+1 vote
I want to buy a home as soon as possible but I'm trying to figure out the best way to 'distribute' my income.

I'm working on my credit (early 600s), but I'm not how to prioritize saving for a down payment or paying down loans/credit cards.

I don't think I qualify for a zero down payment option, probably FHA.

HELP!
asked Nov 9, 2017 in Buying a Home by Lane

2 Answers

+1 vote
Thanks for the question! Your first priority might be paying off debt, if you don't have enough income to qualify for a home while carrying that debt. First, you want to compare your income to your future home payment. Get a feel for your area's home prices, then plug a realistic home price into our FHA calculator: https://themortgagereports.com/fha-loan-calculator.

Put in 3.5% down and hit "next". You want to payment total there to be at or below 31% of your gross (before tax) income. Then, you want your home payment plus all your loan payments/credit card payments to be below 43% of your gross income.

If you would already qualify without paying off any debt, great. If not, pay off debt first.

Your credit is another issue. If your credit is low because you have high balances on your credit cards, you should knock balances down to about 10% of the credit card limit. That should raise your score significantly and make it easier to get qualified.

In short, there's no use saving up a down payment if you won't qualify yet. So first step is to make sure you're good to go in every other area.

Some helpful articles:
https://themortgagereports.com/20054/your-debt-to-income-ratio-can-tell-you-how-much-home-to-buy
https://themortgagereports.com/17157/5-ways-raise-your-credit-fico-score
answered Nov 9, 2017 by TimLucas (8,040 points)
0 votes
Paying down your credit cards will boost your credit scores. You need 3.5% down payment on purchase with FHA LOANS.  Closing costs on home purchase can be covered with sellers concessions or lender credit.  580 credit scores is the minimum credit scores required for FHA LOANS. The higher credit scores the lower mortgage rates.

Gustan Cho NMLS 873293
The Gustan Cho Team at USA MORTGAGE
www.gustancho.com
answered Feb 12, 2018 by GustanCho (106,540 points)

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