Foreclosure in Elk Grove>Question Details

Brian, Home Buyer in Sacramento, CA

First time home buyer question

Asked by Brian, Sacramento, CA Tue Feb 5, 2008

I am a hopeful first time home buyer. I want to buy in Elk grove and keep my monthly payments around 1200/month. My credit is great but I have a small down payment. I also have limited job history a little over one year. I make over 50k a year. IS this possible? I love the housing market right now and I dont want to be left behind.

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19
Jim and Dot,
Thanks for both of your answers, I really appreciate the advice on this site.

Jim, You mentioned youre a loan officer. Would it be possible to set up a time in a few months to go over some of the variables you mentioned below. I understand that this site should only be used as a quick reference guide so I dont want to bog it down with all my details. I also noticed that you are based in Roseville. I am also in Roseville so that might make things a little easier. Send me an email if your interested @ brian@secteam.com

Thanks Everyone
2 votes Thank Flag Link Wed Feb 6, 2008
Dot and Erin are correct. Your next step would be contact Marie, Marlene, myself or another loan officer to get you a prequalification, and hopefully a pre-approval.

Due to lending laws we can only generalize in a public forum such as this, and we do not want to have you divulge too many of your personal details to the World Wide Web.

I mentioned some of the fees that would be added to a homebuyers monthly housing cost calculation. These include, homeowners insurance ( always ) property tax (always) earthquake and or flood insurance (sometimes) Mello-Roos bond payments ( sometimes ) HOA fees ( sometimes ). Mortgage Insurance Premiums ( sometimes )

Notice all the ( sometimes ) -- I took econ in college too.

The (sometimes) monthly costs will depend on which house you buy and the PMI (sometimes) depends on you loan program.

Your closing costs are not directly added to your monthly payment, but you intuited that closing costs do have an effect. Obviously if you pay CC in cash, you will have less for down payment;
If you finance the CC, then your payment is larger. If you ask the seller to pay the CC, then it is likely that you are paying more for the property than if the seller were not paying your closing costs.

How much are the closing costs? There are so many variables here as well. The variables include:
1. Who is paying for which costs ?
2. What time of month and time of year are you closing escrow.
3. What type of home are you buying? Condo? Detached house?
4. What loan are you getting? Paying an origination fee for best rate? Or paying a slightly higher rate to avoid the up-front costs?

Erin, Dot and I don’t mean to be coy with you, but the variables are so, well, varied, that a generalized one size fits all answer does not fit anyone. I’ll try anyway. Closing costs charged directly to the buyer may run anywhere from a few hundred dollars to several thousand dollars.
If it is only a few hundred dollars, you can be sure that the costs will be paid by the buyer in some other way such as through the future interest paid on the loan or a higher price for the house.

- Jim Walker, 1AR Financial and 1st American Realty
2 votes Thank Flag Link Wed Feb 6, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
With your income of $50,000 + per year (and possibly growing) a $1200 per month payment is only 29% of that income, that is well within the guidelines of most lending programs, as long as your other debt - ( student loans, automobile ) does not exceed $460 per month -

The monthly payment includes the interest and principal on an amortized loan; it also includes the property taxes, Mello-Roos tax, and the homeowners insurance. If buying a condo, you would include the HOA fee. These costs leave only about $1000 available monthly to service the debt portion of the monthly payment. That size payment is adequate to service a $178,000 30 year fixed rate amortized loan at 5.5% APR

As it happens, there are some starter homes and condominiums in that price range in Elk Grove, California. - Mostly as a result of bank foreclosure activity.

There are many reasons why you probably qualify for a higher loan, than this conservative scenario.

1. You might qualify for 1st time homebuyer assistance, A Cal HFA bond loan, MCC, or other government agency or private agency assistance.

2. As a recent grad with a promising career, an expectation of higher earnings in future years, you may be able to take advantage of a structured loan such as a 5-25 (fixed for five years, then adjusts after five years). This type of loan is awful for poor people whose incomes don't increase much, but the program does make sense for a 20 something grad who expects his salary to rise significantly in the next five years.

The APR rate on a 5-25 has been running around 5% - that increases your purchasing power by at least $10,000.

3. If you don't have a large car payment and student loan debt. You may be able to carry a payment larger than the $1200 that you said was your target. If you have no other debt, your buying power might be as high $228,000 to $242,000 depending on loan program, and interest rate that you qualify for.

4. Disclaimer: These are generalized estimates based on limited facts derived from your question above. Your situation may be different. A full evaluation and good faith estimate would require an application and a credit report.

-Jim Walker 1AR Financial, and 1st American Realty
2 votes Thank Flag Link Tue Feb 5, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Your scenario is definitely possible. You really need to pose your question to a loan officer who can speak in more definite terms. I highly recommend Marlena Olson with the Vitek Mortgage Group. She can be reached at 916-486-6931. She can analyze your information (credit score, income, employment history, downpayment, reserves, budget, etc) and assist you to come up with a plan. There are some very competitive first time buyer loan programs out there right now with great terms and interest rates...some grant programs too if you qualify (usually income and family size based). I would definitely start with the lending side of things.
Web Reference: http://www.erinattardi.com
2 votes Thank Flag Link Tue Feb 5, 2008
Erin Stumpf…, Real Estate Pro in Sacramento, CA
MVP'08
Contact
Dot, thank you for your response. Yes, I was in school earning a BA in Economics. I am only 24 as of this week. I do have a larger job history, however they were "college jobs" that jsut got me through college and nothing on the professional level.
2 votes Thank Flag Link Tue Feb 5, 2008
Brian, you mentioned a limited employment history...were you in school before that? Sometimes you can get around it if that is the case.

I say there is always hope! You need to work with a good Realtor and loan person. I can recommend a great loan officer in So Cal...she can work with you. If you need a referral for a Realtor let me know.

All the best,
Dot Chance
The Chance Team
Keller Williams Realty Studio City
Web Reference: http://www.DotChance.com
2 votes Thank Flag Link Tue Feb 5, 2008
Thanks Brian, I sent you that email.

I have seen a couple of John's other posts. He is a self described housing bear. - I have no objection to that. I was a bear three years ago at the height of the bubble, when some house prices here were 50 to 75% higher than they are now. Being a bear two and three years ago was smart. Calling for a 50% to 75% drop on top of the crash already experienced is wishful thinking.

I can show you dozens of homes that are listed in the $200,000 +/- range that were sold for 50 to 75% more than that at the peak of the bubble. -

I was an early bear, an on time bear, but I am not a lifetime cave bear, when conditions start to change, when the bottom of the housing market is near, smart bears can come out of our caves and bask in the springtime warmth of the sun.
-
1 vote Thank Flag Link Wed Feb 6, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
John,

That was a good article. As I stated earlier, Im an economist so i understand market forces and other key indicators for housing prices. I agree that the housing market is not nearly done correcting, however for my personal circumstances I believe purchasing a home in the range of 6-12months. thanks for the article
1 vote Thank Flag Link Tue Feb 5, 2008
Well - it appears that you have not factored property taxes and insurance in...that number (if my math is correct) is most likely ONLY principle and interest from the actual loan. Again - you should contact a loan officer who can paint this picture for you and let you know the whole story. I referred Marlena Olson, and she will itemize all of your initial costs and ongoing monthly costs so there are no surprises. Most good loan officers will do this, and give you a "Good Faith Estimate", aka GFE.

Unfortunately, it is difficult to give you definitive answers without knowing everything about all of the variables in your situation. I specialize in the real estate side, and I am not a loan officer...you really should find a loan officer that you like who can run through these scenarios with you.

It is outstanding that you are doing this much research in advance! Sounds like you are ready to take it to the next level and contact a professional loan officer...
Web Reference: http://www.erinattardi.com
1 vote Thank Flag Link Tue Feb 5, 2008
Erin Stumpf…, Real Estate Pro in Sacramento, CA
MVP'08
Contact
Brian,
Why not wait for a year or two or three and pay 50 to 75 percent less for a bigger home?
Check out this article:
http://www.businessweek.com/magazine/content/08_06/b40700407…

John
1 vote Thank Flag Link Tue Feb 5, 2008
I guess what Im trying to get at is take for example this house in Elk Grove:

http://www.trulia.com/property/1051413437-UNKNOWN-Elk-Grove-CA

The price is around 185k. so a loan over 30 years would roughly be around my 1100 or price range. However, I am worried that there are so many fees that will come up that It will push the actual monthly amount outside my budget range. So long question short, do i need to adjust the price of house Im looking for to stay within my monthly budget due to fees and payments of the buying process?
1 vote Thank Flag Link Tue Feb 5, 2008
You sound like a perfect candidate for FHA! Plan on 3% down (+/- closing costs) and note you can utilize down payment assistance programs in order to put less down. The important thing to do is to work with a mortgage professional that can offer FHA programs (because 80% can not) and work with an experienced Realtor who can help you to properly structure your offer. If you need any help, please let us know! Good luck!

Erin
0 votes Thank Flag Link Tue May 13, 2008
It is possible, you need to have a mortgage file run through Desktop Underwriter. It is possible for fannie mae to do a loan with less than 2 years work history. The guidelines for the My Community loan program only require 30 days of employment.
0 votes Thank Flag Link Tue Mar 4, 2008
You're welcome Brian!

FYI - the 2 yr employment rule is an industry standard, not just tied to first time home buyers programs whatsoever. I work almost exclusively with realtors who send me many first timers. Contact me offline if you'd like to learn more about how you might stack up relative to what lenders are looking for.

Regards, Jeff
0 votes Thank Flag Link Mon Mar 3, 2008
thanks for the great answer! Yet another thing I learned about first time home purchases!
0 votes Thank Flag Link Mon Mar 3, 2008
Brian, I can tell you now that pretty much all lenders have a 2 yr job history minimum. If you're at, say the 18 month mark, and it's 45-60 days before you close, this might work......however, keep in mind that the 2 yr rule means 2 years working in the same general capacity, same position, etc...it doesn't mean you had to have been with the same company for 2 years......to keep your payments to $1200 per month, your purchase price will need to be around $150k-$175k

hopefully this helps, Jeff
0 votes Thank Flag Link Sun Mar 2, 2008
Brian,
Very cool that you are an economist...
Can you throw me some info? I'm curious how it works out...I'm eager to buy too, but I can't seem to find prices that make it work for me. How are you doing your calculations? Or are you trying to get a foreclosure?
Thanks for the info!
John
0 votes Thank Flag Link Wed Feb 6, 2008
Hi, Brian. You can email Marie Richarz at: mricharz@metrocities.com

Marie will be able to crunch the numbers for you.

All the best!
Dot
Web Reference: http://www.DotChance.com
0 votes Thank Flag Link Tue Feb 5, 2008
These are all great comprehensive answers. My car payment is 100/month and my student loans are 100/month. The car payment will most likely rise to about 200/month in the next year. I am definetly seeing houses on this website that are under 200k that I would be willing to purchase if the terms are correct. As a follow up question, what other fees are associated with buying a home that I need to factor into the loan amount and ultimately the monthly payments. I wont have a 20% down payment so PMI would be in but what are closing fees and things like that for a buyer? Thanks again everyone for such detailed responses
0 votes Thank Flag Link Tue Feb 5, 2008
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