Thinking of buying a House

[Falloutboy]

so got married a few months ago, and had a kinda 3 year plan. pay off debts this year, buy a house year 2 start on kids year 3. well I'm getting pissed at our landlord (a/c is dieing but not dead, cost us 350 in electricity to run the damn thing last month (800sqft townhouse).

basically I want to be out of this place before next summer so considering accelerating the process of buying a house, and want to start looking at places (debt isn't going to be in a spot to get a good mortgage for another few months but alteast want to get an idea of the market) would an agent even give me the time of day to start showing me places if I don't have a pre approval letter from the bank? Also whats the morgage market out there like now anyway? I know I won't have perfect credit (650ish now, but will improve once my CC debt is gone in a few months) how low of a down payment can you get away with these days, I'm guessing the days of 0 down are long gone.

 

[venkman]

You can get a place for 3.5% down using an FHA loan but you will pay PMI for 5 years.

 

[Falloutboy]

You can get a place for 3.5% down using an FHA loan but you will pay PMI for 5 years.

yeah i'm fine with that. only looking for a 60-80k house which is going to be a cheaper payment regardless than my rent.

 

[ichy]

If you're seriously considering buying a house with only 3.5% down you're not ready to buy one yet.

 

[FallenHero]

0 down doesn't exist. Even though 3.5% down is still accepted, have at least 10% of your price range in your bank as closing costs start to add up along with other unexpected expenses. If your credit score is that weak, I highly suggest you stick with your plan. To get the best rates, you need a much higher score. You really need to sit down with your wife, figure out all your expenses and income and price out your houses. Then start looking for what you want in it. Then after you narrow down everything, get a pre-approval letter and start looking. My wife and I looked for months online at different options we wanted in our house. Only after we had narrowed it down to 3-4 key items did we start looking, and then it was narrowed down even further as our price range came into play along with seeing things we didn't like.

There is a TON more to buying a house then you realize once you get into it.

 

[FallenHero]

If you're seriously considering buying a house with only 3.5% down you're not ready to buy one yet.

FHA loans are perfectly fine as long as you can make the PMI payments.

 

[tooriski]

my wife and I bought a house with 3.5% down using fha fixed loan. we are doing fine, paid more rent then our mortgage. not to mention it's a new house custom built to what we wanted.

 

[adairusmc]

I just closed on my new house a few weeks ago with a VA loan. My credit wasn't perfect, but I did get a fixed 3.75% with 5% down, and the bank chipped in 1.125% of the loan to put towards my closing costs. That, along with the sellers of the house chipping in the rest, we had to play no closing costs at all, just the down payment. Ours was in the $120,000 range. I get a permanent VA disability, so I was exempt from the VA funding fee which did lower the costs for us a bit. But we got the loan and rate just based on my credit score and income, since my fiancee had a much lower credit score.

We went with getting a pre-approval letter first, and then shopping though. We did not tell our agent about our pre-approval until the 2nd or so house we looked at, just told him our price range - so they will most definitely work with you without the pre-approval letter.

 

[tooriski]

If you think you can make the payment, go for it, don't listen to people saying you are not ready if all you can put down is 3.5%.

 

[FallenHero]

my wife and I bought a house with 3.5% down using fha fixed loan. we are doing fine, paid more rent then our mortgage. not to mention it's a new house custom built to what we wanted.

Exactly. But AT being AT, heaven forbid people use options available to them instead of "put 20% down or you are a failure in life."

3.5% down with 3.75% interest is my rate. Suck it AT.

 

[Falloutboy]

If you think you can make the payment, go for it, don't listen to people saying you are not ready if all you can put down is 3.5%.

yeah payment will be easy. and the idea of buying now is I kinda want to go the route where I buy a solid house that needs updating, but also I'm not stupid I know doing the updating quick will be $$$ and if I do it myself well it will take time. I'm 29, wife is 28. I don't want to be working on a house while she is pregnent, so if I wait instead of buying a 60-80k house that needs some TLC i'm looking at a 120-140k move in ready house.

I'm basically going to be buying the house on my income alone, she had a bankruptsy a couple years back, and putting her on the morgage will do more harm than good I have a feeling, so can't include her income (which is actually about the same as mine)

 

[sunzt]

Exactly. But AT being AT, heaven forbid people use options available to them instead of "put 20% down or you are a failure in life."

3.5% down with 3.75% interest is my rate. Suck it AT.

Actually, most ATers only pay houses with cash. Truth.

 

[EagleKeeper]

Exactly. But AT being AT, heaven forbid people use options available to them instead of "put 20% down or you are a failure in life."

3.5% down with 3.75% interest is my rate. Suck it AT.

0% down with 2.75% rate available for those that have served

 

[Falloutboy]

seems to me the smart money is putting the least amount of money down on the house the bank will allow you too. say I got 16k to put down on my 80k house. wouldn't it be better to put 10k of that into some kinda of investment that I still have acess to in the even of an emergency? a House really isn't an investment atleast in the shortterm anymore the way I see it, not unless the housing market changes drastically soon.

 

[Gunslinger08]

seems to me the smart money is putting the least amount of money down on the house the bank will allow you too. say I got 16k to put down on my 80k house. wouldn't it be better to put 10k of that into some kinda of investment that I still have acess to in the even of an emergency? a House really isn't an investment atleast in the shortterm anymore the way I see it, not unless the housing market changes drastically soon.

Only nice thing about putting down $16k on $80k is that you'll have 20% equity, meaning no PMI. I'm pretty sure the tax deduction for PMI expired this year, meaning you lose 100% of it.

If putting $16k down will tap out your savings, I wouldn't do it. You need an emergency fund to pay bills for a while if you lose your job or you're self employed and can't work due to illness or injury.

It sounds like you have the right perspective on home ownership as well. A primary residence really isn't an investment. It's just a place to live that you can call your own. If you're lucky, your value will grow with inflation.

 

[GT1999]

If you put 5% down it will lower your PMI and it's only 1.5% more, so if you can put 5% down I would try to. I'm in the same boat except we got a 3.25 pre-approval (we'll see if that really sticks) and we were going to put 3.5 down but after looking at the numbers 5% down is a better option.

 

[Falloutboy]

now another question say I find a solid house that needs 20k in mechanical, and general updates to work, how hard is it to say buy a 60k house and include the 20k in mechanical and nessary upgardes in the morgage?

 

[NutBucket]

Not easy. FHA requires the home basically be in "move in" condition. Rolling in 30% more for fixes isn't going to happen.

 

[ichy]

Don't forget you'll need money for closing costs and you want some reserves to cover unexpected expenses. If you can only put 3.5% down it doesn't sound like you have much of a buffer. Also, how certain are you that you won't be moving in the next few years (or getting divorced, pardon my cynicism.) I've seen too many people get screwed when they buy a house and then soon have to sell because of a job change or marital status change.

 

[Vdubchaos]

I know I won't have perfect credit (650ish now, but will improve once my CC debt is gone in a few months) how low of a down payment can you get away with these days, I'm guessing the days of 0 down are long gone.

God, if I can get a dollar for every time I hear this.

I have some good and bad news for you.

Good news - it is the best time to buy a house RIGHT NOW (low prices, low interest). I couldn't tell you what it will be like in 2 years time but I doubt home prices will go up much for MANY years to come (just my opinion).

Now onto what matters.....

It doesn't matter what Bank/Government ALLOWS you to do. They will give you the world...but that does NOT answer YOUR question of "am I ready to buy a house".

This is something only YOU can answer. And below will sound harsh, just keep in mind I'm trying to help you.

Question #1
Do you have an emergency fund. 6-9 months to cover ALL expenses in case something goes wrong.

If the answer is no, you are not ready. I'm assuming your answer is no since you are paying off debt.....

I like to tell people to put down good 20% down or simply not buying a house. This does # of things.
- Keeps your mortgage payments down
- no PMI
- Gives you plenty of safety net in the unstable market (in case values go down etc)
- tells the seller you are serious
- tells the agent you are READY

God forbid you lose your job or something happens. Assuming your house value stays the same....at even 5% down you just covered closing costs (maybe) You will most likely PAY to get rid of your house and some.

If you ask me, if you don't have 20% down, you are not ready. But that's just me. No Bank/Government or most people around here will ever tell you that.

Just remember, agent/bank/government is NOT on your side. They are there to make money OFF of you. Do NOT take any financial advice from them!!!

Also, this is VERY important. Remember, home is NOT an investment. It's a place where you live at and build equity over MANY years. It will cost you 25%-35% more than your rent as you will have to cover MANY more expenses. It will also consume lot of your time.

You have a good plan, I just think 3 years is a bit optimistic (but I could be wrong, I just don't know).

Pay off your debt and SAVE SAVE SAVE. Not only this will help you to be more financially stable/reliable down the road (when you will need it the most, during home ownership) but it will give you financial security you really REALLY want when owning a house.

Good call on the kids after home purchase. I did it the wrong way and it was VERY VERY VERY hard to get to the point I'm at now (and not without help from others).

PS. Take your time and be patient. Home ownership is not what it's hyped up to be. Don't get me wrong it's NICE to have your own home but one has to be ready. Risk is ALWAYS on YOUR side.

 

[ThePresence]

OMG I wish I lived in an area where I could buy a house for 80k. That wont get you two blades of grass here in NJ. My house was 400k and I put down 20%. I got 3.75 fixed which was great a year ago.

 

[Vdubchaos]

OMG I wish I lived in an area where I could buy a house for 80k. That wont get you two blades of grass here in NJ. My house was 400k and I put down 20%. I got 3.75 fixed which was great a year ago.

Above is very nice to see. Congrats!!!

Same here in CT btw. Still very expensive (even after the crash)

 

[rh71]

house costing only 60-80k... man I wish I was debt free so quick. That's not even half of what it cost for us to put in the 2nd floor last year. We still have a $270k mortgage that will end up being a $500k payment if we take our time, not to mention our $15k/yr taxes. I'm not complaining about what I pay, I'm complaining about what you pay.

 

[Falloutboy]

house costing only 60-80k... man I wish I was debt free so quick. We still have a $270k mortgage.

you prolly make 2-3x as much as me atleast.

 

[ichy]

Vdubchaos:

Thank you for delivering another voice of caution and explaining yourself much better than I did.