Can you help me with my first mortgage?
Me and my fiance are researching to buy our first home next summer and are trying to find the best route to take.
We will be making a combined income of about $63,000 for the first year and our income should jump to about $85,000 the year after that.
We are interested in houses in the price ranges of $190,000 to $220,000.
We will just be graduating from college so when we go to get the loan we will probably only have been working in our careers for about a month or so. How will this factor into our loan qualifications?
I know that the interest is way less and that the house will be payed off twice as fast with a 15 year mortgage but how much harder is it to qualify for a 15 year mortgage over a 30 year? We would only be interested in fixed rate mortgages.
What types of tax deductions would we be able use for each type of loan?
I have heard about the $8,000 stimulus for first time home-buyers. What are the qualifications for this and when does this stimulus offer expire?
These are the questions we have on our mind now but we need help wherever we can get it. So, any advice will be greatly appreciated. Thanks!
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First, you must qualify on the income you are receiving when you apply for the loan – expectations are not included in the calculations. Based upon the $63,000 you will be making, that is a maximum mortgage of say $190,000 (and probably somewhat less). Having said that, lenders look for a solid year in employment, so coming out of college with both of you on first jobs will mean you will find it very hard to qualify this coming summer (the following summer, with the jump in pay if it materializes will be better).
Given the present credit crunch, you will probably need at least a 10% down payment on whatever you buy. Add in another 3 to 5 % for closing costs and you will need to sit down at the closing table with about $25,000 cash on a $190,000 house.
If you have the income, a 15-year mortgage is not really that much harder to qualify for (it goes by debt to income ratio and the higher payments will, of course, push you closer to the limits). As a rule of thumb, no more than 40% of your income should go to bills, including the mortgage, so applying for the 15-year mortgage lowers your price range.
Tax deductions are the same – interest deduction and property taxes.
First time home buyers tax credit expires at the beginning of December this year – you must close on your house by that time. In all honesty, I don’t think you can make it before then, given the new jobs, etc. But you never know.
When looking at your payment, don’t forget to factor in the PMI (needed for any mortgage for more than 80% of the home’s value), the property tax, and the homeowner’s insurance which will be added into your monthly payment and placed in escrow.
First, make sure you understand the following statement completely:
A house is a purchase, not an investment. If you are looking for an investment, you should look elsewhere.
They will look at your current income, how much down payment you can bring to the table ( if you cannot put 20% up front, you should NOT be purchasing a house ), and your credit report. Just getting out of college, your credit report should be clean other than any school loans you may have, but it will also hurt a bit to not have years of credit building behind you. It is a safer option to go with a 30-year fixed rate mortgage. If you can afford the 15-year monthly payments, fine, but apply them to a 30-year mortgage and pay down the principal. That way if your financial plans falter or one of you stays at home with kids in your empty new home, you can fall back on a lower monthly payment. Keep in mind, you will most likely be adding home owner’s insurance and property taxes; it would be unwise to calculate how much you can afford based solely on the mortgage monthly payment estimate.
You can write off the property taxes on your taxes, check the 1040 itemized instructions for your income bracket for details or ask a qualified professional. I always recommend going to a tax service the first year you own a home, see how they do it, then do the same thing on your own in subsequent years.
We bought our first home and received 7,000.00 when we filed our taxes. That helped out. Since my husband was in the military we got a VA loan with a 5% fixed rate for 30years. We didn’t have to put anything down. I’m guessing for any other loan you might have to put at least 10% down on your home ( I think that is correct). When you buy your home and move in, any appliances that you purchase with the Blue Energy Star on the front make sure you keep the receipts, either scan them or copy them on your computer, receipts can fade with time. With Energy saving appliances you can get a tax reduction the next time you file your income tax. That’s good because that’s a little more money in your pocket. Anything that is energy efficient make sure you keep the documents or receipt for it.
Nice to know that you’re thinking about your future and trying to make the right desicion. I wish you much luck in your home search. I’m telling you it’s going to be a great feeling walking in the doors of your home and knowing that it’s yours. My husband and I were very excited when we purchased ours. Best of luck to you
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