Izzy Posted June 23, 2010 Share Posted June 23, 2010 As some of ya'll know I was considering trading my flying V (signature scorpions) for a 60s Fender Jag. I saw the Jag and it was SO not worth it. Then I decided to give the V a real shot and had it set up, which I should have done ages ago! As it turns out the V is a killer guitar! It sounds and feels amazing. Guitar shop guy said, "wow, where you get this beauty?" and I knew I had done the right thing in keeping her. I've asked for guidance from ya'll in the past and ya'll have given me great insight. This time round I'm asking about a big life choice. I'm looking to buy a house. I've seen several and finally it seems I found one. Been pre-approved for 200k and have 10k in the bank. The property is a foreclosure and its 169k. I'm going to bid less, but not sure what I should bid. There are 2 other houses for sale on that same street. The seller said he'd take care of a large part of closing costs, leaving me at about 2k in closing (so the realtor lady said). Advice? Also...the real estate lady did the math and if I put just the 3.5% required down, assuming I get it at the price listed, my payments will equal one of my two monthly checks...a bit less than that actually, but I like to pretend it will be the whole thing just in case. Is that enough slack for bills? She said the payment would include the escrow and I imagine that means insurance maintenance fees and taxes are covered monthly right there. I'm going to be doing the math again and again...my girlfriend is moving in and she will be helping with about $500, but I don't like to assume I can count on anyone 'cus you never know. I'm getting nervous thinking I might not be accounting for certain expenses in my calculations. Then there is me wanting to go back to school...I just don't want to THROW away money on an apartment. Opinions and comments are appreciated. Link to comment Share on other sites More sharing options...
daveinspain Posted June 23, 2010 Share Posted June 23, 2010 Ok first congrats on keeping the V, good move. About the house/apartment.... Lets play devil's advocate, Why do you need to buy a house now? If you are going back to school maybe renting would work until you finish and get work in your new profession? Is now the best time to buy a house or make such a big investment and commitment? They say things in the economy could be headed for the worse. Might be better to wait a couple years. What is your living situation now? You living with family or do you have your own place? Link to comment Share on other sites More sharing options...
cookieman15061 Posted June 23, 2010 Share Posted June 23, 2010 Izzy I can only share what my daughter is going through at this very moment. She's single and after high school went off to college didn't apply herself and dropped out. The restaurant where she worked since she was 16 took her on full time and she worked hard and became an asst. mgr. She was making pretty good money for a single girl and was in line to get her own restaurant when she decided to buy a house instead of throwing her money away on rent. I wasn't real keen on it but everyone around her thought it was a good idea and the realtor was sure she could swing it financially. Now mind you this was right before the big banking disaster and they were glad to loan monies, even large amounts to people who may not have a large enough income to afford it. Short story is: within a year of buying she changed jobs (less pay), roommate moved out and she decided to go back to school to do what she's always wanted, become a teacher. The house is slowly pulling her down and the market right now as far as selling sucks big time. So my advise is only this, be sure. Be very sure. For most of us its the biggest investment we'll ever make. The total cost of keeping and maintaining a home are always underestimated. I hope everything works out for ya. On the bright side she just finished her first year back at school and made the Deans list. Link to comment Share on other sites More sharing options...
G McBride Posted June 23, 2010 Share Posted June 23, 2010 I understand wanting to buy so that you gain the equity and there are some good deals out there right now. I would suggest that you buy a lot lower than you can afford at this time in your life. Get a smaller house that you can put some sweat equity into it and raise the value. You don't say where you are located so specific buying tips are just a guess. You can never go wrong buying property provided you don't over pay. Link to comment Share on other sites More sharing options...
DiamondJig Posted June 23, 2010 Share Posted June 23, 2010 I'm closing on a house today so I think it's a great time to buy, house prices are down and interest rates are too. I'm no expert some things I doing. If possible putting 20% down will save you on mortgage insurance payment which you'll have to pay till you have aprx 80% equity in the home. Get the house inspected by a pro asap if your offer is accepted. Foreclosures are usually sold "as is" and have problems that you'll have to pay to have fixed. The escrow will be for the mortgage, taxes, house insurance & mortgage insurance. You still have to pay for all the other things to run and maintain a house. You can ask the bank that pre-approved you to do a closing cost estimate. Also check the tax assessors office to see what the houses assessed value is, you might be able to grieve the taxes to a lower amount if the price you are paying is a good deal lower. Link to comment Share on other sites More sharing options...
SGSpecialguy Posted June 23, 2010 Share Posted June 23, 2010 169K huh? whats the estimated value of the house ? I live in Florida where there are LOTS of foreclosures, its really brought the housing values down, but if I was in the market for a house now is a good time to buy because you can get one for CONSIDERABLY less then you could a few years ago also knowing that the market will rebound someday and you could score big if you fall onto the right house. There are houses here that are valued at $200k - $300k a few years ago and due to foreclosures are selling for $65k, granted they will probably need some work, but if you bought a house for $65k and lived there for a few years till the market rebounds then are able to sell it for $200 you will be MUCH better off then if you rented,, its a BUYERS market right now, some people are desperate to sell, if you have good credit and are secure in your job I think its a great time to buy !!! you KNOW the housing market will only go back up eventualy and you'll probably never be able to get a house for as cheap as you can now, so its a perfect time to buy if you are ready Link to comment Share on other sites More sharing options...
EVOL! Posted June 23, 2010 Share Posted June 23, 2010 Being a newer home owner (my wife and I closed on our house Dec. 2008), here is my advice. 1. Do not buy a house unless you are ready to settle in. A house is a huge investment; both financially and time wise. Financially you will have the mortgage. Good to hear they will roll the home owners insurance and property taxes into the payments. Time wise, there is more to upkeep than just mowing the lawn and shoveling the snow. Something always breaks or needs updating and home repairs ain't cheap. 2. I highly advise saving up until you can do a full 20% down payment. I know more than a few people who bought with no money down during the real estate boom and still have not reached the magic 20% equity mark. This makes it impossible for them to get out, especially during a downturn like this. I know it is hard for cats like us with steady income and savings to not jump on that foreclosure property that is selling for $100k less than the seller paid six years ago. Also, I do not think the market is going to come back to where it was ten years ago. That ship has sailed. 3. I cannot emphasize this enough - BEFORE YOU BUY A HOUSE HIRE YOUR OWN INSPECTOR. Not the jerk off the realtor or bank suggests. Do an online search and pay the $350 for him to come out for three hours and look the house over. Foreclosures and short sales are "as is" so know what you are getting into. You may also want to phone the township or county office to find out if there are any pending violations on the property. We got burned by this and had to spend $$$$$ and go to court four times because we inherited a code violation. The kicker is that this pending violation did not turn up in a title search. Good times. If I think of anything I will post it. Also, might want to google it, but I think 1/2 of your monthly pay is a lot for a mortgage. You want to be making around $50k/year if your buying a $169k house. Good luck! Link to comment Share on other sites More sharing options...
badbluesplayer Posted June 23, 2010 Share Posted June 23, 2010 A couple of good rules of thumb about house buying. 1. 20% down is good. It's alot. But any less down and you run the risk of your house going down in value and becoming worth less than your mortgage. 2. It's good if your house payment, insurance and taxes don't exceed about 30 to 40% of your gross income. That's a good guideline to make sure your payments aren't going to be too much to handle. Good luck!! Link to comment Share on other sites More sharing options...
Riffster Posted June 23, 2010 Share Posted June 23, 2010 Good advice here. The Real Estate is a "mild Mafia" the way I see it, there is not really a lot of people involved in the transaction of buying a home that have the same interest or stakes that you do. So not to repeat the advice in posts above the only one thing I will contribute is this: Most of the times houses are valued per square foot, make sure that the listed square footage is the actual, you'd be surprised houses list one way and then when you see the tax records or actual measurements the house is always smaller. My house was listed as 2,400 sq. ft. and at the time square footage was about the only driver in price, once we had an offer and contract on the house I noticed that "someone" had changed the square footage in the listing to 2,250, I asked nobody had an answer.... a 150 sq. ft difference @ $100 per is $15,000. This is just an example of how greedy the Real Estate market had become. Buying a house is a big deal but if you have financial stability it is the way to go, renting gets old as convenint as it is. Link to comment Share on other sites More sharing options...
ShredAstaire Posted June 23, 2010 Share Posted June 23, 2010 I dunno about anywhere else but in Toronto if you put down 20%, you avoid a lot of the real estate fees associated with buying your house. Though, you won't find a house in Toronto for that cheap unless its a run down closet type deal, or its quite a ways outside the city...man I wish my house was that cheap!!! You have to think about your mortgage payment too....are you going to have a house that you can never leave because all of your paycheck goes to your mortgage? I.E. House Poor? I suggest waiting til you have more to put down if you can...though if you gotta get out and do it...then just be careful and do your math before you make a decision. It's likely one of the biggest decisions you will make. Good luck! Link to comment Share on other sites More sharing options...
Witmer Posted June 23, 2010 Share Posted June 23, 2010 my payments will equal one of my two monthly checks...a bit less than that actually' date=' but I like to pretend it will be the whole thing just in case. Is that enough slack for bills? [/quote'] badbluesplayer is right - general wisdom is no higher than 30 - 40% gross income, but that's just an estimate. If you have no debt whatsoever (did you pay cash for that car? No school loans?) you might be able to go higher. If you have higher than average debt, 30% could be too high. If you don't know what you spend every month on credit cards, transportation, utilities, entertainment, food, etc, then you can't make a smart, informed decision. Try to get those numbers, average them over six months or so, and then figure that your utilities are going to go up when you move into a house. (And you'll need misc. $$$ for things like leaky faucet repair). Still only using one of your monthly paychecks? Give yourself a huge pat on the back for living that far beneath your means and being a paradigm of financial responsibility. =) ...Wouldn't surprise me if you are that responsible, given what little we know about you, but YOU need to be sure before you strap yourself to a house. And the time to do that thinking is now. As soon as you walk into a cute house, you'll be emotionally involved, no matter how much you tell yourself you won't. Draw a firm line in the sand now, while you still can. My wife and I had a line like that, and walking away from the house we almost bought was still really, really hard. Not only were we disappointed, but the seller was miffed, the real estate agents were disappointed... and you feel the pressure when you're on the spot. You're the only one in the process who will have your best interests as first priority. Be prepared - we don't want to hear that you had to sell the V to make a house payment! :-) Link to comment Share on other sites More sharing options...
milod Posted June 23, 2010 Share Posted June 23, 2010 evol probably gave the best advice here so far if you're gonna buy. My own thought? You sound as if you're thinking, "Should I do this or should I do that???" My response is that until you don't ask the question any more in a major sort of way, don't. It sounds as if you're doing well and trying to figure a next step. Where's the passion for any new pathway? Is it there or is the passion in wondering which road to take? More school? Sounds like a better long-term investment regardless of the housing market. This morning's news just noted home sales last month were down 33 percent. That's tough on someone wanting to move and I personally don't see things getting better until there are some changes in the economy in general. Local economy also plays a major role and you can lose years of saving and paying in a moment. We're in a time of political and economic swirling and I wouldn't bet on up or down - kinda like a fighter that's been hit hard and may go on to win the bout or may be easier to knock out. An additional degree or diploma or certification, otoh, especially if you keep on in "medicine" probably will last longer. Just some thoughts. m Link to comment Share on other sites More sharing options...
ChanMan Posted June 23, 2010 Share Posted June 23, 2010 1. Do not buy a house unless you are ready to settle in. A house is a huge investment; both financially and time wise. Financially you will have the mortgage. Good to hear they will roll the home owners insurance and property taxes into the payments. Time wise' date=' there is more to upkeep than just mowing the lawn and shoveling the snow. Something always breaks or needs updating and home repairs ain't cheap.[/b'] 3. I cannot emphasize this enough - BEFORE YOU BUY A HOUSE HIRE YOUR OWN INSPECTOR. Not the jerk off the realtor or bank suggests. Do an online search and pay the $350 for him to come out for three hours and look the house over. Foreclosures and short sales are "as is" so know what you are getting into. You may also want to phone the township or county office to find out if there are any pending violations on the property. We got burned by this and had to spend $$$$$ and go to court four times because we inherited a code violation. The kicker is that this pending violation did not turn up in a title search. Good times. Good luck! This. Emphasis mine. Go lower. You'll risk much paying half your income on just the home. Think about it.... where does the money come from when: the airconditioning unit dies? a lightning strike takes out half the power in your house? You wake up one morning to find your toilets overflowing and backed up? Your new car suddenly locks up and dies? all or some of this happens in the same day... or week? Yes, it did to me. We assumed the loan of the previous owners. We put 10k down on a $50k home. The house was four years old when we bought it, and is now completely paid off. I'm not sure what the market is like... I've always had trouble "getting" the Texas real estate market... but I'd look for something that took less of my available income if I were you. Link to comment Share on other sites More sharing options...
swleary Posted June 23, 2010 Share Posted June 23, 2010 Only advice I would really give here is, get done school and that way that portion of your life is covered. Start a job in the field and build your bank account up even more. You are still young so I'd do that all first. Depending ion the amount of the morgage, count on a medical exam ....too bad you weren't in Canada and close to me, I'd have to do the exam .....just sayin Link to comment Share on other sites More sharing options...
Thundergod Posted June 23, 2010 Share Posted June 23, 2010 She said the payment would include the escrow and I imagine that means insurance maintenance fees and taxes are covered monthly right there.I'm going to be doing the math again and again...my girlfriend is moving in and she will be helping with about $500' date=' but I don't like to assume I can count on anyone 'cus you never know. [/quote'] With real estate guys, don't ever imagine, asume, or guess. Ask any and all questions and make sure all the terms are on paper and signed by him/her. If not, you'd end up in real trouble. Always asume you'll spend twice as much as you are expecting to. And of course, great news on the guitar, hope you enjoy it a lot. Link to comment Share on other sites More sharing options...
Bowdiddley Posted June 23, 2010 Share Posted June 23, 2010 Izzy you said the house is listed at 169K. What is the appraised value? What is the market analysis showing? Are the people who are in foreclosure still in the house? If so talk with them and try to find out what is still owed on their mortgage, the bank likely will be willing to take that if you offered it maybe a little lower. I in no circumstance would offer more than what a Fair Market Analysis list the value at. Good luck if you pull the trigger and make the buy! Smart choice on the guitar! Link to comment Share on other sites More sharing options...
Rame Posted June 23, 2010 Share Posted June 23, 2010 Lots of good advice mentioned. I'll reitterate the most important ones IMHO and offer a few of my own. - Hire your own inspector - Factor into your budget repairs to the house. The hot water heater WILL die, the roof WILL need to be reshingled, the HVAC unit WILL die, etc. Just a matter of time so you'll need to budget for that. And as Thundergod said " Always asume you'll spend twice as much as you are expecting to." So true.... so painfully true. Because of this I would get much less of a house so that your payment is no more than 25-35% of your monthly paycheck. I didn't see this mentioned (maybe it's a given) but I also wanted to mention to make sure you get fixed rate and not an adjustable rate. Especially now since rates are so low. They will only go up in time and then your "easily affordable" payment will be choking you. Also I would recommend you get police reports on the neighborhood to see what the crime rate is and what kind of crime happens in the area. I can deal with kids busting up a mail box here and there. Murder, B and E, etc... ehhh...not so much. And lastly, check out the house at various times of the day and night. Drive around the neighborhood at night to see how safe it feels then. It can look like June and Ward Cleaver's neighborhood at 11 am when the realtor shows you the house. But at 9 pm the neighbors have woken up from sleeping off a drunk from the night before and are blasting Metallica and target shooting beer cans in the back yard. Not that that's a bad thing.... just different than what you saw earlier in the day. If you can, see how bad traffic is from the house to your work during rush hour so you know what the commute will be like. Same thing, it may take you 10 minutes to get there at 11 am but an hour and ten minutes in rush hour traffic. Good luck! Link to comment Share on other sites More sharing options...
jamman Posted June 24, 2010 Share Posted June 24, 2010 My 2 cents here, is ... your not putting enough money down on the house. which means you cann't afford it. this is why so many people got into trouble when the banking mess hit. the rates went up and they couldn't swing the difference on the new rate. everyone has given very good advice to you, and it's all dead on. but i think the botton line is ... if you have a "arm" can you afford it going up a few points ? or is it a fixed rate mortage ? there is a big difference. with a fixed rate , you know what your monthly payments will always be. not so with a ARM . good luck. Link to comment Share on other sites More sharing options...
mcmurray Posted June 24, 2010 Share Posted June 24, 2010 Also' date=' might want to google it, but I think 1/2 of your monthly pay is a lot for a mortgage. [/quote'] This is what I was thinking. Ideally you don't want to spend more than 30% of your net income on repayments. But if you're convinced you can afford it, go for it. Also consider renting out a room or two so you can have other people paying the loan off for you Link to comment Share on other sites More sharing options...
Izzy Posted June 24, 2010 Author Share Posted June 24, 2010 Thank you all for your advice. It has been read over carefully and the things which were pointed out again and again are starting to really make sense and sink in. This is a link to the place I'm thinking of getting (already offered 150k, waiting on an answer, won't pay over 160k). I was told my interest would be 4.9% and I have to ask if that will be fixed 'cus otherwise I'm not playing ball. house Question: Why is 20% the lucky down payment figure? I get the feeling this isn't about "the more you put in the less the monthly payment is", because from 10% to 20% down there is only a $100 difference a month, which is not huge. To answer your queries: Why am I looking to move? My boyfriend has been paying for the place we live in now 100%, bills and all. Things are looking bad for us though, so I want to move out and give us space. Why not rent an apt with my friend and save up $? Its a buyer's market, as some of you pointed out, and I want to strike while the iron is hot. Also, a night nurse sleeps odd hours. I need peace and quiet...things a house is much more likely to afford than an apartment. Is the area safe? I made sure to go to that street during the day and at night. It isn't the most elegant side of town, but I feel pretty calm in the area. The neighbor's cars are as nice or nicer than mine, though not fancy. Won't lie when I say I feel safer where I am now. Then again, when I first moved here I was scared (my boyfriend goes out of town often). Mom (God bless her) offered to give me some money towards the purchase. I could pull off 20% but I'd feel bad taking it from her. 11% is as much as I will allow myself to take. When I say the place would cost me half my monthly salary I mean utilities included (I pretended they would all be BAD months for light and gas). I didn't factor in the credit card bill or school loan payment. In total, I would have a quarter of my monthly salary left in the bank, God willing. Thank you all for taking the time to humor me, lend an ear/eye, educate and support. Link to comment Share on other sites More sharing options...
EVOL! Posted June 24, 2010 Share Posted June 24, 2010 20% is a magic number not because of the payments. It has to do with equity. When you put 20% down you instantly own 1/5 of the place which gives you a lot of leverage and more solid footing. It lessens your debt to the lender on the unfortunate chance you have to renegotiate with them down the road (foreclosure, under water, refinance). And if you ever need to bail out on short notice you might not have to sell the house for less than you owe. Example - a friend of mine and his wife bought a condo seven years ago during the real estate boom. No money down because they didn't need it. His wife is a dentists so income looked great (despite the fact that he was in his last two years of med school). A year and a half ago he took a job out of state at a nice practice so they moved. Guess what? He is stuck paying two mortgages: one for the new out of state house and one on his condo. Couple the real estate market downturn with the fact that he has almost no equity in the condo and he cannot even sell it for what he owes. Link to comment Share on other sites More sharing options...
milod Posted June 24, 2010 Share Posted June 24, 2010 Izzy... Yupper on the 20%... But if there's an offer down... all we can say in ways is "good luck." I looked at the location, etc. I don't know Houston nor have other friends there, so I dunno... BTW - glad you're happy too with the Jag decision. m Link to comment Share on other sites More sharing options...
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