To people familiar with mortgage approvals and/or real estate. Please open to see full question.?

I am 19 and a student with $7,000 saved up. I still live at home and have very little expenses. I bring home about $135 a week from a part time job. I save most of it.(I also get about $1500 each year from a scholarship) I have no debt of any kind. I am just starting to build up my credit, by getting 2 credit cards last year. I always pay them off and I can tell that my credit is building because I am getting more cc offers with lower interest rates and my credit line is increasing. Anyway, I live in an extremely cheap living area where I can get a starter house(ones that I want) from around $25,000-$45,000. I was just wondering if any bank or other place would lend me the 80-90% of the asking price that I would need to buy a house. If not, what are some other ways of financing the house(without exhorbitant interest rates). After all, I would only need like $25000-$40000, at most. Thanks

This is a great question!! First of all, I'm amazed at how people WITHOUT any experience in the mortgage lending industry are offering advice to people about one of the most important issues in their life!!! I am the General Manager of a large Mortgage Company. Please listen!!!!!!

1st of all....Congratulations on realizing that real estate is where the security of your financial being is centered!! There are MANY programs that allow you...even a college student...to purchase a home. I'm going to make a few assumptions. 1) Your credit score is higher than 620 and you have no serious collections over a period of the last 12 months. 2) You can provide proof that you've been employed for at least 2 years. 3) You're a citizen of the US. 4) Your credit card HIGH LIMIT on at least ONE of the cards is $1000 or higher. (If it's not, ask them to increase it to at least $1000)

Contact any reputable mortgage BROKER and explain your situation. Typically, it's a broker than also has the ability to do FHA loans, though you don't HAVE to get an FHA loan. They are monitored by the government to a greater degree and MUST be reputable! There are MANY programs that offer 100% financing to you...that means, you will only have to pay the closing costs for the loan AND if you ask your real estate agent to locate homes where the owner is willing to provide SELLER CONCESSIONS, the seller can even pay the closing costs FOR YOU!! MANY MANY sellers are willing to do this since it helps sell the home faster!

IF you can get a business license for ANY job or home based business through your city or county, no matter if you actually do any business through that company or not, and if you can show that you've had that business license for at least 2 years...sometimes a little less...you CAN QUALIFY FOR A "STATED" LOAN. This is a loan that simply lets your credit score do the talking for you. The lender assumes that you have a reasonable income (which you will "state" to them...whether it is true or not) and you don't have to provide proof of it!! In the industry it is called a Liar's Loan. A cute moniker that does not mean the loan won't be done. Lenders understand that it is simply a tool that homeowners use when they can't prove their income. The weigh the credit score and history against the risk of the overall loan amount. Assuming your credit score is greater than 620...and it probably is much higher than that, you'll be fine. The lender may need to see that you have 3 - 6 months worth of mortgage payments in the bank, so you're $7K will come in handy. This is the only income verifcation they will do.

Interest rates for this loan are a little higher, but not by much. However, you can expect the overall rate to be higher than normal simply due to the low loan amount. Any loan smaller than $100K incurs a higher interest rate. It wouldn't be unusual for you to pay as much as 8 - 10%. However, as scary as that sounds, keep in mind that the loan amount is VERY small (relatively) and the payments are stretched over 30 years, so the impact of a high rate on a small loan amount is negligible (comparatively).

As an example.
$40,000 @ 7% = $266 pmt (principle & interest)
$40,000 @ 8% = $293 pmt
$40,000 @ 9% = $322 pmt

$30 per 1% is negligible!!

If you don't have a business license or don't want to wait that long, consider getting a co-borrower, like another party....mom, dad, sister, friend, etc. With both of your incomes, you'll more than qualify for a standard, Fully Documented loan (Full Doc) where you have to prove your income with W-2's, etc. After the loan is completed and closed, the other party can sign a QUIT CLAIM DEED at a title company and remove themselves from the title of the property. They will still be a responsible party for the loan itself, but not have any rights to the property. After 1 - 2 years, you can refinance the property using the STATED loan already explained, leaving the previous party (MOM) off the loan completely.

Lenders WANT to lend money to good people. They make MANY different loan types, like STATED loans to make this happen. Don't be afraid to bend the rules a little. That's why they're there.

Yes there are banks out there who will lend 80 to 90%. In fact most banks will. However if you borrow more then 80% of the value of the home they will often charge mortgage insurance called PMI insurance. That will increase your monthly payment. So you have to think about it it makes more sense to have a low monthly payment vs how much money you put down. Also consider closing coses can run you 3000 to 4000 depending on how you structure the closing.

The banks will be most concerned with your ability to pay the mortgage so they will be looking for your monthly income. If you want to know your credit score you can check it out at a variety of places online. Start talking to banks, but be careful because everytime a bank runs a credit report it can hurt your credit score so be sure to tell them not to run a credit check until you are sure that's the bank you want to go with.

You are definitely headed inthe right direction. Many loan programs us a ratio of 24/36 or some such to determine how much a borrower is qualified. What this means is that the total housing expense, which is the total monthly amount for Principal, Interest, Property Taxes, and Homeowner Insurance, should not exceed 24% of the borowers gross monthly income. The total of that amount PLUS all other recurring debt such as credit cards, car loans, student loans, etc. should not exceed 36% of the borrowers gross monthly income. In additon, AFTER all closing costs are paid the borrower might need to have 1 or 2 months housing payment cost worth of reserve cash left over.

All loan programs are different and guidelines vary all over the ballpark, but this is a rough approximation. You may qualify for an FHA loan which could give you more than a 90% loan.

I used to do this stuff but finally got tired of doing nothing but generating seemingly endless stacks of paperwork.

There may be a first time homebuyer assistance program in your area.

Try searching for your state housing finance agency or your state housing development authority.

Oklahoma is http://www.ohfa.org/
Arkansas is http://www.state.ar.us/adfa/
Missouri is http://www.mhdc.com/
etc.

These programs offer lower interest rates or money to help with the closing costs and down payment. They also typically offer free homebuyer counseling and could refer you to a lender that works with their programs.

Being a first-time home buyer, you have many options to purchase a house with little or no money down. The fact you have some cash and good credit will make you a good customer for any bank or mortgage company. Talk to a couple of real estate agents and get a referral to a lender they prefer. Make sure they have first time buyer products available. (not all lenders participate in these programs) Go in, get pre-approved, and start house hunting. Good luck!

I use to sell real estate 10 years ago and to do a quick qualify we would take their monthly income times 45% then minus any bills if credit cards are paid off but still active just subtract $10.00 for each. This is the payment you could be approved for. If you credit score is good you could go times 50% instead. Most loan companys like at least 5% to 20% down plus you will have some closing costs that you need to tell a Realtor to ask the seller to pay. (yes you can do that). I know those new cards sound tempting but they can add up quick. keep them to a minimum. You seem to be doing the right thing.