Lot of the ability to get a loan these days hinges on your credit score, sadly. I lucked out, and did well with my bills through college, so I ahve a score in the 750's. THis allowed me to buy a house last year- $0 down, 103% loan (to cover most of the closing costs). So I paid about $1000 in closing costs, and ended up with a house.
The good things:
rent in my area for a one bedroom is about $920 a month. My mortgage for a 3 bedroom (ie I have rooms to rent out) is $906 a month. Plus, if/when I sell the house, I will get most of that money back. Also, the mortgage interest is tax deductable if I use it to improve the property. Plus I have my very own grass (about 25x20x20 foot triagle of grass, but grass none the less)
the bad things:
if anything goes wrong, I have to fix it. If the house drops in value, I lose out (however, I'll still get *most* of the mortgage money back when I sell. I have grass to mow every week!
details:
I went to a realitor, talked to their recommended mortage agents, got approved for the amount the house I was looking at was going for (do not pay anyone for a good faith estimate. they are ripping you off). Went online to fannie may.org and read all I could about the process. talked with my sister, who bought a house 4 years ago to get an idea of the current proccess. by this time, the house I was looking at had sold
(the average time on the market around here is about 3 days
) Found a second house, and as I was already pre-aproved for the mortgage, I put in a bid. signed some stuff, hired an inspector over the internet at the US House Inspectors association website. About $150 for the basics + Radon and termit testing. Got that done, requested that the owner fix two things, which he did (thankfully without a fight). I gave the mortgage co a good-faith downpayment of $1000 (this confused me, as I was getting a 0% down loan, but I had run out of time to argue. luckily, I had set aside $1000 in case crasy stuff occured.). closing came, they gave me a check for $300 (overpayment for the first month's payment from my $1000 down payment), signed 20 papers, and got the keys.
all in all, took about 3 weeks. I'm now taking tax deductions on the section of my property that I use for my buisness (bonsais), plus the morgage interest is huge the first few years (about 90% of your's monthly payment is interest the first year. Only about 3% goes towards the principle of the loan), I should get a *huge* tax refund this year, somewhere in the thousands.
So all in all, a little more work=a *lot* of long term savings. Not to mention that I bought a house a few block from where a new trainline will be going into center City Philly in the next 5 years, so house values should skyrocket soon
here's to hoping.
note: beware PMIM! If you have paid anything less than 20% of your mortgage off at any time, they will chanrge you for Mortgage Insurance, which is really expensive. Tricks to get rid of PMI:
1)while they are required by law to remove PMI once you;ve paid off 20% of your loan, if you call and ask them to, they have to remove the PMI charges once you reach 18%. But you have to call them first!
2)Any increase in the value of your house can be applied towards how much of the loan is "paid off" So if you buy a $100,000 house with a 0 down loan, you will hav to pay PMI. The day after you buy the house, gold is discovered in your foundation, and the value of the house goes up to $120,000. that extra $20k increase can be applied to the calculation of "how much have you paid off?" which deterines if you pay PMI. as 20k is 20% of 100,000 (the amount of the loan, you have now "paid" 20% into your loan, so your PMI is gone.
3)pre-pay. every mortgage payment in the begining is mostly interest. however, if you get a loan w/o any sort of pre-payment penalties, and then kick an extra $100-$200 per month, directly into the principle, you will cut your overall loan cost, as well as shorten your PMI term by a huge amount.
note2:
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good luck!
edit:
Where I am west of philly, houses are expensive. I got my 1,200sq ft 3 bedroom (one bedroom is 8'x9'), 1 bathroom twin house for 99,000. I've had it for 6 months, and it's already be re-estimated at $109,000 I hope the housing market doesn't crash in the next 7 years, though...
oh, yeah. interest rates: go for as low as possible. you should be able to get between 6% and 9%.
also: ARM vs 30 year fixed. Are you planning on staying in the house? are you planning on selling in a few years? at this point, mortgage rates are note likely to go down much more, and you can always refinance later. I went with a 30-year fixed to try and keep monthly costs down (as opposed to a 15 year). but I'm also planning on selling on 6 or 7 years. Any money I put into the house will just sit there doing nothing, so It's better for me to put that money into bonds and bank CD's that bare positive interest. If I were planning on living in the house longer than 15 years, I would have gotten a 15 year fixed in order to pay off the loan faster. However, given that I got a loan w/o prepayment penalties, I can still pay offthe loan in 15 years If I want. having the 30-year just gives me more flexability.
This is my expirience. again, good luck!
