Do you have 2 Nickels to Rub Together? © 2012 by Wayne D. Lewis, Sr.

Do you have 2 Nickels to Rub Together? © 2012 by Wayne D. Lewis, Sr.

Imagine a client who lives check to check, makes approximately $2000 a month.  Now, imagine that client paying $1100 a month rent, and $500 a month in food and expenses. At $1600 a month, that is equal to 80% of their income with $400 a month for discretionary spending.  At $1100 a month rental, that is equal to 55% of that client’s income.  This sounds like a recipe for disaster.

For someone earning $2000 a month income, the recommended ratio of a house note or rental would be 28%, or $560.00.  Putting that in perspective, in New Orleans, that translates possibly to a 1, maybe 2 bedroom rental.  But there is something to be said for paying $1100 rental for at least a year or more.  Your lender may verify, but if you are paying $1100 a month and you are on time with your other bills, you may have demonstrated your ability to reasonably maintain your credit, and having paid your monthly rental consistently. 

Your lender can conduct a credit check to see how you qualify, but it’s possible that if you are paying better than 50% of your monthly income, that you are qualified for a number of first-time home buyer programs.  The ratios that are required to buy a home are 28% and 36% (a conventional loan) with the 36%  going towards total home expenses including the house note.  See more at FHA guidelines: https://www.fha.com/fha_article.cfm?id=195

 

DEBT-TO-INCOME RATIOS

For your monthly income, at $2000, you could be paying a minimum of $560 (28%) or  towards your note, and total of 720.00, principal and interest.  There is some room to allow for escrow, but that room is determined by your lender, who looks at possible overtime, any bills that you maybe paying off soon, or maybe there are sources of income that can be added to address and improve your chances of qualifying for a home.

http://financeauthority.org/programs.shtml

FIRST TIME HOME BUYER PROGRAMS-

Often, we hear about First Time Home Buyer programs and wonder what makes them attractive.  For the first time home buyer, particularly here in Southeast Louisiana, there are often incentives.  Those incentives can be anywhere from 3% to 5% in closing costs assistance.  Or, as in the case of the New Orleans City Soft Second program, it is possible for a First Time Home buyer to receive up to $65,000 in Soft Second funding, and up to $10,000 in closing costs assistance.  These incentives are possible for the First Time Home Buyer providing that he/she completes a minimum of 12 hours of home buyer training.  There maybe other incentives including within the training, such as credit counseling, and how to manage your finances.

http://local.youngmoney.com/Whats_Dangerous_about_Credit_Repair_Louisiana-r1211748-Louisiana.html

There are also bond programs that are offered.  These programs may have their own requirements, so check with your lender to see what they are.  Not all lenders access bond programs or First Time Home Buyer Programs.  Before allowing anyone to run your credit, screen them for the services that they offer.  You may also want to screen lenders to see how easily you can communicate with them as they go through the home buying process.

http://homebuying.about.com/od/buyingahome/bb/buyhome.htm 

The drawback, or penalty is that if you take advantage of these great programs, you are required to stay within the home you buy for a minimum time period.  That usual minimum time period is five (5) years.  Your circumstances may vary, consult your lender.  Should you fail to honor the terms and conditions of these programs, you could incur as much as 6% penalties, or whatever is stipulated in your package. 

 

WHAT IS THE POINT?

 

The point of this message is to let you know that, short of having extremely bad credit, it is possible that you may qualify for a home loan.  Even with bad credit, you have an opportunity to rebuild your credit.  There are non-profits out here that offer credit building opportunities.  Once you have met the criteria that they have set aside, you are able to return to the arena of home buyers, able to buy your dream home.  Remember to do your homework.  Ask questions.  Assume nothing.  Just because you may have 2 nickels to rub together, don’t fall for the first program that becomes available.  Your goal is to always 2 nickels and more to rub together.

http://neworleans.la.mykeycreditrepair.com/

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