first time home buyers

I was wondering if you could help me with this question.

With a TU of 580, Eqf of 620 (don't know exp), is it worth it to buy now or wait? I live with mom (pay $500/month rent). I have a take home of $1600/month and $300 in expenses which does not include rent, food, utilities, internet, etc. I'd like $300 a month for myself. $1000 is not enough for all that and a mortgage is it Only if the mortgage was $500 or so. Sigh. I answered my own question.

 

Have a little hope, GatorDeb You may not be entirely accurate. First, you may or may not need 300 every month for yourself, depending on what your needs for that particular month are.

Whereabouts are you considering a house? Local taxes are a factor in the equation. With current mortgage rates at about 5.7% (and government FHAs at about 6.25%), you may be able to get more house than you were expecting.

I'm no certainly no expert (as I'm a first-time home seeker myself, currently walking through the same discussions with my first broker). But, based on your income and credit, I'm willing to guess that you'd be prequalified for anywhere up to about 130K? I could be very wrong -- maybe you qualify for more?

Your lender should discuss FHA with you. Requires less money down. (as low as 3% of the purchase price). Then there's the buyer assistance program (money back, after they jack up the house price by just as much.)

Good luck. Let us know how things shape out. And keep hope alive

-EC

 

GatorDeb have you thought about a condo or townhome? Sometimes they are lower than single family houses. Do some research in your area on pricing, you may be pleasantly surprised.

 

Wrote the wrong monthly income... it's $1800. That's $1500 for the mortgage payment, utilites, food, and Internet (I don't watch TV so I wouldn't need cable). I estimate food at $300, Internet is $50 (expensive here ), utilies at $400 (one person), so that's $750... which leaves $850 for a mortgage payment. Now I do need things like detergent, toilet paper, etc, so that's about $100 a month (toothpaste, maybe a change of clothes, etc), so I'm looking at a $750 mortgage payment. How common is that? I would love a townhouse - less to clean and it's all the house I need

What are the advantages to buying a house now rather than later? Can I refi when scores are better for lower interests? Do I really NEED a house? It's a buyer's market... are professionals projecting a seller's market in the next few years? I'm 24 years old at the moment.

What happens if I'm laid off? I wouldn't be able to afford a mortgage payment. Work gives me a $5000 principal-free loan (I pay the interest for 5 years and that takes care of the loan) so the down-payment closing costs are taken care of (but then there would be that pesky loan payment, which I wouldn't be able to afford).

I have 5k at 3.4% and 3k at 6% in credit cards and loans (and $3500 at 0% until August 2004).

I really need a raise

BTW I live in Las Vegas, NV. I could really prequalify for $130k with a TU of 570?!

Following my calculations I'd need a $750 mortgage but that doesn't include repaying the loan of the $5000 repayment. $600 and that would take care of both but leave no money a month.

I'm just wondering if the whole thing is worth to 1) have the risk of not having $ to pay the mortgage if I get laid off and 2) have no money left at the end of the month.

 

A dose of reality here so bear with me...

Did I read you right that there is just you? Why would your grocery bill be $300 a month? Why would your utilities be $400? Is that water and air conditioning? Yikes!

I don't think a house is out of the question but I do think that you might have to set your priorities to determine what is important right now. There are countless ways to cut monthly household bills.

You could easily cook and freeze a month's worth of meals (nice meals) for under $100. I know because I do it for a family of 4 for under $300 (and that includes lunches, snacks, pop and toiletries).

Also I understand faster internet is so much nicer to have but unless you have work or school requirements for a faster connection you always have the option of going to Juno for $9.95/mo.

See where I am going?

Good luck to you!

 

Re: Re: first time home buyers

It's nice that you realize your needs in a house. A big house isn't for everyone, so I applaud you for sizing your search to your needs. For a townhouse, you should be able to find something nice around your range. Note that I don't think you are a 750-ranger, your situation sounds more like 900-1000. But I could be (and often am) wrong.

You're not going to get much better than current rates. Of course you can refi later, but the general rule of thumb is to only refi if you're gonna gain over 2% from your current rate. And with rates from 5.5 to 6.5 on houses, it's not likely. Rates are lower than they've ever been in decades. (Not to say it won't get lower, but the odds are really low on that.) Keep in mind that to avoid incurring a loss in the long run, you normally can't refinance until after 2-3 years, depending on the loan terms and refi charge.

Only you can answer that one, based on what you want. But if you like something to call your own, want to invest in real estate that will likely appreciate over the years, and you don't like wasting money on rent that you'll never see again, then I'd lean towards a house. Just stay within your means.

It happens, and unfortunately it's not something folks can really plan for, other than having something extra in the bank for a rainy day.

If you take out 5K and only need 3 of it, save the other 2 for a rainy day, house repairs, etc. Also, this can be a safety buffer if you're struggling to make ends meet, until you can find a more permanent solution to your monthly deficit.

I don't know about NV -- I'm in PA. Banks usually include "given" costs in their rate calculators, so you don't have to itemize things like toiletries (unless it helps you with your practical budget plan.)

As cre8ivegrl said, you can probably cut your expenses to qualify for a house to suit your needs. Nobody wants to limit their lifestyle, and we're by no means telling you to do that. But prioritization is important in all things, especially time and money. If you can't live without cable or dsl, then that's what you need, and you may have to trim elsewhere.

If you're serious about the house and want to take the next step, one thing you may want to do is get "pre-qualified" for a mortgage loan. This will give you a ballpark figure of what you can afford. All lenders can give you a estimated quote. But be aware that this step will likely land you with hard inquiries on your CR that can negatively affect your FICO. And avoid internet lenders, as they tend to shop around and can cause more hard inquiries.

GL,

 

Re: Re: first time home buyers

I was guesstimating How much are utilities for a single person? $200? $100? I've always found it's better to overestimate than underestimate.

So if we cut food to $200 and utilities to $200... that would be an extra $300 - $1050 for the mortgage. There's still that loan to take care of. Sigh. But at least we're getting someplace

I don't feel like I'm throwing away my money because I live with family. That's a big reason why I don't rent from a stranger.

 

Re: Re: first time home buyers

I earn about the same as you, just a little more.

My house note: $600 (PITI) - on an $85K townhouse at 6.5% interest.

My food/mad money: $350

My utilities: $250

$40 power, $20 water, $50 gas, $70 phone/cell phone, $70 cable/HS internet

My student loan $140

Car gas: $60

Car insurance: $75

The rest of my cash goes to church and to paying down my credit card. I payed off my 7.9% car loan with a 0% CC, and so my revolving debt is high now, but I did it to save finance charges and if some emergency happened, I could reduce my CC payment significantly.

I have about $1200 in reserves, for 2 months of PITI on the house.

I have had the same fears as a single woman re job security and affording a home. There's really nothing you can do about that except to trust in God to take care of you and learn to market your skills.

Whatever you do - ONLY buy a house/townhouse that you can rent for PITI + a little extra and ONLY buy in a neighborhood that will appreciate well and that most other people want to live in, too. ONLY buy a house in very good physical condition so that you can sell it quickly if you need to. Make SURE that you can pay off the financed amount when you sell, though you may need to do a for sale by owner to accomplish this. Don't borrow against your equity. That's your safety net in case you have to sell.

Buy less than you need. If you're able to shave $300 off of living expenses, don't think of that cash as "more money for a house note". Think of that cash as "more money for disability insurance, emergency fund, repair fund, increased taxes services fund", ext.... because costs associated with a house DO GO UP. What happens if there is a city or county assessment against your house because they decide they need to widen street curves or run a new water line? It's stuff like that which will kill you, so please DON'T buy the max that you are pre-approved for when you're on a limited income.

Buy the cheapest house in the best quality but in the best neighborhood that you can get. Allow it to appreciate and when you raise your income, maybe you can move up.

It was worth it to me; I essentially lived with family (rented from family dirt cheap) but I needed to move, and this place was what I would have payed for any other apartment anywhere.

Start the process looking anyway. No one will force you to buy if you don't want to, but at the same time, you don't want to get priced out of your market/preferential neighborhood before you realize that you shoudl have bought.

I hope it works for you.

 

Re: Re: first time home buyers

You've pointed out some good things to consider. I think I'll consider that idea of yours to not buy what you've been approved for, but to settle for something slightly less. And of course, always with appreciation in mind. Thanks

Now I need to learn more about PITI. I think it's principle, interest, taxes, and income, but I'm probably off on 1 or 2 (or all.)

 

Re: Re: first time home buyers

Principal, Interest, Taxes and Insurance

Be careful when you get quotes of what your payment will be. Most lenders quote PI (or P&I--Principal and Interest). That's easy, it's based on the amount of the loan and the interest rate and the term of the loan.

The TI (Taxes and Insurance) is harder. That will vary from area to area, depending on the tax rate where you live, and on the company and policy that you get for homeowner's insurance.

So, take the PI quote, find out what the taxes and insurance are in the area you're considering (your real estate agent can help you), divide the taxes and insurance by twelve and add to the PI amount. You'll probably have to pay up to a year's worth of taxes and insurance into your escrow account at closing, as part of the closing costs. This is because the insurance has to be paid right away, and taxes may be due soon. Or, they may make you pay the first year's insurance premiums in advance and bring a copy of the payment to closing to prove you've paid.

Then the amount you pay into escrow each month will be there next time the taxes and insurance come due, and the insurance company will pay them. But each year you'll get an analysis of what has been paid and what is projected, and each year your payment will change depending upon whether your escrow is over or short. Hopefully it's not a big change. Mine went up almost $20 this year. Of course, my salary increased by slightly more, so that helps. But utilities and other things will go up as well. Take that into account, and don't let yourself become "house poor."

One of the best pieces of advice I was given when I bought my first house was similar to my last statement. Figure out what you can comfortable afford and stick to it. The real estate agent will often try to sell you a house that is a little more expensive, telling you that your income will go up. Yes, and so will your expenses. And there's always maintenance. Remember, when you own you pay, you can't call the landlord and have it taken care of.

Remember, you can always start with something small and work your way up.

Good luck.