Law Student Grad -- Considering Buying A House/Condo

ianp · Joined: 23 Aug 2005 Posts: 2

Hi everyone. I just came across this Web site and thought I would see if you could give me guidance.

I am graduating from law school in December, and I am taking a job making $70k plus profit sharing that will amount to around $10k at the end of the year. I have a contract that confirms this.

I don't know my credit score, but I don't have any bills to speak of. I got scholarships throughout school and I have never made a big purchase. The problem is that I have nothing to establish my credit (the big purchase), so I don't know how that will work out. I also don't have any employment history. I am told, however, that many lenders will consider time in professional school as employment history.

I would much rather buy a house than dump money in a rental. But I'm not sure if I will be able to do so, given my lack of credit history and work experience. I could put no more than $10k down.

My questions are as follows

1. Is buying a home even an option for me?
2. If so, would it be helpful to get my parents to co-sign?
3. Given my information, does anyone have a rough estimate of what kind of mortgage I would pre-qualify for (i.e. how much I could afford)?

I would be interested in getting answers to these questions and your general thoughts on my situation. I would also be interested in making some contacts that may prove valuable over the next three months.

Thanks in advance for your help!

lenderama · Joined: 08 Aug 2005 Posts: 22

http://lenderama.mariah.com/calc.htm

Try the "How much can I afford" to get started. Meet with a local Brokers to get a better idea.

m2c · Joined: 03 Aug 2005 Posts: 764

Get you credit score NOW – before you start talking with various brokers. Might not be as “nonestablished” as you think. Similar situation (grad school, no car loans, etc.) with my kids and they were in the 800s.. I’d do this “risk free” (no impact on FICO) yourself through www.annualcreditreport.com. This is the site established by Fair Credit Report Act to supply folks with one free credit report per repository per year. PAY THE $5.00 TO GET YOUR FICO. If you opt for various brokers running credit reports, do it within a very short period of time (minimize effect on FICO) and make certain they will give you a copy of your full report.

Armed with your FICO, you’ll have a better idea of what programs are open to you. $10,000 down may limited the programs available for a given purchase price. Is a gift possible? At your income level, you will probably be ineligible for IRS-subsidized interest rates or reduced mortgage insurance through the My Community Mortgage programs. Flex 100 (no down payment) could be best but mortgage insurance is a killer. With this level of liquid assets, you’d likely want to look at lender paid mortgage insurance – 1.75% ONE TIME charge (700 FICO) versus 0.94% PER year.

Speak with at least one lending source who does manual underwriting. Underwriting is an art-science thing and sometimes you don’t know where to put the “more than”. – you may well get more bang for the buck with “art”.

Quick answers are:
1. Yes. But don’t get so swept up in the “American Dream” pitch that you overlooking the rent option. It’s a flexibility-“getting familiar with the community” versus opportunity cost-high cost to liquid thing.
2. Yes. Check on lender’s policy about eventually “releasing” your parents from the loan. If there are positive numbers on the servicing disclosure form, what you are initially told probably doesn’t mean anything
3. Flex 100. 5-1 IO ARM if more down payment can be put in play. Reasons for 5-1 : higher purchasing power; career path and bonus to mitigate payment change after initial 5-year period. Run though the numbers if you go with a 5-1.

Based on the limited information you provided, you shouldn't have too much trouble finding a loan. Get opinions and choices from several brokers so that the loan "fits" your desires.

m2c · Joined: 03 Aug 2005 Posts: 764

Ops ... forgot to mention FHA but there are other restrictions and baggage that come along with FHA.

These are just guesses -- you really need to sit face-to-face with a number of brokers to zero in on the better or best program.

capnmorgan5555 · Joined: 29 Jan 2005 Posts: 29

The problem with getting your credit score from a place like m2c stated is that score has nothing to do with what the score would be with a lender, it might give you an idea but it might not. The model that is used by mortgage lenders is weighted differently than what you get by going directly to the credit bureaus or one of the sites you can buy a bureau.

There are some draw backs to going to a lender, it does count as an inquiry which will drop your score some. According to the scoring models you should be able to pull as many mortgage related bureaus within a 14 day period with no additional hit on your score for inquiries.

I would try to find a lending professional in your area, they are harder to find, but you will know when you are talking to one it is quite obvious. The problem with shopping a bunch of different lenders is if you don't find a true professional all you are going to end up with is the best "liar" that quotes you some ridiculously low rate that they probably will not be able to deliver.

I am a firm believer that putting someone in the right program for their particular situation with a competitive rate will save you a lot more money than the lowest rate on a program that doesn't fit your short and long term financial goals. Contrary to popular belief the mortgage is not a commodity only to be based on price it is an tremendous financial tool that can help you to accomplish many of your financial goals. This is especially true with first time homebuyers and even more so with first time buyers that are professionals with a very good opportunity to increase their incomes significantly in future.

Basically, find a lender that knows their business.

Best wishes.

chow · Posted: Tue Aug 23, 2005 9:23 pm Post subject:

"I got scholarships throughout school and I have never made a big purchase."

CaptMorgan....Please pass the Rum.

who has 16 years of school-professes to have a post Graduate Degree, and structures a sentance like this?

I'm just stupid. Or this is a yank.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

who has 16 years of school-professes to have a post Graduate Degree, and structures a sentance like this?

More people than you might think...

ianp · Joined: 23 Aug 2005 Posts: 2

The same guy who can spell "sentence." Have some more rum.

P.S. Doozy of a sentence structure you have yourself.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Ian,

Chow comes from a land of message boards where people come and post crazy whacked out scenario's as a joke to see how people respond. Don't take it personal, she simply is used to odd people. It's a hard habit to break being suspicious of every person that comes in the door ;)

Luckily I only have that problem in the advertising section. The difference of course is that I have nuke capabilities...

David · Joined: 19 May 2004 Posts: 703

ianp wrote: The same guy who can spell "sentence." Have some more rum.

P.S. Doozy of a sentence structure you have yourself.

That's funny.

I'm sure you can get a house, but I think you need to do some looking around to see what houses would be acceptable to you. For example, I'll bet you would have no problem getting a $100,000 house, but would you like it?

chow · Posted: Wed Aug 24, 2005 1:58 pm Post subject:

ianp wrote: The same guy who can spell "sentence." Have some more rum.

P.S. Doozy of a sentence structure you have yourself.

hey, you ever try typing one handed? and I am a FEMALE

thank you!

you need to talk to someone about a FHA loan, and I agree with the free report issue, as it is a "soft pull" and don't bother spending the money on the score. We have a different set of rules in the little black box of scoring that "unfair fico, baseless beacon, and mindless fair issac" will give you.

(Fico, Beacon and Fair Issac are the scoring sytems of the 3 credit bureau companies we use.)

Watch it, or I'll drag a guy by the name of Grey Goose over, and we can really have a mortgage discussion! :wink:

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Chow you take everything so personal :P If you're going to smack someone, expect a smack back :P

It was kind of funny though ;)

chow · Posted: Wed Aug 24, 2005 9:25 pm Post subject:

A Day without getting "smacked" around is a day without chasing a cat....Out of my house!

(the thing sleeps right beside me and I'm alergic to cats!)

Yeah, I take it so personal.

I thought we could have a little good jest and ribbing? I don't mind it....as long as it is delivered with some wit.