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want a house, need advice

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want a house, need advice

Me and my SO are looking to buy a house within the next year. The reasons I want to buy now as opposed to later are: A) I hear now is a good time to buy due to low rates, and i dont want to wait for the rates to increase B) i feel like im currently burning away $840/month in rent

 

heres my situation:

 

  1. Credit.  My fico score as shown on my discover statement is 732, hers is 750 per the same. I have only had credit for about 1.5 yrs, and have around 10 or 11 inqs on all 3 bureaus, but all will be well over 6 months old by the time we apply. Shes had credit for about 3 yrs and less than 2 inqs on all bureaus. neither of us have any derog of any kind.
  2. Income.  approx 45k  annually
  3. Source of income.  hourly wages from steady employment
  4. Monthly debt payments.  no debts of any kind. only have monthly living costs such as food, internet, etc.
  5. Employment  we both work 40 hrs a week. nothing too fancy as far as type of work. ive worked at a call center for the last ~5 years, she is still young, about to turn 21 and has had several jobs at retail/call center/ house cleaning
  6. Assets/Reserves.  i have about 7k i can use as a down payment
  7. Location.  idaho, ada county
  8. Property.  looking to buy a 2-3 bedroom  home
  9. Value.  im looking to spend under 150k for the home

 

 

 

I know next to nothing about buying a home so any advice will be appreciated. some specific questions i have:

 

a. given my circumstances, would buying a home now be a good idea? would it be difficult for us to qualify for a mortgage loan?

b. what do i look for in a lender? how will i know if im getting a competitive loan offer? what are advantages to going with a big bank vs a smaller bank or CU?

c. what would be a reasonable APR for us to try to qualify for, considering our credit profile? also, we would plan on doing a joint application. would it matter which one of us is listed as primary vs co signer?

d. the biggest question i have is about my down payment. at just $7k, i know i would be subject to pay PMI and maybe even a higher APR, but i feel like that would be worth it, considering i am currently throwing $840/month to the wind in rent. What are your thoughts on this?? Should I wait a couple more years and save up for a bigger down payment? If so, I can comfortably save $6k-$10k per year.

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2 REPLIES 2
Valued Contributor

Re: want a house, need advice

It is my hope that now is a good time to buy, because I am signing my closing papers today! Of course more and less densely populated areas don’t peak the same and all that stuff, but we do share the mortgage rates, which are very favorable, likely until the summer.

Zillow says, “If you cannot put 20 percent down, your lender will require private mortgage insurance (PMI) to protect himself from losses. (However, if you can only afford, for example, 5 percent down, but have good credit, you can still get a loan, and even avoid paying PMI.” Your $7,000 is 5% of $140,000.

Your FICO 08 (TU) score of 732 is good, but the mortgage will be FICO 04 (EQ 04 TU 04 EX 98). Go check out the Score Power at the EQ website for $19.95 a pop. For both you and your SO (what does SO mean?).

Great that you don’t have derogs of any kind. Are your inquiries credit and store cards or rather bank accounts and installment loans? Expect to explain each of them in detail. The scorewise impact of inquiries does not lessen over the first year, but is then gone completely.

Then there is the 28/36 rule. $135,000 at 4% (see also myFICO) over 30 years is $644 a month. Property taxes could be $145 a month. Total $789, which is 21% of your monthly gross salary, so ok. Your PMI is maybe $130 (ballpark estimate), so another 3.5%.

That’s just my ten minute take on it, and your situation is different from mine; others may chime in.

Happy New Year!

Message 2 of 3
Super Contributor

Re: want a house, need advice

I would suggest looking into a USDA Rural Gauranteed loan. up to 100% financing and no PMI. Your income of 45K should be in the ballpark (the limit is 115% of area average), but you would probably have to find a place outside of Boise metro area.

Most Recent FICO 8 Scores EX616/TU587/EQ607 01/09/2018 Starting scores 553/485/543 08/25//2017
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