be approved.  A pre-approval is one step further, your loan officer would gather up the requried documents (signed application from you, W-2's, paycheck stubs, bank statements if assets/reserves are needed, any letter of explanation for negative credit, etc.) and submit it to an underwriter at the lender who would be funding your loan, then the underwriter reviews everything and issues what I refer to as a "formal pre-approval", this means that all you need to do is find a home to make an offer on, get your offer accepted, send a copy of the purchase contract to the loan officer... and then you'd be approved for that home.  The next steps would be to get an appraisal & title report, but your loan officer would handle those items as well.  Being pre-approved really makes the process easy after you've found a home.  It also makes you a real strong buyer in the eyes of the seller, because they know that your financing is all lined up.

I would get in touch with a loan officer you trust, or one that was recommended by family, friends, co-workers, etc. that can help you go through the pre-approval process.  Then once you are pre-approved, find a real estate agent (again one you trust, or was recommended) to help you start looking at offers.  Being in Pittsburgh, in the snow and all, you might find sellers easier to work with as the demand to buy homes isn't too great in the winter months up in your neck of the woods.

[saladdin69]

Rent is not throwing money away. This is a myth that gets people into trouble.

As a home owner you will have to pay the city tax (if in city limits), county tax, PMI, and insurance.

How is renting throwing money away but paying a mortgage that is hundereds more not?

saladdin

[ShanetheMortgageMan]

---

saladdin69 wrote:

Rent is not throwing money away. This is a myth that gets people into trouble.

As a home owner you will have to pay the city tax (if in city limits), county tax, PMI, and insurance.

How is renting throwing money away but paying a mortgage that is hundereds more not?

saladdin

---

Well it can be a myth, but for the right situation buying a home could be more advantageous than renting.  You also can get tax benefits of buying a home vs. renting, so one has to compare all of the pro's/con's when deciding whether to buy vs. rent.  Just because you can qualify to buy a home though, doesn't mean it's the right decision for somoene.

[saladdin69]

Shane,

I'll buy that as a better way to put it. But you lost me on the tax benefits. The benefits are not a dollar for dollar. Paying $1 but getting $0.25 back is not always a benefit. I am in the 15% bracket and can afford a 85K house.

Being single with no kids, would my itemized be higher then my standard to even get the tax benefits at all?

saladdin

[ShanetheMortgageMan]

Probably not for your situation... so it depends on what you are buying, and how much you are financing.  But for example someone in a high cost of living state where rent is $2k+, and can buy a home for $400k, would have a nice sized tax deduction that would be bigger than the standard deduction they'd take.  Like you said, buying isn't always better, but in the right situation it can be more beneficial than renting.  Also, there isn't any worksheet, etc. that one can do for the feeling of owning a home vs. renting... so that's an intangible that owning will always have over renting.  Even then though, owning isn't for everyone, and is definitely not the ultimate definition of happiness in my book.

[masdeocho]

While I can't make the decision for you about buy vs. rent, I applaud you for seriously considering the question of whether buying is "realistic" for your financial situation.  IMHO, too many people are in a big rush to buy a home that they can't afford.  Kudos to you for asking the right questions at a (relatively) young age.  Good luck, and let us know what you decide to do!