Jenn,

Yes that is too much house for you, you will be house poor. With the current market the way it is, you should be able to find something real nice for much less than 250k. I don't spesifically know the Sierra Vista market, but I can't imagine it can be very pricey.

Deep River,

That is a great answer!

Here are some general rules of thumb:

1.) It is best to keep as much money in savings as possible, especially if home appreciation is flat or possibly declining. With a VA loan (100% financing) or FHA (3% down) you will have little or no equity in your home to tap in an emergency for several years (assuming the real estate market in your area does not undergo a sea change overnight).

2.) Your main concern on affordability should be debt ratios. VA and FHA have target debt ratios of 28% and 43% each. The first number is for your housing expense only - mortgage principle, interest, property tax, insurance, and association fees if applicable. The second is for your housing expense PLUS all other debts you pay (car loan, student loan, credit cards, etc). To calculate your ratio, divide your annual income by 12 (in this case $5500 per month). Multiply that figure by 28% to get a maximum of $1,540 monthly for your housing expense. Your total debts should not exceed $2,365 per month including mortgage payment.

3.) A $250,000 VA loan at 6.5% is $1,580.17 per month PLUS property tax, insurance, and association fees (if applicable). So right off the bat you are over the ideal housing expense ratio. A 6.0% rate would cost $1,498.88 per month which leaves virtually no room for tax, insurance, and association fees. To get the principle an interest payment below $1,000 per month on a $250,000 home at 6.0% for 30 years, you will need a down payment in excess of $83,000.

4.) With an excellent credit score, excellent credit history (no lates or collections in the past 24 months) plus some savings for retirement, you could possibly be approved for higher-than-target debt ratios... but the target ratios are there for a reason. It's up to you to decide if you should exceed them (assuming a lender would approve the exception).

5.) Closing costs: VA and FHA loans allow the seller to pay up to 6% of the purchase price towards your closing costs. Closing costs include lender fees, title work, state/local tax, plus money going into an escrow account so the lender can pay your property tax and insurance bills when due. The nearer the property tax due date is to your closing date, the larger the amount of closing cost required to set up your escrow account. Bear in mind that when a seller "pays your closing costs" the seller is actually giving back to you some of the money you borrowed to buy the home... UNLESS the Settlement Statement shows the seller is bringing that money to the closing as cash (a very rare event).

Additionally, FHA and VA loans come with extra fees to pay for the insurance that guarantees reimbursement to the lender in the case of foreclosure. FHA loans at present have a closing cost of 1.5% of the loan amount paid to FHA. VA loans have a sliding scale "Funding Fee" (at present 2.15% for first use). In both cases, the FHA insurance premium or VA funding fee must be paid entirely by either the borrower (from your cash at closing) or by the seller (if the seller is paying your closing costs).

6.) A professional Realtor acting as your buyer's agent can help you negotiate the best purchase terms. It's a wise investment that the seller pays for out of his/her proceeds from the sale.

If you are considering a VA loan, the first item you must secure, regardless of lender, is a VA Certificate of Eligibility. I've attached the link to the VA to download the form you must send in to request the CoE.

Jenn,

If you bought a house at the price you indicated and didn't put any significant down payment in the deal (I would refrain from putting much down since you have almost no savings), then at current interest rates, your payment is going to be in excess of $1,400 a month just for principle and interest. When you add taxes and insurance, plus the VA burden for a low or no down payment loan, you're going to probably run closer to $2,000 or more. That would be 36% of your gross income. If your other recurring (credit cards) and installment (cars, boats, etc.) debt exceeds $255, then you're over the 41% debt to income ratio permitted under VA guidelines.

Regardless, I think you're pushing the envelope by trying to buy so much house with virtually no downpayment and your current income. Don't try to buy what people are willing to loan you the money for. Figure out what you can really afford to give up each month in housing costs, then go talk to a reliable mortgage broker. If you let people sell you on what they will loan you money for, you'll likely end up buying way too much home.

Regards,

Jeffrey

Jenn,
Your question should be directed to a lender. If you would send me your e-mail address, I will put you in touch with a knowlegible lender. Also, I would be able to assist you withe the peocess of buying, providede that you ar not already working with an agent. As as buyer you pay no commision - so agents' service costs you nothing. If you give me a litlle more information about the house, I may be able to give you an estimate of what your monthly costs will be.
In a VA loan you do not have to make a downpayment but you can if you want to. However, you have to pay closing costs so your $3,000 will be gone.
George GeoSzk@WBhsi.net
Tucson/Sierra Vista Home Advisor - Realtors

The first step in buying a home is to talk with your bank's mortgage loan officer to see what you qualify for. You should then make a buyer's agency agreement with a good REALTOR to help you find what you want. It's possible, by the way, that you may be able to negotiate a deal wherein the seller will pay your closing costs, allowing you to keep your savings.

See the following HUD Web page for validation of my advice, and for many another answer to other questions you may have.

http://www.hud.gov/buying/comq.cfm

It is really up to you as to whether you can afford it. To answer your question: Yes you can put money down with a VA loan. They would want to know where you go it, but even as a gift it should be OK. These are really questions to ask you mortgage person.