Want to buy new home. First time home buyer. Help!?

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I am 25 years old
-income of about $ 25,000
-about $ 40,000 downpayment

I am wanting to buy a new home, but I am skeptical of what kind of mortgage loan to get, ARM or fixed? What is the difference? Also I would like to not pay over $ 800 monthly. I am looking at a home currently that is $ 136,900. Is buying a home really worth it, instead of renting? I have been prequalified for a loan, but not PRE-APPROVED yet. My fiance is currently in school to become a nurse. She has about a year and a half left. Should I buy now while rates are supposedly “down” or just wait until she is finished with school? Whenever she finishes, there is no doubt of affording it. Please help and honest answers will be appreciative!

  1. Reply
    May 3, 2011 at 11:39 pm

    You have to ask yourself if you want what home ownership offers.
    Privacy, yard, a permanent place to call home.
    You also have to consider the full cost of home ownership – the principal, the interest, the utilities, groceries, upkeep, maintenance, and any other thing you can think of that you dont have with a rental.
    I own a home free and clear, but would I do it again in this economy? I am not sure. I would go with a fixed mortgage and refinance if rates go down from the rate you are fixed at.
    You have a great down payment which helps a lot.
    Good luck!

  2. Reply
    May 4, 2011 at 12:00 am

    What ever you do STAY AWAY from ARM LOAN!!!!!
    You need to find a real estate agent who you feel comfortable with and who can help you find a house within your budget. Also talk to a reputable mortgage banker or broker to find out what you are able to buy and what mortgage would be best for you. For a first time home buyer I always recommend FHA loans.

    Owning a home is an investment in your future security. Talk to a Realtor and see what makes sense to you. Or check out the National Association of Realtor’s website for help deciding what’s the best option for you.

  3. Reply
    David B
    May 4, 2011 at 12:13 am

    Good for you that you have such great assets available to you to put down!

    There are a few things that we don’t know about you that will play a part in qualifying for a home.

    1) Credit score should be over 620+. Any collections should be resolved and credit cards that are maxed out should be paid down to near $ 0 (to maximize the house you can qualify for and to make you look as responsible on credit as possible)

    2) DTI (debt to income ratio). Your gross income/month = $ 2083.33 X 55% = $ 1145.83 Your total mortgage payment (PITI + MI) and any other bills you have on credit must not exceed $ 1145.83 total. Lenders today will lend up to a certain $ amount depending on how much you make (gross) against the mortgage payment, taxes, insurance (on the house), and any other bills appearing on your credit. If you have a big car payment, your mortgage payment will be lower as a result. FHA allows a DTI of up to 50% with compensating factors (like big down payment and high credit scores… 700+). FannieMae/FreddieMac will allow up to 55% (used to be 65% until recently) with compensating factors.

    3) Co borrowers. If your girlfriend has good credit, no bills and a little income, she will help you qualify for more house. She will be on the mortgage and probably on title.

    On your $ 139900 purchase, negotiate the seller paying your closing costs (up to 6% FHA). You could move into that house for $ 27800 down and have a payment near $ 850/month (I assumed $ 150/month taxes/insurance).

    That leaves you with $ 295/month in car payment, student loan, etc payments and $ 12000 in the bank for furniture, etc!

    I hope that was helpful. Email with questions if I didn’t cover all you were needing.

    Best of luck!

  4. Reply
    Digital Sister
    May 4, 2011 at 12:33 am

    Where do you live? In Colorado, there is a state program that helps out first time homebuyers. http://www.chfa.org
    There maybe something similar in your state.

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