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No clue how this works or what the first step is!
My husband and I want to buy a house and MUST be in by feb 1 to avoid signing another year lease at our condo (landlord won't work with us)
i am 24, he is 32. In 2010 he filed for bankruptcy because of tax liens on a property he had on anther property. Since the NGOs credit has improved, he has been approved for credit cards and two car loans....all of which I make sure are always paid on time.
My credit is less than perfect, at 18 I defaulted on a credit card and ended up settling with them. I have always been denied for loans and credit cards since then. After we got married I was suddenly approved for two cards!! Both store cards for ny&co and tjmaxx, but still a good start. I was added on to my husbands capital one card sometime last year...but I don't think I am a joint holder? No clue tbh
anyway, our income is pretty good and we have no debt...I just have a couple things on my credit report that need to fall off. Husband is self employed making about 5k a month and I have been at the same job for 7 years this coming October.
What is our first step in the process? We are looking at foreclosed homes which I know can be a pain to buy, but in our area there are tons of them and the prices are great. Our real estate friend said we need to get pre approved first, but does t a pre approval only last 60 days? If we keep reapplying, will that hurt our credit?
Should we both apply for a loan or just him? I don't want my fair credit to hurt us.
Our small business is registered under my name only in Ohio, we just opened it this year. Not sure if that matters for anything?
Obviously we should put down as much money a a possible, but what is the average amount to put down on a home that's 150k? If we even got approved for that much. Basically, what do we do first?!? I've been reading a lot and am overwhelmed!
Re: No clue how this works or what the first step is!
Get and read Home Buying for Dummies.
ETA: To avoid paying PMI, you need to put down at least 20% of the purchase price of the home. On a home with a sales price of $150k, that's $30k.
If you have a self-employed business your lender will most likely want at least 2 years worth of tax statements from that business. Honestly, if this is the only income and it is so new, since it is self-employment income, and your credit is already kind of weak, getting a loan might be tough.
Lenders are assessing applicants' ability to repay a loan and it is hard for them to make lending decisions based on less than 2 years of data coming from a typically unsure and waivering source (self-employment).
Just want you to be prepared for that.
To figure out how much house you can afford monthly, you need to figure out your take home pay after taxes, health insurance and retirement contributions have been taken out.
If you live in a low to mid cost of living area you can have your housing payment be 25%-28% of this take home amount. In a high COL area, it is 30%.
This housing cost needs to include the mortgage principle, interest, property taxes, and home owner's insurance as well as your major utilities (gas, electric, water, sewer, trash).
For example, if your take home pay is $40,000:
At 25% you should spend no more than $833 per month.
28% no more than $933 per month.
30% no more than $1,000 per month.
You also need to decide if you are going to budget your housing costs on one or two incomes. Many people budget on one only and then put the 2nd income into savings or toward debts. Others budget on one income only in case they decide to have one person be a SAH parent in the future when they have a family.
Before you meet with a lender I would urge you to read Home Buying for Dummies. Meeting with a lender before you have a basic understanding of what this all means, will only confuse you and muddy the waters.
I spoke with a lender today and ran husbands credit, his score is good and should be fine to get a loan. She said that due to the bankruptcy he will qualify for FHA. I shouldn't have said self employed above, what I meant was a 1099 employee. Our business is taking off this year, but he still works for another company as a 1099 employee. The business is under only my name, so I'd assume if the business is paying him (me), then he would still be a 1099 employee and not "self employed". He also works for the airlines but that's only part time....no real money is made at that job but he basically keeps it for the free flight and retirement benefits :-)
the lender advised that we don't apply for a loan together because the banks will look at the lowest score (mine) and base everything off that. But I can have my name on the deed
now, here's a question.... Will the loan amount depend on the gross income or the amount AFTER write offs?
It may depend on the lender. As of June of this year FHA loans without 20% down have to pay PMI for the life of the loan. Also, your loan amount should be based on what you can afford, based on your budget, NOT on what the bank wants to approve you for (they are often higher).
Make your own budget and see what your budget says you can afford as a monthly house payment. The bank said we could borrow twice the amount of what we actually did. However, when we plugged the numbers into our budget, we could not make that monthly house payment.
Looking at foreclosures is not a bad idea, but you have to have some money saved to make repairs. We bought a foreclosure and there were some repairs that needed to be done and we needed to buy all electrical appliances.
Besides the down payment and repair cost, you will also need to bring closing costs to the table.
Also remember your house payment will include home owners insurance and property taxes.
We are going thru this right now ourselves. We are going to do a FHA loan, and you can put as little as 3.5% down, but you will have to pay the mortgage insurance for the life of the loan.
We were approved for 125k but are not going to spend that as it would not fit in with our budget no matter what the bank thinks, I dont think they take into consideration of water, sewage, electric, gas, etc bills. They look at your income and credit cards, car payments, student loans, etc you pay. We currently rent a house, so we have a pretty good idea of how much those bills are per month.
If you do FHA the house has to pass an appraisal and inspection, I had a friend who actually had to go in and paint some things because there was chipped paint. So he did work to the house that he didn't even own yet. So if you are doing FHA and looking into foreclosures you might need to take that into consideration.