Profile picture for mb1975

Tips on pre-req to home buying.

My credit isn't HORRIBLE, it's probably mid 600's. I have a secure job with above average income $40k + annually. What price is realistic for me to look at when considering buying a home?? Also what advice/tips can you give in order to make home buying, getting a loan easier? Thnx!
  • January 05 2011 - Cerritos
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (2)

Profile picture for the_country_hick
The general rule of thumb is 3 x your annual income for a mortgage. However, that is both rough and wrong. A lender can give you much more precise numbers.

The real way is to do the math backwards. This way you know what you can really afford. Instead of asking how much money can I borrow ask what can I get for $x amount per month?

How much can you afford a month? If all you really want to spend a month on housing (renting or buying) is $1,000 you know what you can pay for rent.

Buying a house you must pay less. Here is why. You pay $850 a month for the mortgage. You pay another $50 for insurance, then you pay another $100 a month for property taxes. You just maxed out your payment. You are now house-broke. Plus insurance and taxes will cost more every year whether you get a raise or not. Some cities are now giving major tax hikes to cover pensions and other unfunded costs. I would check into the financial situation of your prospective city to see if they are doing fine financially or if guaranteed pensions could literally drive them to bankruptcy.

You need to include the cost of heat, probably at $5 a gallon maybe much more. Energy is going to get very expensive in the future it appears. Then you have to include electricity, repairs for things that would go wrong like dead furnaces, leaking roofs and so on. You need to include the cost of water, sewer, hoa fees, and more as they will cost you. I would try to allow 20% for problems that could arise. You could have a bad month. Imagine a month in which your car loses a transmission and your furnace dies at the same time the kids need new shoes. You have to be able to handle it.

To answer you more directly, most lenders now want a 640 fico score. FHA needs 3.5% down. Then you have closing costs to pay for. You also want some money left over after closing. If you finish closing to broke you might not be able to put gas in your car or be able to replace a ripped pair of jeans. You want to have some extra cash just in case some things go wrong. It might happen.

Consider the blogs below. They may be of help.

"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

"Why rent if you could buy for less money? Valid reasons inside."

This covers the basic home buying process. It is simple and covers what you need to know.
"Its your first home and you are looking for something but are not sure where to start to look or about loans."

This is something many people never think about. It could be extremely important in future years. We see gas going over $3 a gallon now. There are some people who think we could see $5 a gallon with the next 2 years and some who think $20 a gallon is possible in the not that distant future. I hope they are wrong.
"Should you consider the price of gasoline both today and tomorrow when buying a house? I say yes. See why inside."

Look at my zillow profile for more useful blogs They were written only to get people to learn and ask the right questions. I am not a professional in the real estate circle so if you buy or rent I gain nothing.  

If you have more questions ask them here or as a new question.
  • January 05 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

There are a few other factors that have to be considered, such as your debit ratio, job history and available unsecured credit.

Talk to a mortgage company/broker and your current bank or credit union. Finf out what their mortgage rates are and what their application fees are. Do not authorize anyone to pull a credit report until you are comfortable with that lender ... excessive pulling of your report will cost you points on your record.

A lender will explain how much of a down payment you will need and how much home you can afford. Be sure to check a credit union.
  • January 05 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.