Buying A Home
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The house hunt is on!

I've had the desire to buy a house for the last two years but kept putting it off for various reasons (the latest of which was saving up for our wedding that happened in September). Recently we learned that MSHDA is giving a $3k grant on a first come first serve basis to first time homebuyers, so now my husband and I are officially on the hunt!

Already talked to a mortgage broker (apparently my credit is even better than I thought it was!) and it looks like we're not going to have any problems getting any kind of loan we need/want. 

I've already purchased "Home buying for dummies" and am making my way through it, but can anyone break down for me why it might be a BAD idea to do an FHA loan? FHA is what we're leaning towards at the moment, but I'm not even sure we can qualify with the types of houses we're looking at (we're interested in $25,000-$45,000 houses that need a little work but are livable).

Our first round of looking at houses starts tomorrow - can't wait! 

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Re: The house hunt is on!

  • The upfront and monthly costs for your mortgage insurance premium on an FHA loan may not be worth it in the end for you. If you're able to put just a little more down (5% instead of 3.5%) you may qualify for a conventional loan, which is much better for many reasons. I would ask your mortgage broker to run through both scenarios with you so you can actually see the difference. If you're buying a home in that price range, I would think coming up with a larger down payment would be a little easier and will save you a ton in unnecessary fees over the life of your mortgage.

    GL!

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  • As the previous poster said, have your loan officer run both an FHA and 5% down conventional loan breakdown.  FHA will be more expensive both in terms of closing cost fees and monthly payment.  We went in thinking we were going to go with FHA because we thought the only two options were either that or 20% down and we knew we'd not be able to put that much down.  But then when talking through our numbers with our LO, he suggested a conventional loan with 5% down.  You don't have the upfront mortgage insurance that FHA has plus with FHA you have to keep the monthly mortgage insurance for 5 years even if you loan to home value ratio is less than 80% before that.  With the 5% down conventional loan you can get the insurance dropped after 2 years once it's under 80%.  

    Definitely talk to realtor and LO about a conventional loan and especially in the price range you are looking at the difference between putting 3.5% and 5% isn't very much more to save up. 

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  • Oh, for the price range we're looking at we have 10% plus for down payment and closing costs...so that's not an issue. The mortgage guy went over the options and was kind enough to run multiple scenarios with FHA and conventional - looked like the monthly payments for FHA would be slightly higher but the $$ needed at closing is significantly less for FHA (which would leave us enough money left over to do immediate renovations that are needed for most of the properties in our price range). All the options seemed relatively close to the point that It made it really hard to tell which one was actually more beneficial.

    In an ideal world I'd have enough to just buy a house at this low of a cost outright, but the $3k grant is just too good to pass up right now. 

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