New Guy Questions

[n83653]

I have been working on rebuilding my credit for a few years now, and am hoping to buy my first home in the near future. I have OK credit, but no money saved up for a down payment or closing costs. I am wondering what price range I will be able to look at when I am able to get some money saved up. I am hoping for around $120k, but have no idea what I would be approved for.

My questions:

1. Should I just start saving/building my credit and apply in a year or two?

2. Is there something I can do to actually start the process now? 

3. How much is a reasonable amount to have in savings before talking in to a lender? 

Thanks for any help, this forum is awesome.

1. Credit.  Ex-732 TU-742 EQ-747; 2 Negatives (medical  for $34 and $40 from 2009), one 30 day late from 2008. 
2. Income.  $55K
3. Source of income.  Hourly employment, including bonuses and overtime
4. Monthly debt payments.  $285 for auto loan, 3 years left. $70 credit cards.
5. Employment. W2, 7 years at current job. 13 years in the industry.
6. Assets/Reserves.  $0 saved, $1200 in 401K
7. Location.  Kent County, Michigan
8. Property.  Single family house
9. Value.  $120,000?
10. Occupancy.  Primary residence
11. Transaction Type.  Purchase

[ShanetheMortgageMan]

With your income & current debts, you could realistically qualify for up to a $200k sales price in the Grand Rapids, MI area.

Michigan has a good down payment assistance program at https://www.michigan.gov/mshda/0,1607,7-141-45866_45870-175332--,00.html which you can use with FHA or USDA financing.  FHA requires 3.5% down and USDA requires 0% down.  USDA is for rural areas, which in Kent count would be Rockford, Sparta, Caledonia, on the otherside of the Grand River in Forest Hills, etc.  Conventional would be another good financing option for you because of your great credit scores, but would require 5% down.  The down payment can come from a gift from a family member, in case you have any who are willing to help you out.  There are also closing costs with all of those loans, figure in the ballpark of $5k for a $120k sales price.  You can get a credit (from the lender and/or seller) to help pay for the closing costs though - 3% of the sales price for conventional, 6% for FHA, no maximum for USDA.  Your late payment & medical collections wouldn't be an issue.  Even if you do decide to purchase now, I'd still recommend you build up your checking/savings account balance so you'd have at least $3k available after closing, you just never know what kind of emergency expenses a house may spur on you.

[n83653]

Thanks for the advice, that is exactly what I was looking for. 

It looks like the MSHDA loans max out at 105k, but I'll keep an eye out for a good deal. Are there certain houses that qualify for that loan with down payment assistance or is it anything that is in the area they show on the website?

As far as the USDA loan, I would prefer to live closer to the city, but something might pop up. Looks like I'll be saving for a couple years, which is probably better anyway.

Thanks again, I appreciate the advice. 

[ShanetheMortgageMan]

You are welcome.  It should be anything they show on the website in those areas, however I have never done a MSHDA loan, I am just familiar with the info on their website.  To get details I've found emailing or calling them works just fine, although usually you have to leave a voice mail for them to call you back.  They are very helpful once you get someone live though.