First time home purchase

[Eric]

First and foremost, I'd like to say what a great forum you have running here. It's the first i've viewed that's not completely riddled with advertisements you have to sort through.

Now....I have recently started shopping for a home, my first. I have essentially localized the area I'd like to buy in, and have begun looking at all my loan options. I have been innundated, to say the least, by all the "propaganda" out there on home loans. I was wondering if anyone could help me sort through the garbage, and lock in my viable options.

Here's my quick scenario (sort of quick anyway).

After being married to a "spender" for a decade, I cut my losses and ran. I had to declare bankruptcy in 1995, and discovered a good deal of "ghost debt" when i got divorced. I have since cleaned up my credit report of all things except one two year old negative entry, and of course the nine+ year old bankruptcy. I have two credit cards with zero balance, and a debt to income ratio of about 1:10 positive. Despite all my letter writing and other efforts, my credit report is still only 650ish or so. I'm staring at a gross annual income of about 65k.

Since I'm military, and don't plan to be in the home greater than four years(five max) I've been told I have many options on my loan type. The area in question is very up-scale, and growing RAPIDLY! The average home price is about 210k, and they are on the market less than two weeks avg.

1. Standard 30yr fixed mortgage
2. Variable 15yr mortgage
3. Interest only mortage
4. Cash flow loan for mortgage

Does anyone have any advice on why I should steer towards or clear any of these options based on my criteria? Numbers 3 and 4 sound tempting due to extra money to be invested elsewhere, but I don't want to be blindsided due to ignorance.

Thank you in advance for any and all information...sorry for the essay.

[David]

I'm sure you are going to get some good answers. Check back early in the work week and I think you will have some good advice.
Welcome, and thanks for the compliments about the forum.

[Mac]

Eric, first of all you never said what state you live in. One of the brokers on this site might well be able to help you arrange your financing for you.

This leads to my next bit of advice. Hook up with a broker, either here or locally and have them do your research for you. They have access to many programs you may not have heard of.

Personally, It sounds like a 7 year Adjustable Rate Mortgage is what you are looking for. I say 7 year because this would give you additional time should your 4-5 year time frame get extended for some reason.

Your item #4 sounds viable however if the housing bubble in that neighborhood bursts as they are prone to do, you could find yourself not very happy with that loan.

I never heard of item #2. I'm not saying it isn't out there but it's been my experience that ARMs are based on a 30 year term and not 15.

One of the things that is keeping your credit scores depressed looks to be your lack of open credit. You have everything paid off (if I am reading your text correctly) and unfortunately, in order to prove yourself worthy of credit you have to go into debt. This new mortgage should help in that regard.

Good luck and I hope you get to enjoy your new home ASAP.
p.s. I'm no VA specialist but you might ask your broker if a VA, I/O, 7 year ARM is possible.

_________________
You can't make a bad man good but you can make a good man better.

[Haplo]

To simplify one of the things that Mac said, every scenario is different and it would be difficult to state which options are the best for you, and which wouldn't work as well. Quite simply because there may be other factors involved that would sway whether this program or that program even worked.

I believe that credit score req's on your #4 is around 700ish, so I'm not even sure that one would be available.

Also, fairly certain that there isn't a I/O feature on VA loans at all.

_________________
Travis J. Halwachs
Renovation Specialist
217-553-6494

[chow]

Keep your open credit cards at less than 50% of the limit. Since some credit card companies only report the high balance, not the limit-if you haven't used them much, you might want to go buy a big ticket item and pay it down quick. 650 scores are nothing to scoff at.

_________________
Kathy Grider

[Eric]

wow....Thank you everyone for the great info. I'm sitting down with my wife to digest all of this.

I'm in Virginia by the way.

The 650 score is with the bankruptcy still there....with it gone i should go up a bit. Its just past the ten year span so I'm petitioning for removal.

Thanks again for all the info!!

[chow]

I forgot something and I'm suprised Mac didn't bring it up. Be careful of the type of credit you get. Steer clear of credit cards or accounts that are "finance company" type cards. Don't open small accounts with the same type of companies. (ie Associates, Benefical, those little outlet stores/lenders in every neighborhood-these also would include those pesky home improvment store accounts! Yes, read the signs in the store, they are usually Beni, Assoc's and a few others who have really high rates on revolving credit cards)

It's not that they are bad companies, but those tradelines don't help, and you will actually have a score drop with them on your credit. While they help people re-establish after a BK, they should not be kept open or reopened once regular credit is established unless you need the quick emergency "my roof blew off" loan over the weekend, and I can pay it off when the insurance company sends the check.....

_________________
Kathy Grider

[OptionArm]

Hi Eric,

You mentioned cash flow from your mortgage #4.

I have an option arm with 4 monthly payment options.

1. minimum payment
2. interest only payment
3 30year payment
4 15 year payment

If you have a broker already mention World Savings Pick-A-Pay loan.

If you would like more info, you can give me a call.

[OptionArm]

sorry forgot to put my info.

Phillip Hansen
World Savings
800-778-0009 x38986
phansen010@worldsavings.com

[Haplo]

Is that option Arm available with a 650 score? My understanding was that for the most part you need a 680 or 700 score?

_________________
Travis J. Halwachs
Renovation Specialist
217-553-6494

[Nikko]

It has been my experience that World is not always score-driven. As a portfolio lender, they take it on a case-by-case basis. Would you agree with this, Phillip?

[Haplo]

Alright, I hadn't had any dealings with them that's why I didn't know

_________________
Travis J. Halwachs
Renovation Specialist
217-553-6494

[chow]

I'd just like to say this about option arms and the wrong borrower for them.


the lower the score, the higher the risk. And will you have a referral in any amount of years?


eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeekkkkkkkkkkkkkkkkkkkk

That is the sound of fingernails on the chalkboard in first grade class.
First Rule of money.


Trust.


do not use it all at one time.

_________________
Kathy Grider

[LoanGoddess]

Actually we offer Option ARMS all the way down to scores of 620 full doc to 95% so that is a good option for you. I, however, am not a broker but rather an AE. I see that some of my brokers are posting on this board so my products should be available to you.

It is very important that you keep several accounts open. Lots of folks who get into trouble with credit cards do not reestablish credit as they harbor a fear of credit from that time on. As a lender we require three accounts with 24 months history. Not all three need be open or have balances yet one must still be open.

As a first time buyer, you might find a combo loan of 80/15 or 80/20 more to your liking preserving some of your money to furnish the home. With a score of 620+ that is also a possibility with many lenders. We will even offer it stated income for a wage earner. Spend time checking out all your options and connect with a broker you trust and then stop looking for better deals. If you go from broker to broker and each one pulls your credit you will be in a world of hurt and will have won no broker loyalty to your cause. You need to become partners with the person you chose, so chose wisely.

Good luck and happy house hunting!

[David]

Welcome to the Mortgage Forums, LoanGoddess.