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Are we ready to buy our first home?

Our current rental lease is up in Jan 2013. We would love to buy a home (our first) but I'm not sure we're ready yet financially. Then again, as a friend pointed out, better to pay a little more on interest than just "throw away" money on rent for another year.

Need some advice on if we should think about trying to get pre-approved. I have little to no idea what is required. Obviously, the higher our FICO scores, the better. We are actively working to get them up, but currently mine is somewhere about 650 and my husband's is in the low 600s. I have a bankruptcy from 2005 that is affecting my score and will not fall off for another 3 years. We have credit card debt, student loans, and a car loan, but have paid on time and are working on paying them down drastically. I'm not ready to pull my latest score for another month or two, to allow time for this to reflect.

I have about $16,000 in a 401k account from a job that I left earlier this year. We're trying to decide if it makes sense to cash this out, even with the penalty, to use as a down payment on a home. I am now a stay at home mom and my husband works full time. 

Any thoughts/advice? Would we stand a chance at getting a home loan in the next few months? All advice is appreciated and hopefully we help us decide what we should do in the next few months! Thank you!
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August 30 2012 - Brandon
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Answers (3)

If you CAN buy, this is a wonderful time to buy. It does seem intimidating, but the only way to truly know if this would work for you is to talk to a trusted and experienced mortgage lender in your area.  They will tell you what your options are, if you are pre-approved - for how much, and if not, will give you goals to get there.  They will also be able to help you understand how much your payment would be at a certain price point and be able to estimate the breakdown for interest, principal, taxes, insurance and PMI.

You can speculate all day, but you have the best intuition about your life and your current situation. A mortgage lender is who can help you fill in the unknown details!
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August 30 2012
Huh, I have a completely different take, as a Realtor and former Loan Officer.  An excellent Mortgage Banker/Loan Broker will not only help you get pre-approved, but also help you devise a plan if you're not quite ready to purchase today.  That may include helping you improve your credit, debt repayment strategy, savings goals, etc..  With this in mind, I'd ask your friends, family and associates who they've worked with in the past. 

Interest rates are incredibly low, so I'd encourage you to take action sooner than later.  Also, you can take out some money from  your 401k w/out penalty.  Lastly, there are both FHA and conventional loans w/low down payments (3.5% and 3%, respectively and if you qualify based on your FICO score).  There's even a 5% down payment program w/out PMI so find a good Mortgage Banker who access to most if not all these programs.

Best of luck!
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August 30 2012
Hi Brandon, my advice to you woudl be to get in touch with a mortgage specialist at a local bank where you live. I tend to find that while any of the large banks will pre -approve most folks without giving you the time of day, working with a loan officer at a smaller community bank you will not only get all of your questions answered but be that much more confident when the time comes to actually applying for that loan.
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August 30 2012
 
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