First Time Home Buyer Programs
What is a first time home buying program that I can use?
One program that is available for first time home buyers is called "Home Possible"
One of the key factors in determining one’s ability to qualify for a home loan is the borrowers debt-to-income ratio. This specific program allows for a 50% debt to income ratio. This means that that the total income compared to this persons debts + proposed housing payment must be at or below 50%.
For an example; an individual with an $80k per year salary (or $6,667 per month) is inquiring to find out if he can qualify to purchase a $450k putting 3% down. The proposed housing payment is as follows:
Principal and Interest: $2,148
Mortgage Insurance: $155
Homeowners Insurance: $68
Property Taxes: $405
Total: $2,799
This individual also has a car payment of $300 per month, and is the only other debt that he carries. By adding the proposed monthly payment + car payment together and comparing this number to his monthly income, you receive his debt-to-income ratio of 44%. The total debt-to-income ratio is one of the key factors in determining an individual’s ability to qualify, although there are other requirements that need to be met. As long as all others are requirements are met, the individual in this example would qualify for this purchase.
How much should I save before starting to look?
There are loan programs that allow for 0% down, although you will still need to pay for closing costs and prepaids. The minimum you would need to utilize a 0% down loan would be $5-6k.
How much do I need in the bank after buying?
Although some loan programs require you to have reserves in the bank after closing, this requirement is reserved for jumbo loans (loan amounts above $736,525). For any loan amount below this amount, you are not required to have a certain amount of money in the bank after closing. This is based on your particular comfort level and what you would like to have in the bank.
