This is going to be my first home!

[memevertical]

Ok, in aprox 6 months I will apply for a home loan. I've heard from friends/people a lot about FHA Loans, also about Fannie Mae. I have also heard about getting your loan from a Credit Union and not a bank......I dont know, for me, this is all a lot of info, and I dont understand that much.

Dont get me wrong, I understand the basics about getting a loan, but I want to know what is my best option. Some lady told me that I could even get away with 3% down and the have the seller pay all closing costs.....

Basically I need to be pointed into the right direction. 

I will post here some information about my situation so that if anyone out there can help me, he/she will know my exact scenario:

- Credit: My scores are 620,664,688. My utilization is at 90%, which in 1 month I will bring down to 7% and FICO Simulator says the score should go to a range of 750-780.

I have no negatives, not a bad thing on my report. The only bad thing about my credit history is that the oldest account is only 2 years 6 months.

- Income: I started my own company on 2009 (never worked before that). My 2009 income tax was done with a 1099 and the gross income came out to be $14,000. Because the company was opened on Aug. But this years income tax return will end up reporting around $24,000.

- Source of Income: My company provides IT support for another IT Company. They pay my company every 15 days for all services provided.

- Expenses: Well, my wife works, and I plan on telling the Loan office that my wife's salary pays all the bills, so my income pretty much is available for mortgage payments.

- Savings: Currently I have no savings towards a down payment. But I could save around 6,000 to 8,000 by the time I apply for the loan.

- Location: I live in Miami, FL. (Ideally I wanna move close to Flagler St., because me and my wife work around that area, but I know Homestead has some incredible prices.)

- Value: Basically I want to pay around $1,200 a month. I dont know what other expenses are added to the mortgage. I've heard about the Home owners insurance, but dont know what else....but I would like to pay that including those extras.

- Occupancy: This will be my main residence.

This is a lot of info, so I want to thank in advance anyone who takes the time to read my post.

[Anonymous]

Are you going to go for the loan in only your name, or joint.  If you are going it alone, what debts (laons or credit card minimum payments) do you have.

If you are going joint, what is your wifes income and job situation, as well as her debts.

The big issue is that they are going to require 2 full years of the business being open.  That means you have another year, not 6 months.  Even then, you would probably have issues becuase 1099 and S/E employment they average the last 2 years tax returns so the 24K income for this year is nto going to buy you very much.  Even assuming that your minimum credit card payments are only say $50 per month once paid down, you would be looking at:

income of 24K = 2000 per month

Acceptable debt ratios are usually 31% mortgage debt (mortgage, insurance, PMI, taxes, and any HOA's) and 43% total debt.

So 31% of 2000 per month is 620 per month mortgage and 43% total debt = 860.

In Florida, most of the places have pretty high insurance to the tune of 2-30 per month or more due to hurricane and seasonal issues.  But that could be alot higher or lower depending on where you are at.  Taxes would also be anywhere from 200 and up per month (not sure on Florida taxes though).  But I think you see my point.

They will not count your income until you have been in business for 2 full years.  Even if they do (or even once the income is 24 months), the income is almost certainly too low to qualify for any home loan and with a new business being young, little cash to put down, and in one of the hardest hit areas of the country, there is no way an underwriter is going to make any exceptions for DTI or income restrictions.

[memevertical]

Thanks for replying.

I was planning on applying alone, but looking at what you said about my income, I can consider applying joint with my wife. The problem is that she started her job 2 months ago, and she was unemployed for over 5 months. She makes around $2000 a month also.

The thing that has me scratching my head, is that my brother in law got a loan for like $120,000 and he reported on his income tax return with W2 around $23,000 income.

Do you think its a good idea to sit down with a LO and discuss my case? Or they will just try to get me into applying with no concern on the affect it could have to my credit?

Thanks again.

[Anonymous]

Insurance costs will vary.  And its especially harder to find a big name company that will provide it. in FL   I had made ALOT of phone calls. Just as a warning   I'm in Jax.   They quoted me $1200-2200 at most which they will look at the replacement cost of the home, not the appraised value. Not sure how much more or less Miami would be.

You can get an estimate of property taxes by going to your county tax collectors site.   We managed to find a company who gave us insurance at around $800. a year and our property taxes are $2000. a year. So figure roughly $75. a month for insurance and $150 or more a month for the taxes. 

 We are purchasing our home for just under $170,000. and will expect to pay $1250. a month with tax and insurance.  Combined my husband and I could buy more house, but we didn't want to get caught up in the same mess everyone in the country did and made it so that if one of us lost our jobs, we can still pay our bills on one paycheck.

Basically, don't rush into anything.  These boards have ALOT of great people with great advice.  The housing market will not jump overnight, so I would just start prepping yourselves now by taking what you would be paying for a mortgage and putting that into savings account, give it a couple of years and then make the leap.

[memevertical]

Thanks for your advice.

Our expenses every month, aside from Rent are $450. So if we could apply together I think that would improve our chances. 

Also, there are some houses down south in Homestead (which is where we are renting right now) that are going for $75,000 and $85,000. We're also considering that.

We are not crazy to move into a house, but the thing is that with houses with the Homestead price, the monthly payments come out to be equal or less than the rent we're paying.

Anyway, thanks for all your advices......I really appreciate them.

[Anonymous]

unfortunately with your wife's unemployment (unless you can document her as a seasonal employee who has a history of going on UW that time of the year every year)along with you your newer business, it will be next to impossible to get a loan until at least your business has 2 full years income, and more than likely until your wife is back for 2 years and you can count her income.  That said, if you are looking at the homestead homes that are in the lower price point, you may be able to squeeze by on your income once you hit a year.  The key is job stability and neither you or your wife have it right now.  In your brother's (or whoever it was...) case he was probably able to qualify with comp[ensating factors such as uncounted income, high FICO, decent down payment, similiar rental payment history,or very steady income)  Most likely he would have needed at least several of these to qualify over standard DTI ratios since I doubt he got a 120K loan for 620 per month with taxes and insurance.  In your case, the only one of these you may qualify for is that your current rent payment is similiar to the expected mortgage payment, and that is not enough given the job situation.

Good luck.

[memevertical]

Ok, I think I understand. So, basically, its not entirely my income, the real problem is the short life of my company, correct?

If it was just the income, and this probably a stupid idea, but tell me what you think. What if I paid an extra $1000 in taxes so that I can increase the income from 24,000 to 34,000 at the end of the year? Or is that fraud? I dont know, I'm just thiniking out loud.

Thanks everyone......

[memevertical]

I made a mistake on my initial post, the income that I posted was my NET income and not my Gross income. I dont know if that makes a difference or not, but just wanted to clear that.