What would we qualify for?

[GirlGhost]

So, my husband is the only one working. Some other facts:

 

He makes $75K a year.

We currently rent an apartment.

Aside from the normal utilities, we only have a $110 a month credit card bill and a $170 a month revolving line of credit with our credit union.

Our credit should be good. Never have any late payments, no bankruptcies, no defaults, etc.

If we buy we are first time buyers.

We currently have about $3,000 for down payment/closing costs, etc. Of course that doesn't include the $8,000 tax credit for first time buyers.

 

So, based on that info, what do you think we would/could qualify for? We are very interested in a house that's close by and is currently going for $210,000. Does it sound possible?

Edited November 18, 2009 by GirlGhost

[jst300z]

$75k/year would be around $1000+/- paycheck (after tax, etc.)

 

$210,000 mortgage, just P&I, would be $1,200+/-. YOU would need to figure out taxes for your area as they can vary from state to state, could be $1000/year or $5000/year, no one but you knows. Insurance no more that $50 a month.

 

Seems doable, close but doable. Check and double check your numbers.

[Bloody but Unbowed]

Well im not an expert, but will give it a try:

 

75k = 6250/mos

 

270/mos is non-mortgage debt

 

6250 *43% backend ratio = 2687.50 (backend ratio is all debt + housing payment)

 

210000 @ 5% is 1126 (30 yr fixed fha)

 

1126 mortgage + 300 (taxes of 3600/yr find out what yours are) + 96.55 pmi (pros please verify I used .055% I think) + 60 (homeowners ins)

 

= 1582.55/ mos for housing

 

1582.55 + 270 (other debt) = 1852.55 total debt outlay

 

1852.55/6250 = 29% backend ratio so you should be fine if that is all of your debts (be sure to include any student loans, child support, etc...)

 

However your issue will be with the 3.5% that is required down for FHA which in your case would be 7350/down and whatever closing costs are needed (you could ask the seller to cover the closing costs).

 

Disclaimer: I am not a professional however I think the numbers are close. The only difference will be that your loan amount will be different because you have a pmi funding fee that has to be paid and that will be financed into the loan however the difference in payment should be inconsequential (possible + or - 25-30 a mos)

 

S.

[Bloody but Unbowed]

Hmmm just thought of a possible issue after seeing the other poster. Your frontend ratio based on 6250/mos and a 1582/mos housing payment is ~25% so you may have a little trouble there, but a good mortgage pro should be able to give you more advice regarding this.

 

I would say go for it, feel free to contact any of the mortgage pros on this forum (Brian B, Shane, Dallas), they have gotten pretty good reviews for the most part from others.

 

Good Luck

[Bloody but Unbowed]

Hmmm just thought of a possible issue after seeing the other poster. Your frontend ratio based on 6250/mos and a 1582/mos housing payment is ~25% so you may have a little trouble there, but a good mortgage pro should be able to give you more advice regarding this.

 

I would say go for it, feel free to contact any of the mortgage pros on this forum (Brian B, Shane, Dallas), they have gotten pretty good reviews for the most part from others.

 

Good Luck

[GirlGhost]

Nope. No other debts. No student loans, child support, etc. Just what I listed above.

 

Thanks for the info. And, I found that the median property tax for the area that the house is in that I mentioned above, is 1.2%

 

I figured the low amount of money we have on hand would be our biggest issue. Would be great if the house was still around in February cause we usually get about $7200 back in income tax. That would be nice to add to the pot.

 

Thanks again!

[GirlGhost]

Ok, I have another question for you. Let's say we don't go for this house and come tax time, when we get our income tax back, would it be wise to pay off the revolving line of credit we have and put the rest towards our credit card? Or, just use that money towards a down payment?

 

We usually get about $7200 back in income tax.

The revolving loan has about $5,000 left on it to pay off.

The credit card has about $4,000 left to pay off.

 

I was thinking of using the income tax to totally pay off the revolving line of credit, and then put the rest towards the credit card. THEN, save what we normally would pay on those two bills and that money will eventually go towards closing costs/down payment in the future.

 

My husband is trying to say that we shouldn't do that and that we should just use it towards a down payment. I say no. Since this is all new to us, we never bought a home before or applied for a mortgage, what do you think? Pay off what we can with that money? Or use it towards closing costs/down payment?

 

Thanks again! Just want to look at several scenarios here.

[Brian B The Loan Professor]

So long as the credit is fine like you say the debt ratios shouldnt be a problem

I didnt run the numbers but you look to be well under the limit

The issue as i see it is a down payment

You cannot use the tax credit for that

You will need 3.5%

I have heard but not personally experienced any of the county programs that front the money with a promise of repayment after you get your tax credit?

If something like that is available you may be ok - otherwise you will need a minimum of 7k on a 200k purchase

that does not include closing costs but you can negotiate with the seller to pay the closing costs

 

Good Luck

B

[mommyof2monkeys]

I would use the tax return for the down payment then use the first time buy $8K for paying off the debt. Then I would change that W4 ASAP you are giving the government a $7K loan every year YIKES! Not to mention you might have an even lower tax bill with a mortgage write off. $7K divided by 12 months is about $580 that could be in your paycheck. That would help with new house stuff that would pop up while getting settled.

 

Tammy

[clambert1273]

remember - not everyone can control what is withdrawn for taxes I can control my salary which currently takes out 0 in taxes for federal; however, my commissions are taxed heavily which I can't set the rates for or change so I still get back over 5K a year...

[GirlGhost]

Yeah. We set it that way so that we get a bigger return back each year. Hubby even has work take out a little more. Our intention for the future with the bigger returns was to put the entire income tax check towards our mortgage every year. To try and pay it off faster than 30 years. Is that not a good idea?

 

But yeah mom, I do see what you are saying.

 

And thanks again everyone for the info. We were under the assumption, initially, that that $8K would go directly towards the down payment (so we were told by two other couples who got the tax credit this year when buying their first house). Didn't know it didn't work that way. The one couple even told us something like, you can only use $5K of it towards the down payment and the remaining money you get back at tax time? Not sure. It was something like that. Trying to remember what my husband told me they told him. I could be wrong.

[resqume1]

Like Brian said above some counties do have a local program like that-but since its a local program you would need to check with your local housing authority for details. Some of those programs have not been extended with the extended tax credit.

 

As for letting the gov't take out more money and then once a year applying it all towards your mortgage to pay it off faster? You would be better off to take the $580 per month and apply it monthly toward the mortgage principal.

Edited November 18, 2009 by resqume1

[mommyof2monkeys]

remember - not everyone can control what is withdrawn for taxes I can control my salary which currently takes out 0 in taxes for federal; however, my commissions are taxed heavily which I can't set the rates for or change so I still get back over 5K a year...

 

Yep we were that way also while dh was commission until about 2 to 3 yrs ago. We had our W4 set to not pull federal taxes since his commissions were taxed so heavily.

 

Tammy

[clambert1273]

it totally blows LOL however, can't say that I don't like the big check once a year its good for my savings accoun LOL