I recently started training for the New York City ING Marathon and on my long run yesterday morning I realized that buying a home is much like training for a marathon. That is, not many people can just go out and buy a house...just like not many people can go out and run a marathon with out preparation. When buying a house there are a few steps that you need to make sure of first. The essentials are that: you get pre-approved for a home loan and that you have a down payment saved up. Saving for a down payment can take a long time!
I am often asked how much you need to put down on a house. The answer is that it depends. It can depend on the kind of loan as well as the lender. General guidelines are that for an FHA loan you only need 3.5% and you can have a credit score as low as 640. These loans are also assumable. However, you cannot borrow more than $271,050 (on a single family home) and you will pay MIP (Mortgage Insurance Premium). A future blog article in the near future on FHA. If you have any questions in the mean time...please don't hesitate to give me a call.
General guidelines for a Conventional Loan: 10%-20% down
This too depends on the lender. Some will even go lower than 10%, but you will have to pay PMI (Private Mortgage Insurance)
Side note: If you are a doctor or lawyer...there are a few banks out there that will offer 100% financing for you. There is only one bank in Dallas that I know of that offers this! The reason they do this is that they are banking on you making a lot more money in the future.
The bottom line is to choose a lender that you trust! Never borrow the maximum that the bank says you can borrow. Use a lender that is local! Ask your REALTOR for a few recommendations.