I put 10% down and went with ING Direct as a loan source. My credit was solid and I wans’t worried about my job.

My suggestions:

1. Wait at least 1 year to buy, rent first, get a feel for the area
2. Research what neighborhoods you’d want to live in and what house prices are, come up with a goal.
3. Save, save, save. Even now, some lenders will give you a loan with less than 10% down, but don’t take it, you’ll get ripped off in the long run. Make sure you can put down at least 10-20% down at closing.
4. Save an extra 2-3k for closing/moving costs.
5. To figure out how much house you can afford, run numbers based on 30 year fixed rates. If you can’t afford this type of loan, your price range is too high. My rule of thumb: if the monthly payment is more than 1/4 of your NET paycheck (after all taxes, benefits, etc.), go lower.
6. From the 2-3k that you’ve saved up for closing and moving, whatever you don’t use, roll over into an emergency fund immediately. Don’t touch that money until you ABSOLUTELY NEED it.

I am currently trying to purchase my first home and it has not been easy.

I considered my self in good shape financially, 0 debt, 100 K salary and 60k for a down payment. I live in a high priced area so I was am looking at condos in the 300K range. This would allow me to put 20% down.

I tried to get a morgage and was flat out rejected by 2 banks because my credit score was only 699. You must have a 700 or better or they simply won’t talk to you. I have 1 credit card and no credit history. I was absolutly amazed. Now I have to take out an FHA loan and pay PMI even though I can put 20% down. The morgage companys are placing harder restricts on the FHA loans that are hard than the goverment restrictions.

I believe that the banks right now just don’t want to lend money!.

-Dan Malone-

Something nice about being young and just starting out is that you can move around the country a bit to build up your resume before settling down. If you buy a house right now it would be hard to pull up those roots and move if a good opportunity came knocking.

Why is this? Two reasons:
-If your reserves are going to be low due to the purchase, this will help rebuild them.
-If you buy a home, you often need to undertake some projects to customize it or just buy furnishings and this can be expensive.
-It’s one of the easiest ways to functionally take a very low-interest loan out.

Now, don’t get me wrong, you should be somewhat careful with this. But if you have to scrape together a significant chunk of your savings for that 10 or 20% down, then getting a few grand back at closing (or much more, in the case of new construction) may help negate it significantly. I did this and it meant I really didn’t have any money worries until I was able to build up my reserves a bit, and was able to easily afford the upgrades such as flooring and paint that had to be done right away.

I was lucky in that, due to having some investments, my partner and I had enough for 20% down on a fairly modest condo. Our combined income then was not all that high given that we were in a pricey urban market, but the combination of all these other factors made it. We got a 5/1 ARM in 2003 (a good choice then, less so now) at 3.75% and recently sold due to a relocation for a modest gain, which isn’t bad considering the market and that we enjoyed 5 years of tax bennies and money not wasted on rent. Plus owning was just a much better living experience in general.

Nowadays I’m pretty sure that 10-20% down (depending on your local market) will be a necessity. A few years ago it was rare to see this, but not now. Also I’ve been hearing that you need a credit score well into the 700s, cash reserves (which could include investments, retirement accounts, 401ks, etc.) and a low debt load.