Great question and very timely. You could not have chosen a better time; affordability is at an all time high, interest rates are at record lows, and the $8000 tax credit has been extended into the spring.
If I'm understanding you correctly, you want to understand the ins and outs of the financing end of purchasing your first home. Great question, because your financial pre- approval is the underpinning and first step to your home search. Yes, you have a very good chance, but there are several issues to be discussed before you know if now is the time for YOU to buy.
First, don't be dissuaded by the answer from NBW, who says you must be earning $100000 per year. Your situation is unique to you. What you need to earn is COMPLETELY dependent upon the price of the property you buy and your down payment.
As a college student, you may or may not have established good credit history. FICO score is all-important in qualifying. In addition, certain lenders like certain occupations more than others, based on the ability for future earnings to increase predictably. So obviously, job history will be important. When did you graduate, and how long have you been working?
One thing that hasn't been addressed so far is a discussion of student loans (if any) that you may have, and their impact on the home buying process.
My recommendations are as follows:
1. Get yourself a great, trustworthy mortgage broker. A mortgage broker differs from an institutional banker (such as Wells Fargo or B of A) in that they shop all lenders on your behalf to get the best rate and terms. Sit down with them for a confidential interview and discuss every aspect of your financial situation. A good mortgage broker will tell you what documents you need to have for your first meeting (including salaried or non-salaried income statements, pay stubs, miscellaneous income, assets, and debts) and during your initial interview, will be able to provide you with about five or six scenarios for your home purchase.
How do you find a great mortgage broker? It's a good idea to ask your Realtor for recommendations, and then interview to see who is the best fit. Find out how long they have been in the business, what their closed ratio is, etc., before you agree to give them any of your financial information.
2. Make sure you understand the options in loans out there, based on your purchase price. Your Realtor and mortgage broker should work hand in hand to help you find a loan program that fits both your financial situation and your home buying needs. Be sure you understand the current rates, what rates are doing (moving up or down) on a week to week basis (this affects affordability) and the overall costs of the loan involved. A great mortgage broker and Realtor will give you an up front good faith estimate of your closing costs. (what it will really cost you at the point of sale.)
What's the best loan for you? That depends on a number of factors, including:
How long youâ€™ll stay in the home;
How much money youâ€™ll put down;
How youâ€™ll finance the closing costs.
3. Keep these tips in mind as you go through the process:
Establish good credit.
Raise your credit score
Save for a down payment & closing costs.
Keep detailed records of money spent and debts repaid.
Develop a financial plan.
Maintain a working relationship with a Realtor Buyer's Agent.
Learn your area's market values.
As I have often said before, Buyers often approach finding their Realtor based on the property they like. I'd like to respectfully suggest that your question should be, "how do I find a well qualified agent who will help me find the RIGHT property for me, at the RIGHT price, while protecting MY interests." Don't settle. Interview a few buyer's agents, and begin your home search that way. If you do that, you can be confident that your financial investment will be a successful one.
The normal sequence of events, for my clients, runs like this:
1. I invite them to my office, where they meet with me and a mortgage broker, who will review all financial documents. That meeting should take no more than 30 minutes. At the end of that meeting, my clients will have in hand a pre-approval for a loan, with a clear dollar amount of what they can afford to spend on a home, and what monthly payments, down payment, and closing costs will be.
2. We search and find a property to fit the desired parameters. Offer is written, and accepted.
3. The loan is locked and the appraisal is ordered. All documents are submitted to the lender of choice and formal approval is obtained.
Whether you choose to interview me or some other Realtor, I wish you the best of luck and my congratulations.
Certified Short Sale Professional
Certified Home Retention Specialist
Blogging at: http://TheBremnerGroup.com/blog