First time home buyer. I've been working steady for a year and a few months. Getting married in July. Fiance is graduating in May and has been applying to jobs already (hoping to hear back in the next 2 weeks). Would like to consider buying a house by September when apartment lease expires. We will be on our own in terms of paying for it.

The 20% down payment really seems unreachable by then, but at the same time I do not want to keep throwing money away into an apartment which is no type of investment.

Being a first time home buyer, are there any perks? I would like to avoid PMI and any other avoidable fees if possible.

Are the 95/5 or 80/15/5 good options?

Just my opinion, but I would save for a year or so. I know that rates are sexy right now and you are anxious to get into a house, but there is nothing wrong with saving up for a while longer and then looking at homes. That would give you time to really investigate what you are wanting in a home, location, and also gives you time to know your financial situation. I was in your shoes a few years ago and I am very glad we were patient and saved up, rather than rush into something and regretted it later.

As far as how much, there are several online calculators to see what you can potentially afford. I would aim for 10 percent of the home value, then tack on a few thousand more for closing costs.

[This message has been edited by Hoyt Ag (edited 3/19/2013 9:28a).]

The min required down payment for an FHA loan is 3.5%. The min for a conventional loan is now 3% down, but the rate is going to be better with 5% down. And yes, you can avoid mortgage insurance by doing a first lien at 80% with a 15% second lien. Sometimes this approach makes more sense, but sometimes just a straight 95% one lien with mortgage insurance can be the best option depending on the buyers goal and the property itself.

If you happen to be a veteran you can still put 0% down and if you are buying your home in a rural/or some exurban areas, you might be able to qualify for 0% with a USDA loan.

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Stri - I'm a lender in Katy. I have a First Time Home Buyer program that can be pretty appealing.

-No PMI
-No lender fees
-5% down
-No payments for 3 months

This is a portfolio loan that my bank offers so the rate is a little higher than a conventional or FHA loan. However, with no PMI, the payment is still less than the others. If you are wanting to put down more than 5% this may not be the program for you.

If you have any questions feel free to contact me. My info is in my profile.

If you are looking for a loan with a low down payment, then a FHA loan may be the ticket (3.5% minimum down) but there are changes that are coming in April 2013 that could make you pay thousands in extra fees.

New FHA borrows will need to have a credit score of at least 580 to qualify for the low down payment loan. If your FICO score is less than 580, you are not disqualified for a loan, but you will be required to put a minimum of 10% down.

Because you would be putting less than 20% down, you will be required to pay mortgage insurance. FHA has an upfront fee of 1.75% which is wrapped into your loan and a monthly fee of 1.30 % if the original loan amount to value is less than 95% and 1.35% if you put less than 5% down.

Typically, once you reach a 20% equity position, the PMI is removed. Not so with the new FHA loan changes. The insurance stays on your loan for the life of the loan.

For example, if you are paying $112.50 (borrowing $100,000) per month in mortgage insurance and you pay the mortgage for the full 30 years, you will have paid $40,500 for insurance that benefits the lender.

Make sure you weigh the long-term costs to the short term benefits before you go get a loan.


Simon Campbell
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[This message has been edited by TexAgs staff (edited 3/20/2013 9:36a).]

Great info, Simon. Thank you. I have heard about some of the bad things that come with the FHA.

I disagree with the comment that paying less than 20% down will require mortgage insurance. There are a number of options with less down and no mortgage insurance.

All the loans that "don't have PMI" just work that cost into the price of the loan some other way. For example, if I recall correctly USDA loans have no PMI but charge a $3000 up front fee.

There are packages out there that will avoid PMI and save you money. You're going to have to get a second loan in most cases but the math works out for programs like the 80/10/10 program that jja79 at Bank of Texas offers.

You obviously have to look at the numbers and make sure it makes sense for you.

Accountant you mention a program specifically that does blend in, one way or another, the cost of MI.

The blanket statement though doesn't cover every program and financing combination.