Profile picture for benhopp

First Time home buyer - Where to start?

I am interested in buying my first house. However, I am a bit overwhelmed.  

My financials are as follows:
Gross Annual Income: 60-65k
Car Loan: 16k owed $300/mo
Unsecured Debt: 10k Min payment approx $200/mo
Student Loans: 20k owed  approx $180/mo
Solid credit score of about 730

Currently have about $4000 saved and plan to purchase in 3-6mo during which time I will be able to save another $4-5000.

I am looking to purchase a house in the $125-150k range.

My questions are as follows:
Should I save every penny I can and make minimum payments on my unsecured debt and have a larger down payment... or should I pay down debt and have a smaller down payment.

What loans should I be looking for.  Georgia Dream program seems to be the way to go, but I don't know what is out there.

Thanks for the help!!
 
  • January 24 2011 - Marietta
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Answers (15)

  • April 24 2011
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Your first step should be to contact a qualifed lender. The lender will direct you as to the loan program that best fits your financial situation and advise you as what to do with your extra income. Good luck to you
  • February 25 2011
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Profile picture for Teri Arbogast
I suggest you speak with at least 2 lenders.  A mortgage broker and a direct lender. Explore your options and get at least 2 lender opinions on the best plan for you.
  • January 28 2011
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Profile picture for JSBSells
Make the first step and speak with a lender regarding pre-approval.  You might request they not pull credit scores until you are ready to move forward. 730 is a good score but multiple pulls wont help.
  • January 27 2011
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Profile picture for Connie Klemme
get rid of the unsecured debt, wait just a bit longer to buy (yes i am a realtor and saying wait) once your debt is gone you can save even more, faster because you won't be paying that unsecured debt anymore.  don't borrow at the full capacity that you get approved for.  things willl go wrong, you'll need money.  save money for your down payment but keep looking for programs like the dream program.  if you can get into a house with no down...that's more money against other debt that you can pay off.  talk with a CPA too, not just a lender. interest on your house helps you at tax time, interested on credit cards doesn't. (or usually doesn't) 
  • January 26 2011
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Please first find a qualified lender by askign friends for a referal or askign your rela estate agent...best of luck
  • January 25 2011
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Profile picture for Terry Burger
The money you borrow on a mortgage is so cheap these days that it makes much more sense to have your down payment set aside first, then tackle the unsecured debt if the interest rate is much higher.

You'll need 3.5% down on a house if you go with an FHA mortgage. I believe Georgia Dream has a no down payment loan, but Georgia Dream loans rarely close on time, so you'll need to be patient. Check to make sure. But even with the headaches, it's worth trying to do a Georgia Dream loan.

If you're going to put down 20%, then you won't have to pay mortgage insurance.

My advice is this: Less than 20% down? Tackle your other debts that have a higher interest rate. If you think you can get to 20% down in 6 months, then consider saving more for the down payment and have equity in your house and no PMI.

Be sure to pick a quality real estate agent buy asking around or looking on Zillow for those with good ratings.
  • January 25 2011
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Profile picture for dacolan
Based on the personal financial info you've given above, I wouldn't jump into buying a house just yet. If you're able to save $4-5K in 3-6 months you'll be far better served paying down that debt and building up your savings.

$4K savings isn't enough to cover the minimum 3.5% down payment Fannie/Freddie require on a $125-150K house, much less the laundry list of closing costs that could easily exceed $4K (loan application fees and credit report, loan origination fee, points, documentation, title search and insurance fees, lender's attorney, appraisal, homeowner's insurance, PMI, inspections, survey, recording fees, transfer taxes, buyer's attorney, escrow deposit for taxes (depends on closing date and varies by state), partial month's property taxes, partial month's HOA dues, partial month's interest (depends on closing date), etc.).

You'll also want to have a rainy day fund/cash reserves for the typical maintenance and repair issues that come with buying a house. There will be no landlord if the roof leaks, HVAC malfunctions, a pipe bursts, etc.

Run the numbers for yourself, perform your own due diligence and go into this with your eyes wide open to avoid being house poor and saddled with a 30 yr commitment you could have been better prepared for.
  • January 25 2011
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My answer is going to be a little more conservative than most. 

Your basic question is should you pay down your debt and make a smaller down payment or keep the debt and make a larger down payment.  My answer is to do both. 

Dump as much of the debt as you can.  At a very minimum get rid of the unsecured debt.  Save as much money as you can.  Not just for down payment but also cash reserves.  Have some rainy day money set aside.  It looks like you'll have down payment money, so Ga Dream doesn't need to be an option.  Figure 3.5% of the purchase price for down payment.  Try to build up cash reserves after that equal to 3 months of income.

These aren't lender requirements.  I'm just trying to give you real solid advice so that home ownership is a blessing for you and not a burden.

If you haven't talked to a mortgage lender yet I know several good ones in Cobb co. that would be glad to help you.  Feel free to contact me if you have any questions or need help with your home search.
  • January 25 2011
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Great Question Benhopp
All good Advise from Every one here!  IMHO Start right in your own "back yard"  sit down and figure out where "Every Penney" is going now to figure out what you can afford in the future... Look on line for a spread sheet to help work you though the process... If ya can't find one I have one for you

It can be an intence process but well worth the effort

All My Best,   Neal

Downers Grove Homes for Sale
  • January 24 2011
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First, I would suggest speaking to several lenders with eye spent on the one that hears and understands what you want and need versus one that has "the solution" for you. Seriously, interview them like you would for a job. This is a big step with long-term repercussions. Based on your information and level of detail, I would think finding willing parties to sit down with. It is also really that smart that you have set a specific target for price range. This avoids much frustration in the home search part of the process. When you get to the buying search, it too is a process: Seek out a Realtor. Compare the services of different agents and look for good personal chemistry.  Check out the neighborhoods, schools, crime rate, traffic, zoning, and work commute. Rely on your Realtor's expertise and resources. Check the Web for helpful information  Do your research and evaluate each property of interest.  Visit or have your agent visit the town or city hall to learn of any zoning changes, liens, easements, or other restrictions.  Be informed and your Realtor will prepare your offer and apply his/her trained negotiating skills during the buying process.  Get your Realtor to prepare a property value study. Ask the seller if there are any other offers and ascertain his motivation for selling, deadlines, etc. Interview and hire  a certified inspector to conduct a home inspection and any other specific inspections.  To prevent surprises and disappointments after you move into your new home, use the inspection period written into your contract to fullest advantage by hiring a home inspector to thoroughly examine the home you want to buy. Be aware of the final negotiating factors that may benefit you in the purchase of the home.  Use the inspection report to re-negotiate, if necessary. 
  • January 24 2011
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Profile picture for the_country_hick
First, ignore what a lender says is the most you can safely borrow. You may not be able to really afford that much. The simple way to determine what you can safely pay is to add up all of your monthly expenses except for rent. This includes food, car, insurance, clothes, gas, everything.

Whatever you have left is the maximum amount you can spend for everything. This includes heat, electricity, HOA fees, taxes, insurance, and repairs. It should also include you saving 10% of your income towards retirement. It should include another 10% for future repairs. I would figure on at least $5 a gallon for heating oil.

Ask how many gallons of fuel or kilowatts of electricity it takes for the house to run. Inflate the cost of energy up a fair amount. It is very likely to cost a lot more within 5 years maybe even this year.

Then talk to a lender and ask how much you can qualify for. It may be more or less than you could safely afford. If it is more ask them how much you could afford at your safe monthly payment.

I would first determine if buying or renting makes the most economic sense for you. It could be either way. The blog below shows how to figure this out.
"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

Sometimes renting at a slightly higher monthly cost is really the best choice. For a very different perspective read below.
"Why rent if you could buy for less money? Valid reasons inside."

(look inside, it does not seem that low rates are good for house buyers)
"Do low interest rates really make it a good time to buy a house?"

You have decided you want to buy a house. The blog below shows the basics involved in buying one.
"Its your first home and you are looking for something but are not sure where to start to look or about loans."

If those were helpful look at my zillow profile for other helpful blogs about the house buying experience.
  • January 24 2011
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Ben,

I'll ditto Ryan & Katie, with an additional suggestion: speak to a Lender who does both FHA and Fannie Mae Homepath financing. If you are going to live in the house, you can buy a Fannie owned property for as little 3% down and save money on closing costs to boot.

Since this is a first loan for you, I would suggest working with a lender who can meet face-to-face, rather than working over the phone or internet which can be confusing even for folks with experience.

Good Luck!

Gary







  • January 24 2011
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Hi there,
I agree 100% with Katie...you should have a chat with a mortgage lender/broker in your area. If you are already working with an agent, they should be able to refer a few quality folks to you. If not, start asking friends and colleagues for a referral. They'll be able to point you in the right direction, show you the advantages to saving more or paying items off and get you on the right track.

I know it can be overwhelming, but try to make a personal contact with someone in your area and they'll be able to help walk you through it!

Good Luck!
Ryan Halset, Realtor
Seattle, Wa
  • January 24 2011
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You shoud really take advantage of a mortgage lender. A good mortgage lender will take a look at all your financial obligations, look at your credit score, income, debts and pre approve you on how much they think you can afford.

A FHA loan may be a good loan to consider. You do not have to put that much down.

Hope this helps!
  • January 24 2011
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