1. Is it smart to buy a house in Toledo instead of renting?
Short answer: Probably yes, if you plan on sticking around. check out this rent vs buy calculator from the New York Times. Since Toledo housing tends to be cheap, the answer tends to look better towards buying, IF you plan on staying for 5 years or more. The average home in Toledo is $78,000. When you get to nicer areas it creeps up to $100,00-$125,000. Suburbs like Maumee, Perrysburg, Sylvania are usually $150,000-$250,000. These are averages – you will find some less, some more.
2 Can I afford to buy a house / qualify for a mortgage?
To be comfortable buying a house in Toledo, I would recommend having at a BARE MINIMUM $2500 saved up. More realistically, if you aren’t planning or are unable to use the programs I’m going to talk about, you need more like $5000-7000. There are several down payment assistance programs, you can ask for closing costs, and mitigate costs as much as possible, but you still need to have cash on hand for inspections, repairs upon moving in, and escrow.
To qualify for a mortgage, I’d recommend checking out Glass City Federal Credit Union’s mortgage calculator. (Note: you will need to enable flash. Sorry.) Click “Could I Qualify” or “How much Could I afford” and play with the numbers. Mortgage acceptance is not just based on your income & credit scores, but also your debt to income ratio. This calculator allows you to put in all your debts as well as income.
Side note: No matter how much you qualify for, you should never buy a house for more than 3 x your income! Conservatively, shoot for 2.5 x income.
Also, you need 2 years at your current job, sometimes 3 if you are self employed/an independent contractor. Sometimes, depending on what your job is, you can qualify if you have less than 2 years if you have been in the same field for that amount of time with no breaks in employment.
3 What about my credit score?
Whoo, this is a doozy. So in general, for a conventional loan, you need to have a minimum of 620-640. However, most lenders play it safe, and tend not to lend conventional to anyone with less than a 700-720. If you are on the lower end of the spectrum, consider an FHA loan – you need a minimum of 480, but again, most lenders play it safe and tend to stick to 600+. VA is usually around 620. Remember, if you are buying a home with someone else, the lender will look at the lowest score – so even if you have a steller 850 but your spouse has a 650, they are going to use the 650. to check out an estimate of your credit score, check out Credit Karma. The better your credit score, the better your interest rate.
4 How much of a down payment do I need? What about down payment assistance?
For a conventional loan you need a minimum down payment of 5%. If you are going FHA, you will need a minimum of 3.5%. Va loans don’t require a down payment. It is recommended to put down 20% so you can avoid Private mortgage insurance, but it is common that first time home buyers don’t have the full 20%.
Here are some programs for down payment assistance:
OFHA Down Payment Assistance Loan – Up to 5% of purchase price for down payment & closing cost assistance, must have a credit score of 620 for conventional or 640 for fha. You also need to meet income limits. Here are the limits for Lucas County and Wood County. You have to stay in the house for at least 7 years, or you have to pay back the full amount of the assistance.
OFHA Ohio Heroes Loan – Up to 5% of purchase price for down payment & closing cost assistance, must have a credit score of 640 for conventional or 660 for fha. You also need to meet income limits. Here are the limits for Lucas County and Wood County.You work in one of the following careers: [Veterans, active duty military members or members of reserve components (including surviving spouses) Police officers, firefighters, volunteer firefighters, EMTs and paramedics, Physicians, nurse practitioners, nurses (RN and LPN) and STNAs, Teachers (pre-K through grade 12), administrators and counselors.] You have to stay in the house for at least 7 years, or you have to pay back the full amount of the assistance.
OFHA Grants for Grads – Up to 5% of purchase price for down payment & closing cost assistance, must have a credit score of 640 for conventional or 660 for fha. You also need to meet income limits. Here are the limits for Lucas County and Wood County. You must be a college graduate. You have to live in Ohio (not the house) for at least 5 years, or you have to pay back the full amount of the assistance.
Toledo Division of Housing Down Payment Assistance: Up to 6% of purchase price towards down payment & closing cost assistance, has to be in Toledo, you have to meet income limits, and put down at least $500 of your own money. On the plus side, paying for an inspection counts towards your $500. You have to stay in the house for at least 5 years, or you have to pay back the full amount of the assistance.
Many lenders have similar programs that aren’t through the State or City – You can shop around at multiple lenders within a 30 day period, and it will only ding your credit once. Let me know if I can help you find some of them!
5 When should I start looking for a house?
Get pre-approved for a mortgage first! That way not only are you not wasting your and others’ time, you can can pounce on a house right away if you find one. The market (in my area, at least) is pretty hot right now, with multiple offers and homes being under contract right away.