Quote:
Originally posted by Diva_01
I will be a first time home buyer, but not for another two or three years(probably in Indiana). What should I do to prepare myself?
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Diva, I had had a horrific experience until I met my girl, Pearls...she is THE BEST....of course!
1. Check your credit and your score!!! Like right now, for ANY discrepencies. Pay off any past due debts over the past year. If you have little or no credit, apply for a credit card w/low interests rates and pay them ON TIME for one full year. Yes, you CAN get a home w/ a score as low as 500 in some cases lower than that but be prepared to pay some money! Try to maintain a score of 620 or above to get 100% financing. A score as low as 580 will get you at least 95% financing. For example, you want a home that is $100,000, 95% of that is $95K which means you have to provide the addt'l 5K plus closing cost and prepaids.
2. Check your DTI or debt-to-income ratio. DTI is a ratio/percentage that determines how much you owe on credit cards and loans compared with how much you earn. Typically, most lenders use the 28/36 model. Click here to determine yours:
www.consumercredit.com/debt-to-income.htm
The first number, 28%,indicates the maximum percentage of your monthly gross income that the lender allows for housing expenses. The total includes payments on the loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner's association dues.The second number, 36%, refers to the maximum percentage of your monthly gross income that the lender allows for housing expenses plus recurring debt.
Recurring debt includes credit card payments, child support, car loans, and other obligations that will not be paid off within a relatively short period of time (6-10 months).
This part is really good to know ESPECIALLY if you are trying to get credit cards or purchase your new home in the near future. Ladies and men too, those "extra" cards like Speigel, Nordstrom's, Sears etc. can hem you up in you have high balances and make minimum payments when you are ready to purchase that home! Consolidate those student loans--it helps to lower that dti!
Ex:
Yearly Gross Income = $45,000 / Divided by 12 = $3,750 per month income
$3,750 Monthly Income x .28 = $1,050 allowed for housing expense
$3,750 Monthly Income x .36 = $1,350 allowed for housing expense plus recurring debt.
Not all loans are the same, some allow as much as 55% for recurring debt--that could put you into a subprime market (another thread).
The hardest part is financing, but there is more!
3. Get your taxes together from the last 2 years, last 2 pay check stubs, addt'l income,bank statements, CD's, money market accts,and W-2's. They need to know this to see how much house you qualify for and to verify income. Just have it ready--they WILL ask!
4. Save for your down payment. If you know the house you want is $100K, for example, try to save at least 20%. Whatever you don't spend can be used for decorations,etc.
You can kinda guesstimate how much house you can get by taking your yearly income (+ your spouse's if applicable) and multiplying by 2.5....EX: $45K x 2.5= $112,500..IT IS JUST A GUESSTIMATE. Then you can gauge how much house to look for.
5. Investigate into down payment programs like
www.neighborhoodgold.com, www.allianceassistance.org, www.nehemiahcorp.org, are just a few programs for people who need money. It is NOT just for low-income people!!!!! It is not a just a hand-out! In some programs, you can get a home for up to $356,895+/-. And you wonder how the rich do it!
6. Once you have chosen your home, ask for seller's concession @ least up to 6%. This will cover closing cost, prepaids, etc. which means the less amount of money you have to bring for closing.
7. Save for appraisals and inspections. Generally each cost from $275-500. Wait until you get pre-approved and financed before you pay because you can get burned. Do not fall in love with a house you may not get it!
Tips:
*Check with your realtor for foreclosures,bank-owned properties, and assumable mortgages (people who need to sell their house fast before they are foreclosed or they may be moving due to job transfer offer assumables). Also, auction houses like Williams and Williams auctioneers, you can save a lot of money that way too and avoid PMI (private mortgage insurance--this is paid when you make a down payment on a house and the down payment is less than 20%.)
*Keep a minimum balance of at least $2500 (maybe less)because the lender will check at closing that you have had your closing cost funds for at least 2 months.
*Check for realty companies that offer lease with an option to buy homes, and land contracts. It may be better for you than renting an apartment. This option will allow for you to save money while investing in the house you are living in.
*Do not buy a home for as much as you are pre-approved for. Take at least 10% off using the example #4, instead of a home for $112500 buy a $101,250 home.
*Read HUD's homebuying guide, good info there.
*Be careful when shopping for mortgages. Inquiries made into your credit can drop your score tremendously. But do shop around! Don't use on-line places like E-loan and Lending Tree; the people competing for your business are allowed to pull your credit-hence the inquiries. If you chose to go that route, utilize only that one venue. It is better to find someone locally if you can. Credit Unions are a great start! IMO, better than banks, they are easier on lending, homes,cars, etc.
* If you have a low credit score, be cautious of subprime lenders like Di-tech, Ameriquest, Household Financial, Beneficial, etc. They charge crazy APR's ,interest rates, and prepaid fees. You may have to use them but check out Countrywide's Full Spectrum lending division--they are high but o.k.
* Check with your state for any tax credits, downpayment programs, or if your area is designated as a Renaissance zone. If you area a teacher or police officer,they have Teacher/Officer Next Door programs that give discounts on housing.
Happy home shopping!
Sorors.. Mortgage or Loan Questions... answered...Step to the mic...
Please allow me 2 day turn around time during the week...I do have a job and family life....lol I will try to get to you quickly. 
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