First job and owning a home? Help!

[tagrims]

My fiancee and I are looking to purchase a home but I have no idea if we will be able to qualify for a mortgage. My soon to be wife is a social worker and I just signed my first teaching contract (I am only 23).

Her annual pay(Gross): $27,452 (been working 1+ year)
My annual pay(Gross): $30,194 (contract begins July 1)

The home we are looking at is asking $214,000 (we live in a high priced housing market) and this house is below the median selling price for a home (excluding trailers/mobile homes)

We have enough money for a 20% down payment plus closing costs (through family gifts from earlier years)

The only liabilities we have is a $310/mo car payment and $100 /mo in student loans.

We are currently paying $930 /month to RENT

Will we be able to qualify for a mortgage? I know they usually say you have to be "stable" in a job for 2 years which I am clearly not. So should we even bother continue looking? Is it possible for a new teacher to get a mortgage?

Any insights?

[34saving]

I was in a very similar position when I bought my first home and we qualified just fine. (My fiance had been working for a year and I had just finished a 6 month short term contract that they promised to renew.) A lot will depend on your FICO score. Any mortgage person will be able to tell you if you're pre-qualified or not . . . BTW, the 20% down is huge. It is kind of weird that for my second house they were very interested in whether or not I had tenure, but maybe that's because I was VERY pregnant and taking a leave . . .

[baselle]

These days, the joke is that if you can fog a mirror, you can get a mortgage. The real question is whether you can get a 30 yr fixed mortgage, which will give you a stable payment and allow you to build equity. You might just as well seek out a banker and ask, and have him run the numbers, especially the monthly payment.

If he says no, frankly that's the best answer. There's a lot of consensus out there that this is close to the top of the real estate market. While you wait for the bubble to deflate, see if you can save the monthly payment and still be comfortable. There's more to owning a house than the mortgage.

[tagrims]

Of course I don't have tenure yet, but this is not a "long-term" sub job. I was told by the principal this was a "permanent" position of course if I hit a kid or I can't do my job that obviously changes things.

I'm just concerned over the whole documentation that is required that we keep hearing about. We don't have that much documented and my latest 1040 I was claimed as a dependent by my parents and I only had substitute teaching as income.

(So far this year Jan-May I student taught ,sub'ing every now and then plus I coached....total gross income of $3,300)

Something tells me that a loan officer will see that $3,300 and our application and throw it out the window.

Thanks for the insight and keep it coming


P.S. While I agree the housing market seems to be at or near it's peak, I don't believe it is going to burst like the stock market. I think it will slow but not really reverse course. In addition, the region where I am located has a lot of tourists (weekend variety from Boston) and they plan on starting to widen the highway in the region, once that occurs I believe real estate is going to sky rocket and make it unaffordable.

[PrincessPerky]

The mortgage thing can be pretty easy, though I had the advantage of a DH with great credit (he was older) but they wanted to loan us almost 2ce what we needed for this house, since I am struggling with the payment now I am VERY glad we didn't take the extra and buy a bigger house!

[Tree0164]

Make sure you are saving all of your paystubs. The mortgage companies will look at that as well.

Try getting prequalified! And wow great job on saving 20% down that should count for something.

[Snoopy2645]

Yes 20% down will help you alot!!! BTW I bought my first house at 23 & I had a hard time getting qualified & my mortgage was alot less than yours it was 60k & my dh & I were making what you & your finance are making & we had a big down payment too. So I am not sure you will be qualifed but please be careful dont get a bigger payment than you can afford KWIM I think if you are paying that much in rent your mortgage will be fine but also remember the escrow. That will add to your payment. Thats something no one told me about when I bought my house. Also take into consideration your futures will you have kids & will your wife stay home will you still be able to afford the house then. Just some things to think about because these all happened to me. A year after we bought our house we had our 2nd dd & became a sahm so we had to pay the mortgage on dhs income only we have been just fine but we had to cut back in other ways ALOT!!

[tagrims]

"Also take into consideration your futures will you have kids & will your wife stay home will you still be able to afford the house then."


That is honestly one of the biggest things we are looking at but in this market we are being very conservative (average sale price for 3br 1ba home is $253,000) we are getting a better deal but it means a farther commute to work, which we are both okay with.


Update:

Today with the advice of a friend who is a real estate broker we were "pre-approved" for a mortgage of $164,000 (The mortgage guy said we could be approved for up to around $200,000 in a loan) and we are going to look at a house tomorrow...though we both are not 100% for buying a house at this point. (Waiting a year wouldn't kill us) but if it's a nice place then we would be for it.

[Tree0164]

Mortgage brokers will qualify you sometimes for a lot more than you really can afford. Decide what you can afford as well. Also if you are waiting a year save up some more. You are really in a great position right now.

Also make sure that you have a good emergency fund as well. A house can be more expensive than just renting. Repairs, maintenance etc.

[jmjj215]

Also make sure that you have a good emergency fund as well. A house can be more expensive than just renting. Repairs, maintenance etc.

This is key. Renting is not "thorwing away money" as people like to say. You're paying for the luxury of not having to worry about a property - which can be quite a luxury sometimes!

YOU decide what you can afford. Don't let a mortgage officer convince you that you can afford more - be very careful there. Don't rush. Take your time. Be patient. Sleep on it lots. There's no rush. Don't worry about market moves or anything like that - don't worry about "bubble" talk. If you're in it for the long haul and not planning on moving in the next few years, market timing shouldn't even be an issue. Just take your time and make sure you are financially able to do what you are wanting to do. Don't work for a mortgage

[PennyPincher]

My two cents...

Get in the housing market as early as possible. With your down payment, your mortgage is likely to be similar to your current rent, if not less!

I pushed myself to buy two years ago, and I'm so glad I did. (at age 28) Yes, sometimes it's a little tough, but it would have been tougher if I waited. Houses are going up 21%+ per YEAR in my area of Virginia! My condo from 2 years ago has gone up $80,000 ~ an increase that I would not have been able to afford.

Because of the great market, I've since moved to a townhouse and kept my condo to rent out. It is amazing what you can manage to do. And both places are in my name alone; my fiance is not on the mortgages and I did not have a co-signor.

Good credit will also go a long way in securing a mortgage rate.

If I had bought at 23, I'd be in better shape for my future. I know opinions vary, but to me...renting is like leasing a car ~ something that is hard to make financial sense of. (unless the rent is crazy low....) The tax benefits of owning a home are wonderful.

Good luck!

[DivaJen]

I agree with the advice not to rush into anything, but I also agree that if you can afford to buy and are qualified by a mortgage broker/bank, then the earlier you buy the better if you're in an area that is going up, up, up year after year. I suppose if you were in an area where prices are fairly stable and low to begin with, it wouldn't be much of an issue to wait a year or two, maybe longer. I know for my own situation, had DH and I waited to buy (and we were both teachers when we bought, FWIW), we would have been priced out of our area within a year, two max.

The bottom line for us was we knew what we could afford including all those extras (insurance, taxes, upkeep, utilities, etc.) and when we were in negotiations for this house, we stuck to what we could afford. We bought a home in an area we knew we wouldn't want to leave right away, so we don't have to worry about trading up or anything like that.

Good luck! Buying a home is scary and fun all at the same time.

[jmjj215]

Nice snag PennyPincher. BUT

Remember that your monthly payment doesn't change when the value increases 80k in two years. If you're tight on the monthly and don't have the requisite emergency fund in place, you're asking for a disaster. Having 3-6 months' expenses and qualifying by your terms, not the broker's is what I suggest for home buying. Then, and only then, can you start to think about the market and all of that.

DivaJen, glad you guys got in when you did too. My wife and I have been priced out of Phoenix We're heading to Dallas next year.

[34saving]

Having some cash around is a good idea, esp. if you're buying a new house. If you don't have any sort of emergency fund and you still want/need a house you might want to consider putting 10% down instead of 20%. Yes, you'll be stuck with PMI and that's pricey, but having no cash when you need if can be pricey too. (Of course, if you have an emergency fund or even willing parents who will help you out in a bind, not paying PMI is good too . . . )

[mom-from-missouri]

In my area, teachers belong to a union. As part of their union benifits, they have a credit union which offers mortgage and auto rates less than the banks. You may want to check that out.

[Bluezy]

Originally Posted by 34saving

... If you don't have any sort of emergency fund and you still want/need a house you might want to consider putting 10% down instead of 20%.

This is fabulous advice! You are young enough and have time to build up equity, do not be in a hurry to get the mortgage paid. Enjoy having the tax benefits and a secure place to raise your upcoming children, for they pop up when you LEAST expect them Keep as much personal funding as you can for emergent expenses. You are most fortunate in having this kind of money available - use it wisely and you won't be caught off guard.

All the best for your future!

Bluezy

[CRFSaver]

If you can put the 20% down thats great. Remember if you only put down 10% you have PMI which adds a chunk. If you are worried about getting qualified you can always check out a no-doc loan. It is what a lot of private contractors and business owners use as it is a pure underwriting decision. The biggest players are Indymac, Countrywide and check out Green Point Mortgage.

[jmjj215]

Also, in putting less down, obviously your payment will be higher. Avoid having your payment be more than 25-30% of your take-home pay. You don't want to work for your bank