My wife and I are first time home buyers pre-approved for an FHA home loan.?
With this, we are allowed to recieve a "gift" of money to cover our down payment. Does this mean that we can have very minimal funds in our bank account--say $2,000? We have other funds elsewhere, but they are in my mother's name (under my request, and so it's harder for us to access). We can definitely afford this house with money to spare every month, so do you think this may be a problem?
Our checking account was overdrafted a couple times, does this affect us buying a home?
We have a 667 credit score, also approved with the FHA.
We are both teachers with decent jobs (pay could be higher), so I don't forsee us having any trouble in affording it, just getting the loan may be difficult.
We have 3.5% closing cost coverage
- loanmasteroneLv 71 decade agoBest Answer
There appear to be a few half truths, near truths and I don't know,with the current answers, with the exception of one other.
In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.
Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.
He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.
The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.
When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.
#1 One month of pay stubs for each person that will be on the mortgage.
#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.
#3 Two years of federal income tax along with the W-2 that match.
Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.
Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.
Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.
If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.
You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.
Make sure your mortgage broker explain all your options so you may make an intelligent decision.
What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.
So select the best option for you and your financial situation.
You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.
Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.
Your mortgage broker will now order an appraisal to show proof of the property value.
The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.
After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.
Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.
I hope this has been of some benefit to you, good luck
- Expert8675309Lv 71 decade ago
I'll answer your question one at a time.
FHA will allow you to receive gift money from another relative. Their only requirements is that it be seasoned (60 days), you can prove seasoning (via bank statements, which will be your mother's)...and that the gift letter (that the bank will provide to you to fill out), comes with no repayment.
FHA requires YOU to have the funds seasoned and sourced of your own money for anything paid at the closing table that the seller concession for closing costs and the down payment doesn't cover.
If you have overdrafts, more than one can equal a loan denial...it shows you cannot manage your money now which is especially a problem if your home loan is higher than your rental rate...that is a HUGE deal with FHA.Source(s): former FHA underwriter
- Lisa LLv 61 decade ago
Bunch of non truths in answers here.
1. 3.5% is down payment not closing cost. This is how much you must have invested from either your own funds or a gift.
2. Seller can pay all closing costs & prepaids up to 6% of purchase price.
3. MI on an FHA loan has a .55 factor, regardless of credit score.
4. Gift funds DO NOT have to be deposited in your account. I ALWAYS have the cashier's check brought to closing. Proof of withdrawal from donor's account is required. The approval is conditioned for that.
5. It is possible to get money back at closing up to the amount you have paid...i.e. appraisal money, earnest money.
- Anonymous1 decade ago
Nate, you are asking questions, that really a loan officer should answer for you based on your whole financial picture.
If you qualify to purchase, some counties have money available for first time buyers to use, check there first. Yes you could have a "gift" of money from anyone, as long as they sign a letter stated that it doesn't have to be repaid. If you have had some overdrafts, yes it will affect your credit. Which you may need to improve from 667. If you have the 3.5%, then consider another 3-4% for closing costs based on purchase price. And don't let some Realtor entice you to spend all that you are qualified to purchase. Consider what monthly payment would be comfortable for the two of you and purchase a home that fit's that criteria. Some agents will push the limits. So don't be afraid to tell them you only want to spend such and such an amount, or you want to have a mortgage payment around this amount.
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- ?Lv 51 decade ago
You need to be able to put down 3.5% plus closing costs. The sellers can't give you money back. You need to set aside an emergency fund in a not easily accessible savings account in case you need to do an emergency repair to the house.
The more assets you have to show the bank, the easier it will be to get final loan approval.
- 1 decade ago
Your mother can gift the downpayment money to you. You will need to pay your own closing costs. Verification of the source of gift money is not required. However, it is necessary that the gift funds be deposited in the your bank or savings account, or in an escrow account, prior to underwriting approval. Proof of deposit is required.
Gift donors are restricted primarily to a relative of the borrower. They can also be certain organizations, such as a labor union or charitable organization.Source(s): www.mortgage101.com
- godgedLv 71 decade ago
I am a bit concerned that PMI may price you out of being able to afford this house. PMI with credit scores under 680 is pushing some folks out of their prospecitve purchases. Please check on this before you commit to a purchase contract.
The pre-approval is nice, what you want to be is pre-qualified.Source(s): Oregon Realtor