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Basic Questions about where to start...
We live in a HCOL area, and our combined income is higher than average for our area, we make a decent living. But we've JUST started out, my husband has worked for the same company for 6 years and just graduated university in April and was hired the same week. I'm in a profession that is in high demand. We have almost no debt, a car loan that will be finished in Febuary. I have no student loans, but also not alot of credit either. Which I've recently gotten a credit card to build. My husband has good credit. We are living in my parents suite for extremely cheap rent. We paid for our over budget wedding ourselves and without going into any debt so we don't have much for savings. We want to buy our first house ASAP. We have begun saving for a downpayment and are able to save 10% by summer depending on the cost of the home.
Questions: When do we go speak to the bank about pre-approval? Now or when we have more savings?
Either of our parents have offered to co-sign for us. Do we need this? And what does that mean? More of a loan amount?
What does pre-approval mean? That's the amount the bank will lend to you, what if it's not enough?
Many of the hosues in the area we like, are brand new homes, as well they have legal inlaw suites in them. We definitely want a mortgage helper. Do lenders consider this when you're looking for your home? Many 1bedroom suites are rented for $1000 in our area, which is almost have of what we're expecting the monthly mortgage to be.
I just really want to get on this and I don't know if we're ready to begin. I feel like other than not having much in savings we're in a good position for a young couple. What should my next steps be?
Sorry this ended up long.
Re: Basic Questions about where to start...
Home Buying for Dummies
Mortgages for Dummies
Both worth reading
Know how much ou want to spend for housing (mortgage+PMI+taxes+insurance+utilities+HOA) In a HCOL that is recommended to be 30-35% of your TAKEHOME pay. More tends to make people house poor - but that depends on lifestyle and if you are willing to make sacrifices in other areas to spend more on housing.
Save for downpayment, closing costs, inspection, moving costs, start up costs, repairs/renovations costs, set-up and decorating as well as furniture, yard care items etc etc. AND still have an emergency fund of 6 months expenses AFTER you have moved in. (roofs leak, furnace/AC break down, people lose their jobs etc)
Step one is get your finances in order, step 2 make a list of what you need and another of what you want -- know the difference and what you are willing to compromise on. Identify Location where you want to be-- most important.
Do not overbuy.
Questions: When do we go speak to the bank about pre-approval? Now or when we have more savings? I would def wait until you have more savings and are potentially ready to actively start looking.
Either of our parents have offered to co-sign for us. Do we need this? And what does that mean? More of a loan amount? Honestly I wouldn't buy anything that required me to have someone cosign. It would mean your income or credit wasn't sufficient for the loan, and in the event you couldn't make the payments the responsibility would fall to the cosigner.
What does pre-approval mean? That's the amount the bank will lend to you, what if it's not enough? Preapproval basically means you meet a simple checklist for the bank to loan you money. If the amount isn't enough you either need to buy a less expensive house or save a bigger down payment. Keep in mind that banks usually qualify you for much more than you should realistically think about spending.
Many of the hosues in the area we like, are brand new homes, as well they have legal inlaw suites in them. We definitely want a mortgage helper. Do lenders consider this when you're looking for your home? Many 1bedroom suites are rented for $1000 in our area, which is almost have of what we're expecting the monthly mortgage to be. Most likely this will not be considered because it is not guaranteed income. I think in rental situations you have to have 12 months of consistent rent for it to be considered.
Also remember that your mortgage payment will consist of taxes, insurance and PMI if you don't have a 20% down payment. I've seen some of your previous posts and if you are truly hoping to buy a $600K house you will need much more than a 20% down payment in order to keep your mortgage at the $2K mark. As pp said, you will also need to save for closing costs and a sufficient efund.
Thanks so much for the info! $600 000 is the very I would ever spend as I'm rather conservative. I would like to keep mortgage payments under $3000, preferably closer to $2000 and ontop of that a mortgage helper! And in our area, a mortgage for $600K would be a monthly amount of approx $2700 with all the extras.
I'm going to go and get some books on first time home ownership!!