Buying A Home
kannf1982
member
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
FHA Loan Question - Sorry to be Nosy!!!
Hey everyone, my boyfriend and I are getting engaged soon and we're talking about wanting to be able to move out of this apartment (or do month-to-month for awhile, whatever) when this lease ends next December 31, 2014. We will be able to have maybe around $10,000 by this time next year (assuming no help from anyone else, which is what I will assume), so I am definitely thinking we will only be able to get an FHA (3.5% down) loan unless we wait many many more years.
My boyfriend seems to be pretty gun-shy from the whole housing crash and is convinced we can't afford much or won't get approved for much. We pay $1300 a month in rent right now and are fairly comfortable...$135,000 household income. I just want us to look next year in the $200,000-300,000 range (ideally find something on the lower end, though, maybe even with a 15 year mortgage if it was doable), and he keeps saying that is way beyond what we would ever be able to get as a first house. We're in our 30's and he works from home, and we'd like to have kids fairly soon, so for me I'd rather get a decent sized house we can stay in for quite awhile now, versus like what a lot of our friends did marrying young ten years ago, starting with a small house for a couple years then upgrading. Of course, if that IS too much for me to expect I will do whatever, but I think he is underestimating what I think is a decent household income to start mid-sized.
With that said, sorry to be nosy and divulge so much info, but has anyone applied for and gotten an FHA loan? What was your general household income, debts, rate, and amount you got approved for and/or amount you paid for the house? I can do the calculators online until I am blue in the face but I really don't feel like they reflect reality. Any information you have about your situation in general numbers would help. Thanks!! 
Re: FHA Loan Question - Sorry to be Nosy!!!
You need your down payment, inspection, closing costs, moving costs (incude a few days of eating out until the kitchen is ready & stocked, repair/renovation, start-up utility deposits, decorating, additional furniture/appliances, yard items, tools/ladders etc.
Rule of thumb is housing should be no more than 25-28% of your TAKEHOME pay, (30-35) in a HCOL area. More than that can quickly make you house poor. That includes: mortgage interest & principal, taxes, insurance, PMI if needed, utilities, HOA if applicable, Add more for on going maintenance.
OK - now with your monthly figure in mind - use a reverse mortgage calulator (or a lender can give you the amount) to see what that translates to house price. Key point is that YOU determine how much you want to spend on housing first - then with that set the loan amount to accomplish that. Lenders still will tell you that you can afford much more than is reasonably comfortable for most people --- what got people into trouble recently. It is not just how much income you have, but also your other financial obligations and the lifestyle you want to live. (cars, student loans, credit cards, vacations?) crunch the numbers.
If you do not currently have a budget - start tracking your money - what comes in and what goes out ---to the dollar --
Meanwhile continue to save, and pay off any credit cards you have prior to a home purchase.
Final point - I would not buy a house until AFTER you are married. Everyone thinks that the relationship will evolve into the planned marriage, however, not all make it that far (and who think it will happen to them?). You have more legal protections when you are married.
You need your down payment, inspection, closing costs, moving costs (incude a few days of eating out until the kitchen is ready & stocked, repair/renovation, start-up utility deposits, decorating, additional furniture/appliances, yard items, tools/ladders etc.
Rule of thumb is housing should be no more than 25-28% of your TAKEHOME pay, (30-35) in a HCOL area. More than that can quickly make you house poor. That includes: mortgage interest & principal, taxes, insurance, PMI if needed, utilities, HOA if applicable, Add more for on going maintenance.
OK - now with your monthly figure in mind - use a reverse mortgage calulator (or a lender can give you the amount) to see what that translates to house price. Key point is that YOU determine how much you want to spend on housing first - then with that set the loan amount to accomplish that. Lenders still will tell you that you can afford much more than is reasonably comfortable for most people --- what got people into trouble recently. It is not just how much income you have, but also your other financial obligations and the lifestyle you want to live. (cars, student loans, credit cards, vacations?) crunch the numbers.
If you do not currently have a budget - start tracking your money - what comes in and what goes out ---to the dollar --
Meanwhile continue to save, and pay off any credit cards you have prior to a home purchase.
Final point - I would not buy a house until AFTER you are married. Everyone thinks that the relationship will evolve into the planned marriage, however, not all make it that far (and who think it will happen to them?). You have more legal protections when you are married.
I doubt you'll find any lender who will pre-qual you on any loan based on DTI alone, let alone without running a credit check--and especially not a mortgage. I used to do consumer lending and that is unheard of.
I do know with FHA loans you're now required to pay PMI for the life of the loan, so you'd need to plan to potentially refi once you get down under 20%. Save what you can and when you feel like you're ready to buy, submit an application and see what happens (and get ready for a mountain of paperwork). You don't want to do it before you're ready because you're right, too many credit checks are not a good thing. One or two shouldn't hurt. Good luck!
You have $135k income with the two of you. What if one loses a job, dies, cannot work, or stays at home with kids? Many people buy homes budgeted off of one income only to allow for these life events. While you have 2 incomes, you can save one and use the other for expenses.
Budget your home price based on what you can afford, not what the bank/lender approves you for.
JPMorgan Chase and Navy Federal just to name two will give you a pre-qual based on a DTI. However, it is purely an estimate and is *not* a pre-approval or any kind of guarantee. It is, however, a good estimate to go house hunting with. I generally stay below the amount they give me anyway. To actually get a pre-approval, they will require a credit check.
Keep in mind, we also have excellent credit and nothing weird in our financial history that causes a difference between the DTI estimate and the pre-approval. Your mileage may vary....
We got FHA loan. We put down 3.5% down, 3.25% interest on 30 yr loan
Is your "can't save more than $10k" a general statement, or is that $10k amount totally seperate from the 10% of your income being put into retirement savings? I ask because that will affect your budget. If you truly can only save $10k total in the next year, then your total mortgage (principal, interest, property taxes, HOA fees, and mortgage insurance) should not exceed your current rent amount. Ideally the mortgage payment should be lower than what you are currently paying in rent to allow you to save appropriately for retirement and afford the inevitable maintenance required by a home.
I also second the recommendation of a PP to think several years ahead. You want kids. Will one of you stop working to stay home with the kids? If so, you need to make sure you can afford to pay the mortgage, bills, retirement savings, and fun money on one salary. If not, look into the cost of childcare in your area. Where we live, daycare for a child under 2 is $1000 a month. That's a pretty big line item in a household budget and it should be anticipated when deciding how much house you can afford. Also, do not count on family for free daycare. Parents develop health problems, relationships have fallouts, things happen. If family does end up providing free childcare, that's awesome. But don't count on it when projecting your budget.