Home Buying in Lynn>Question Details

Joshua Barbi…, Home Buyer in East Boston, MA

Is FHA loans my only option for being a 1st time home buyer?

Asked by Joshua Barbieri, East Boston, MA Mon Aug 8, 2011

My wife and I really don't have a lot to put down and can only put down around 3.5% totaling around $5K However our monthly mortgage payment can not exceed $1,250, as our budget for rent is set at that. We are working with a mortgage broker now, who has pre-approved us for $125K but we are concerned that that isn't enough for the places we love. We are looking for a condo and will pay the condo fees but we want to make sure our mortgage and fees doesn't exceed our monthly limit. We are asking for any advice anyone can provide us for more options than FHA loans that are low-interest - low down payment and are a fixed-rate. Thank you in advance.

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Hi Joshua,

It will depend on your credit score. You can get conventional financing with as little as 3% down but it requires 720+ credit scores.

Part of the reason you've been limited to 125K is because of your down payment. FHA requires 3.5% or $4,375.00 on 125K but the principle, interest and mortgage insurance payment is only $714 per month. Depending on what the taxes and condo fees are you still have $536 to work with based on your budget.

How much do you need for the places you're interested?

The no money down USDA loan is a great option but you would have to look at homes in the following areas.

1) Middleton
2) Whenham
3) Hamilton
4) Topsfiled
5) Essex
6) Ipswich

There are other areas but these appear to be the closest to Lynn.

Please feel free to contact me for more information on the USDA loan or if you need more help.
1 vote Thank Flag Link Tue Aug 9, 2011
A USDA loan is for agricultural properties. There are grants available to first time home buyers to help with down pyment/closing costs. Call City Hall and ask for Community Development. They will tell you what they have and what criteria.
0 votes Thank Flag Link Sun Jul 1, 2012
Lenders will use the lowest middle of your (you and wife) three scores.

If that loweset middle score is below 680 then FHA might be your only option. It is possible to raise your score in a month or two as well. Since you mention Sutdent Loans, I am wondering if this is what is causing your score.
0 votes Thank Flag Link Tue Aug 9, 2011
One last comment about the last comment I made is that 672 is the average and we do have higher and lower scores around the 672.

Thank you.
0 votes Thank Flag Link Tue Aug 9, 2011
Hi, It really depends on where you live. In NY we have a SONYMA loan which is funded by the state. Check with your loan officer to see what other options there are. Also keep in mind that FHA only fuinds certain condos. If you go to https://entp.hud.gov/idapp/html/condlook.cfm, you can input any state and/or condo to see if they are on the FHA approved list.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
0 votes Thank Flag Link Tue Aug 9, 2011
Hello John,

We are focused on condos because we feel that owning a house would be too much (i.e. if something major was to happen). We feel more comfortable knowing that we would be part of condo association. I know that if something goes wrong within our condo than we are responsible but on the other hand anything goes wrong on the exterior of a condo my condo fees would protect that. As far as our middle score is concerned we are around 672 for both of us. One last issue we had with FHA loan was that we had to justify our student loan as it is applied to our debt to income ratio and it something that the current mortgage broker feels is working against us. Our student loans don’t got into repayment until the earliest of June 2012, in which case we still have on average another year plus of forbearance we can apply and this is something we are tying to convey to our current mortgage broker.

Thank you again.
0 votes Thank Flag Link Tue Aug 9, 2011
FHA can be tough with condos. If you are looking in the Lynn area I assume you will be considering converted 2-4 family homes. If that is the case, MaHousing, a 3% Fannie or Freddie loan might be a little easier for condo approval. You can typically be as low as 680 on the credit score for fannie/freddie 3% down. It seems like you need to find a property then see which programs works best for you. If you are not getting answers in a timely fasion, you should be shopping around. Good Luck.
0 votes Thank Flag Link Tue Aug 9, 2011
Hi Joshua and Allison,

At 140K you should be ok to go FHA since the down payment would be $4,900 and you have $5,000.

As far as figuring out what's available on a conventional loan, I would need to know what your middle score is.

The other "issue" here is that any loan program is going to require that the condo is "warrantable" so that issue isn't just an FHA issue.

Is there a particular reason why you're so focused on condos?
0 votes Thank Flag Link Tue Aug 9, 2011
Thank you everyone for your help. We are really concerned that we aren't going to be able to get a condo or get approved because of our student loans. Even though we aren't actually going to be paying on them until 2013 at the earliest, they seem to be getting in the way of the MassHousing loan. We really don't want an FHA loan because it limits whicn condos we can buy. I am getting really frustrated so any help or suggestions are aprpeciated. Our current broker seems to take forever to get back to us....

Allison (asker's wife)
0 votes Thank Flag Link Tue Aug 9, 2011
Hello Everyone,

I want to thank everyone so much for your responses and suggestions and my wife and I am really hoping we can find a great place within our budget level. We are definitely going to look into the USDA loans and I had a question outside of the USDA loans and FHA loans and that is with conventional loans if you have a lower credit score than 720 and only have about 3.5% for a down payment will we still be eligible for a mortgage? And what would be the forecasted interest rate and potential monthly mortgage payment on a mortgage loan of about approximately $140K, as those are condo price range we are enjoying though we can still find a place for under $125K? Anyway Thank you again and please keep the suggestions coming, I know my wife is very pleased with the responses so far. Thank you again.
0 votes Thank Flag Link Tue Aug 9, 2011
USDA-But tough to do indside certain area of 128.
Mass Housing
Fannie and Freddie both have 3% down products

I think you need to move beyond keeping the mortgageh housing payment (P&I, Taxes, Condo Fee) equal to your rent. There is a tax benefit to home ownership where if you are able to itemize and deduct your interest paid and property taxes, a slightly higher monthly mortgage payment might equal out to your current rent when income tax savings are considered. It might be helpful to see the difference if you have a tax professional show you on a tax planning program.
0 votes Thank Flag Link Tue Aug 9, 2011
I just worked with a client using a USDA financing and it was great! They were even able to finance up to 3.5% of the closing cost. It was a great way to go! Good luck!
0 votes Thank Flag Link Tue Aug 9, 2011
You should also look into matching downpayment funds/grants that are available from most towns. Any good Realtor or mortgage person will know about them and can help you get the info on them. This may allow you to go a little higher on your purchase price. You can also find info on downpayment assistance for each town by going to http://www.northshorerealtors.com.
Good luck.
Jim Armstrong
0 votes Thank Flag Link Tue Aug 9, 2011
First of all, congratulations on your first step in making one of the most important purchases in your life: a home and secondly, for researching your options.

My suggestion that you take a first time home buyer's class (you will need it if you apply for downpayment assistance program) where you will learn all your options and become aware of programs available to you - for a list of the classes go Lynn Housing Authority,12 Church Street or online at http://www.lhand.org
Some towns offer a grant for downpayment assistance with either o% interest or very low interest. For instance, the city of Lynn has grants and loan programs where the assistance for downpayment (up to $5000) can be forgivable - see http://www.lhand.org/resources_pages/grantsandloans.html. If you are considering living in the North Shore, please go to http://www.northshoremahomeprograms.com/
to find out what kind of programs are available to you.

Do not give up, this is the time to buy - never in 40 years have the interest rates and prices been down at the same time. You are in the driver's seat, take advantage of it, yes you can!

0 votes Thank Flag Link Tue Aug 9, 2011
Ask your Mortgage Broker about Mass Housing Loans. They have very good programs for first-time Home Buyers.
0 votes Thank Flag Link Tue Aug 9, 2011
A USDA loan which is 100% finance with no monthly PMI or a Mass Housing loan is also an option providing that you qualify. I would be happy to look into those options for you or give you a 2nd opinion. Feel free to contact me.

Steve Boucher
0 votes Thank Flag Link Tue Aug 9, 2011
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