Buying a new home

[DigiSLR]

All these threads recently about martgage pre approvals, escrow, and home buying have prompted me to start yet another thread.

I am beginning to look into purchasing a home. I am in my mid 30's and between 8 - 10 years ago I had a bankruptcy. I have long since re-established my credit and check my credit reports frequently. My FICO is between 680 - 720 depending on which agency I look at.

My problem is that although I have the money to afford a new home and taxes, insurance, etc, I can't seem to save for a decent down payment. I currently rent a house and I am certain that my mortgage paayments with taxes, insurance, and "fees" will only be $50 - 100 more than my rent per month.

I do have some debt, but I am at less than 20% of debt to income. (I know, I know, keep paying it down...)

Am I doomed to move to a less expensive rental for a long period of time to save a down payment? What are my options short of saving more and more and more.

[Torrey]

When I bought my first house a couple of years ago, I didn't have anything for a down-payment either. You didn't mention whether you're married or not, but when I bought my house, I wasn't (that came a month later). Therefore, I was able to get a special loan through my bank, Bank of America. I'm not sure if they still do this, but it was essentially 2 loans, but I can't remember off-hand if it was an 80%/20%, 85%/15%, or a 90%/10%. I qualified because essentially I was making less than $50k, and I was buying the house based only on my own income. It really worked out well, because I both got married and got a raise that put me over $50k a month later. The closing costs were very minimal as well. If this sounds like something you might be interested in, the guy I dealt with at Bank of America was John Keilen - (972) 599-3012. This was at the Bank of America on Preston Rd. near Plano Parkway.

[DigiSLR]

Torrey,

Thanks. I am not currently married. I've begun to look into the 80/20 2 loan option. How did that work for you? Are both loans interest tax deductable? I understand this method also removes the PMI requirement...

[Torrey]

Exactly, no PMI...I forgot to mention that. And yes, interest from both are deductible. There is only 1 mortgage payment, so you will only see the combined interest. Just to give you an idea...my loan was for $157k and I believe my interest rate was 6.25%. This gave me a mortgage of around $900/month...then tack on property taxes, insurance, etc. and it brings it to about $1,350/month.

[DigiSLR]

ok one more question. You actually have 2 loans, but you only make one payment? I assume thats because both loans are from the same lender. Are you able to prepay the individual loans? Say I got a nice bonus at work and wanted to pay off the smaller 20% loan, is that possbile, or are the payments automatically split between both loans?

Have you found any downfall to this approach? Anything you'd do over again if you could?

[Torrey]

Yes, only one payment since it's the same lender. You can prepay, but I don't think you can designate how the payment is applied. This is my first home and I'm no expert, but I haven't seen any downfall yet. One thing that was required for my particular program was sitting in on a little home-ownership seminar that last about 2 hours. Basically since the program was for family incomes of less than $50k, they want to make sure everybody understands the costs and little intricacies of owning a home. In the seminar, they actually encourage making accelerated payments to shave off interest if you're planning on staying put for awhile.

[Debbi]

We also have an 80/20 loan (because we wanted to put a shop in after closing) but our's are two separate loans, same lender. I think it just depends on the lender. Interest on the 20% is generally higher. Our first mortgage years ago was an FHA with no down but you do have to pay PMI. All interest is deductible. Definitely check into First Time Home Buyer's programs. Call around to get the best rates and closing costs as they can vary quite a bit.

[smdebnam]

We did an 80/10/10.

Put 10% down, a loan for 80%, and a second loan for 10%. It's the same lender but each loan has a different account number so my husband pays the 80% loan, and I paid on the 10% loan. I paid more than the minimum on the 10% so that one is paid off now, so I would assume that you could always apply a bonus or additional payments to either of the loans.

[d2creative]

We did an 80/15/5% down.
When we had enough equity built up we refinanced and were able to get it all into one loan with no pmi.

[DigiSLR]

Wow, glad to hear that the 80/20 , 80/15/5, 80/10/10 option appears to be pretty popular. Thank you all for the boost in confidence.

[Buddha]

To be clear, the second and third loans are payed at a higher interest rate than the first loan, and they are due in 15 years, not 30 as the first loan is, so for both reasons, you will pay more than a single loan does.
Last year, PMI became tax deductible. I assume that is still true. If so, a single loan with PMI that is cancellable when the balance reaches 80% has a lower payment than multiple loans. Over time, the total payed in is substantially less.
If you decide to pay extra, you can designate on the payment coupon where the extra goes. Loans usually have a prepayment clause, some make prepayment a penalty in order to qualify for a lower interest rate, but each loan varies.
A bankruptcy more than three years ago shouldn't affect your qualifying for a loan, but it might affect your credit. Incidentally, the score you see from a website isn't what your loan officer will see. He will get a credit report that is a combination of three credit agencies and will use the middle score to qualify you.
FWIW, loan balances on debts that are under 50% of the debt or your credit limit are good enough. 20% is great, though.
Find a way to save some money so you will have a downpayment. That seems to count above all else these days.

[Breezy]

We have the 80 20 currently and HATE it lol
But I think it is just the one here.
That said we have 2 separate loans and are required to make 2 separate payments. So apparently it does flucuate from branch to branch. Just make sure that they figure out your taxes and insurance properly cause OH MY LORD they haven't gotten ours right yet lol.
That said it was painless to get but the VA was much smoother over all.

[Breezy]

Oh and it is with BOA too