If you haven’t owned a home in the last three years you are probably eligible for a first time homebuyer program! These have many advantages like access to Down Payment Assistance (DPA) depending on your location and income level that can pay all or part of your way into a home. There are also programs that accommodate that first purchase like government backed programs through FHA, USDA or if you are a veteran, VA. The conventional lenders have good options as well.
Here are some basics to get you started beginning with common terms:
PITI – This is the full housing expense (not utilities) that comprise your payment: Payment and Interest, Property Taxes, and Homeowners Insurance. We try to keep this total number at about 1/3 of your total gross monthly income though there are a lot of factors that comprise this.
Debt to Income Ratio – This is your new payment + your monthly credit obligations divided by your gross monthly income.
Cash for closing – Down payment + closing costs and prepaids
Closing Costs – Fees that you pay for one time in order to purchase the home and obtain a mortgage loan, they might include loan fees, appraisal, escrow, title insurance, recording fees, credit report, home inspection, processing, tax service or transfer taxes and others.
Prepaids – These are items you pay for in advance that will recur and are typically property taxes, homeowners insurance, prorated interest, mortgage insurance reserve.
How much will it cost you to get into a home? It depends on where you are looking, your income bracket, veteran status and which program you choose. It can be anywhere from nothing to 5% of the sales price plus the closing costs and prepaids.
Tips:
- Talk to a mortgage broker and get some numbers and a better understanding of programs and options
- Interview realtors that work with buyers and pick one you want to work with
- Look at different areas you might want to live in
- Have your mortgage broker give you a fee sheet that shows options on programs and costs
- Get pre-approved with your broker. You will need to ante up some documentation to document your financial situation
- Look at your own budget. Decide what is reasonable for your payment. Even if you qualify for more, remember that it will be you making that payment every month.
- If you have credit issues or need to save up, go ahead and make contact anyway. Start the discussion.
Typical Documents needed:
- A full month of paystubs and two years of W-2’s
- If you are self-employed, own an asset that produces income or are on commission you will likely need to provide two years of recent federal tax returns, all schedules
- Two months of bank statements – all pages for all accounts
- A list of your current credit obligations
- If you are receiving alimony or child support, SSI or other income you will need to provide all pages of the appropriate documentation
- Your mortgage consultant may ask for other items in order to fully build out the story of your credit picture and make the best case for an approval of your loan.
Those are the basics. I welcome your comments and questions.
Happy shopping!
Have helped buyers of all types and financial levels and worked on 1000's of loans.
There is always something new!
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