Do we go for it now, or wait a bit longer?

lco1022 · #1 (**permalink**) 06-01-2010, 11:58 PM

Hi everyone! I'm in an interesting predicament and I'm hoping others can help me think this through

My husband and I just started discussing the idea of buying our first home. There are a number of variables at play here, so we are unsure if it would be best to jump on this now, or wait. Here goes:

My husbands credit scores are great, but mine are non-existant...literally. I have no credit history since 2008, so Fair-Isaac is unable to calculate any scores. There's no way he could apply for the mortgage alone, we need both of our incomes considered. Our plan is for him to work on his debt-to-limit ratio, and for me to establish credit over the next year with a secured credit card (then transition to an unsecured card). I'm not sure how much this will improve my FICO score by next year, but it's a start.

We also have enough to put down a 20% down payment plus some closing costs at the moment, which is ideal because it would minimize our monthly payments and eliminate PMI. However, doing this now would clean out my savings completely. In a year, we would have saved a bit more for other costs associated with moving into a home.

If we apply for a mortgage now:
- prices and rates are incredibly low and we can get a better home
- we'd start building equity sooner
- we can throw down 20% plus closing costs, but not have much left
- although interest rates are low, my nonexistent FICO scores would drive them up

If we apply for a mortgage later (say, a year):
- prices and rates might go up
- we won't start building equity until then
- we can throw down 20% plus closing costs, and would have extra money we saved throughout the year
- my FICO score may be better (not sure how much better), which would help us secure a better interest rate, but interest rates might be higher at that time anyways. My husband would have a better debt-to-credit limit ratio, as well.

We are absolutely planning on sitting down with a lender to help us work out the figures, but I'd rather get advice from others who have nothing to gain here.

So... what would you do?

Note: I keep hearing that now's the best time to buy, and it clearly is. So maybe the better question is, does anything suggest the housing market will go up significantly next year? Are we worrying too much about the possibility of these increased rates? As you can tell, we're putting quite a bit of pressure on ourselves to do this now, but we would hate to miss the boat.

littleroc02us · #2 (**permalink**) 06-04-2010, 11:04 AM

Why don't you try manual underwriters? There are still certain companies (Church Hill Mortgage) who don't used the FICO score to lend you money. Unlike the FICO score the lender actually pays attention to your ability to pay back the principle, they look at your debt to income ratio, your employment history, your rental history and your payment history. This is a viable option.

sapphirecapital · #3 (**permalink**) 06-06-2010, 02:15 AM

talk to a small credit union and if you do not have debt just no credit get a co-credit card with your husband and only use it slowly, also consider some games with your credit score, for example there are free company cards which show you have 5000 credit with them and you do not even need to buy something. I would wait, sure the rates are low but the situation is not that the Fed will go for higher rates fast and the house prices are not exploding, work on it but be ready to move on something when you have everything together.

PS: There are grants for first time homebuyers and even guarantee programs for families in specific income brackets, Do Your Homework!

C9Consulting · #4 (**permalink**) 06-06-2010, 02:50 PM

I would not advise anyone to completely deplete their savings, just for a house. So many things can come up between the time you close and the day that you build back up your savings. I see you guys are ready for a house, but would it be worth it to buy a house and then something (car, job change, etc..) happen and you have no saved cash to fall back on?

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