[lennyd]

Hey guys, like the title says, I'm a college student looking into buying a home as an alternative to renting. I've rented for the last 2 years or so (an apartment) and I'm just tired of throwing my money away - thus why I thought it would be better to purchase a home and then rent a couple of the rooms out to friends to keep the payments about what they were for an apartment. My girlfriend (basically finance) will be signing the loan with me. At first I didn't think that buying a home so young was possible, but recently while talking to a real-estate agent, we got on the topic and she informed me that with my credit and my girlfriends income helping out, it was more than possible. She put me in touch with a couple lenders, which I'll talk about more later.

Here's some info on us - we're 20 years old, juniors in college, both attend school full time. I've been in my current line of work for about two years and make roughly $1600 a month. She's been in hers for about a year and makes $1400-$1500 a month. My credit score is about 740, not sure of what hers is, but its decent as well. We are looking for a traditional 30year fixed loan with as low an interest rate as possible.

Here's my questions/concerns. Like I said previously, I thought the idea of purchasing a home was only a dream considering how young we are - I always knew we could make the payments just fine (renting was a little more than owning will be monthly), but I didn't think anyone in their right mind would finance someone 20 years old. Low and behold, I was wrong - but even though we're eligible for a loan, I'm new to the process and, still being in shell-shock from this being a real opportunity, I'm afraid people are going to take advantage of me with bad rates, fees, or just a bad loan in general.

What should I be looking for in a loan? The first lender I talked to said he could get us a 30year fixed rate mortgage up to $140,000, with a rate "in the low 7%s" (his exact words). It might be important to point out that I haven't actually gone through the pre-approval process, only pre-qualification, so the numbers aren't exact. This would be with 5% down. He also said that going with nothing down was an option, but I didn't ask how that would affect my rate. He also said something about how since we're under a certain income, we're eligible for better rates on insurance, didn't really explain it in full. Personally I would be hoping to spend somewhere around $120,000, but it's nice to know I could spend up to $140,000. I would like to keep our payments under $1000 a month. We will be having a buddy of mine living in the house with us for the duration of our college career (2 years, at which point we will have real jobs), so we will be going three ways on the total cost of rent/utilities, etc etc.

Again, I'm not so worried about making the payments, I would sign anything I didn't KNOW that we could pay on-time every month, but as far as the mortgage goes, what should I be looking for? What kind of rates do people my age normally get with the credit and income I have? Since I would only be putting 5% down, would just going with nothing down affect me much?? I know national rates are around 6.25% right now, so is me being offered a rate around 7% decent for my situation? Is a 30 year fixed loan the best way to go (I do NOT want to do interest only)? Please, please, please if you are knowledgeable in this department or have been through the process before, please comment. I'm just really afraid of hidden fee's and interest that they are not telling me about because I do not know any better. What is normal and what is not?

I'm afraid to really ask the lender about these things because I don't want him to tell me something's OK just to get my business. HELP!!

[Fr_Chuck]

First this is actually a good idea ( except for the renting to friends)

When I worked for GA TECH in Atlanta, several students were doing this, esp because the value of the property was going up a lot each year.

So they got interest only loans, with the idea of selling it in three to four years ( more if they were going to do masters degree) and were hopeing to not only get all the money they paid ( means they lived free) but also make money on the sale.

There are a lot of ways to "quote interest" and we see them advertised as something in the 6 percent but in the fine print at the end, it shows in the 7 percent. But currently 7 percent is not a bad interest

Biggest thing, never sign anything to commit until you get a sheet telling and showing you all of the costs

[lennyd]

Thanks father, we will only be renting out a room to one of my friends (whom I've roomed with over the last 2 years, and have been best friends with since 2nd grade). My girlfriend, him, and myself have all lived together for the past two years, so I'm not worried about him not paying, or anything like that. And even if he did, my girlfriend and I can make enough to pay the mortgage each month. We have absolutely zero monetary obligations (car payment, etc ect) right now, and shouldn't have any for the next two years.

What should I be looking for in a loan? I didn't want to do interest only because I'd like to build up as much equity in the home as I can prior to leaving school - and we can manage a normal payment just fine, so I figured that'd be best.

I'm just really afraid of being taken with the fine print, or things I have no idea about (since this is my first time and all). I just don't want to be eaten alive by a mortgage lender. What should I be expecting?

[Fr_Chuck]

Well that is why you use a good real estate person and you use a real estate attorney to look over everything ( before) you sign it.

But to be honest that first couple of years most of the money you pay is interest even on a normal mortgage. But either way works great.

But yes, I have always said, this about several professions and most mortgage lenders are the same way ( sorry for those on the board) if their mouths are moving they are lying.

So that is why you should first try and work with your local bank, and talk to your real estate person, normally they know who are good lenders and who are not.

Spend that little money up front on an attorney to review your documents, and it will be thousands saved ( sometimes)
But there will be house inspections, sometimes application fees and points. But ask for a complete sheet of costs and fees before doing anyting.

[dasuperfly]

I'm in an identical situation myself now with the question of buying a home on my mind as well. I'd love to hear from you Lenny D and how your home buying experance has turned out.
Please e-mail me if you can, thank you
[email protected]