STYLETHREAD -- LET'S TALK SHOP!

Elle · Hermes

Thoughts on homebuying?

Hermione · Kate Spade

I'm sure some of the other experienced homebuyers here will have better and more informative advice, but isn't this the kind of thing that a realtor can help you out with? or whoever's showing you the houses? i would think that b/c of how well FH is doing money-wise, you guys would qualify for lower interest, better deal (like the $0 down or whatever.)

nunzi182 · Kate Spade

DH and I are in a similar position now. We are moving into a new townhouse at the end of this month. Before I say anything else, are you sure you can't qualify for 0 down? Our mortgage guy gave us the impression that as long as your credit is good, you can do 0 down, which is what we actually did. You might now be as bad off as you thought. There are a lot of incentives for first time buyers and I believe 0 down is one of them. My first suggestion is to look into mortgages right now to see what you can get. We went on lending tree's web site for a pre approval sort of thing.

Elle · Hermes

Hermione - The house isn't even built yet, so we'd be buying direct from the builder instead of through a real estate agent.

From our research thus far, it appears that many mortgage lenders do offer first time homebuying incentives, but they come with a cap on income (some have a set dollar amount cap, others use a percentage of the median income in the area as a cap). The 'regular' financing we do qualify for usually requires a hefty downpayment (normally it would come from selling another house, since most people who get this kind of financing aren't first timers). Since we don't have much of a downpayment, our payments would be about double what we're willing to pay, which is what's throwing a wrench in this whole thing. It's not that we couldn't get financed, it's just looking like we might not be able to be financed on terms we're comfortable with because like I said we're not willing to be house poor.

We've done multiple mortgage calculators, and as far as we're concerned what they say we can 'afford' is totally ridiculous. They come out to being almost 3/4 of take home , which we are absolutely not willing to do!

JoceyBaby23 · Gucci

If you aren't sure.. I would not buy right now. I'm afraid you guys have too much going on this year. Homebuying is something you should be comfortable with and until this wedding is over and done with.. Things are going to be so crazy in your life!

Normally, I am all for buying a House as soon as possible. But in this case, if you guys wait another 6 months, you will be in a much better situation.

Although you may find a mortgage company that will do $0 down.. that only means that your mortgage payments are going to be WAY higher than if you would be able to put down 10-20%. Even putting down $10K can lower your monthly payments by $100-$200! (we are going through this right now so I am speaking from experience.)

I would go and talk to someone from a Mortgage company and talk about your options. And since you mentioned it.. being "house-poor" is NOT fun!

NCshopper · Hermes

I totally agree with Jocey. Just wait. Buying a house is a really stressful experience and with that going on right around the time of your wedding, you may be in over your head in terms of stress.

Also, while it feels like you need to move on it now, you really don't. New developments are always going up and a year from now, you'll still be able to find an affordable place to live. Having a $0 down mortgage will mean a MUCH higher mortgage payment. If you can save for the next year and then put down a larger down payment, you'll be a lot happier in the long run. Renting does kinda suck and all, but you're doing it now, and you can continue to do it for another year.

Think of it this way: one year of waiting will be much easier to deal with than 5, 10, or 20 years of a high mortgage payment.

halleybird · Hermes

Elle wrote:

The 'regular' financing we do qualify for usually requires a hefty downpayment (normally it would come from selling another house, since most people who get this kind of financing aren't first timers). Since we don't have much of a downpayment, our payments would be about double what we're willing to pay, which is what's throwing a wrench in this whole thing.

Elle, are you talking about a conventional mortgage loan? If so, if you don't have 20% to put down, you can get mortgage insurance, which shouldn't increase your payments that much (we had it on our old house...it was about $180/month). Once you hit 20% equity, you can have it removed. If your area is a hot market, which it sounds like it is, that won't be long. (It was only about a year in our old house.)

Also, even FHA loans and VA loans, which are for lower income brackets, require mortgage insurance if you have less than 20% to put down.

As for being house-poor, I think it's worth it. You guys are young, so your income should go up. We were "house poor" when we bought this house, and we probably still are, but we can afford it -- it just means giving up other things.

Elle · Hermes

I think we might actually have hope - FHA looks like it might work for us! You also get about a 50% discount on mortgage insurance through FHA, and the payments their calculators give are promising. I'll show the site to FH when he gets home and see what he thinks. Through them you can borrow up to 97% of the homes value.

If we can get our payments where we want them, we won't hesitate. We need to keep some money free each month to upgrade the house slowly (we'd have it built as a bare-minimum base model, because I categorically refuse to pay $1,000 more to have silver hardware instead of gold throughout!), but there isn't a whole heck of alot that we could give up, short of food and heat .

Thanks so much for your thoughts - keep 'em coming! I'll let you know if/when/what we decide on ...

halleybird · Hermes

we had an FHA loan with our first house and it was great. Just keep track of your equity and get your inspection the moment you hit 20% equity, so you don't pay more mortgage insurance than you have to. And I totally agree about starting with a "base" model. My parents always said only to upgrade things that are really, really hard to do on your own (like double doors, etc). My mom is STILL paying for the wood-floor upgrade on her house, even though she replaced them with slate in 1996.

Elle · Hermes

halleybird wrote:

we had an FHA loan with our first house and it was great. Just keep track of your equity and get your inspection the moment you hit 20% equity, so you don't pay more mortgage insurance than you have to. And I totally agree about starting with a "base" model. My parents always said only to upgrade things that are really, really hard to do on your own (like double doors, etc). My mom is STILL paying for the wood-floor upgrade on her house, even though she replaced them with slate in 1996.

EXACTLY! We'd upgrade to get a master bathroom (5k, but good for resale), and maybe cabinets (or maybe not, depending on how atrocious the base models are and how expensive refacing would be) but that's about it! We're pretty handy anyhow, and it would be fun to have projects to work on. And I don't understand how they talk people into financing the upgrades that they already paid at least double for just by having the builder do them into their mortgages so they can pay for them for the next 30 years

. Beyond me! So we'd be painting, replacing appliances, replacing flooring with wood downstairs and high quality carpet upstairs, replacing tacky hardware, putting a banister in the stairways instead of the half-walls, and I think that's it. Damn, now I'm getting all excited again!

valenciana · Dooney & Bourke

alright...i realized i just hijacked this thred and will now post my question in a spinoff thread instead...

-- Edited by valenciana at 21:30, 2006-03-13

Deuce · Dooney & Bourke

Elle, Have you though about or factored in Homeowners association dues, and property taxes? I could buy a condo now if I didnt have to worry about these. The HOA does usually take the place of some insurances, but it is an issue.

If you live in an area where you are sure the prices are going up, and you dont want to pass up the deal you can always do an intrest only 100% financing mortgage and refi in 1-5 years. It is pretty common here to do a 5 year intrest only loan, (a pay more when you can) and refi to a traditional amortized mortgage. That is just an option if you really want to but now.

Elle · Hermes

Deuce wrote:

Elle, Have you though about or factored in Homeowners association dues, and property taxes? I could buy a condo now if I didnt have to worry about these. The HOA does usually take the place of some insurances, but it is an issue.

If you live in an area where you are sure the prices are going up, and you dont want to pass up the deal you can always do an intrest only 100% financing mortgage and refi in 1-5 years. It is pretty common here to do a 5 year intrest only loan, (a pay more when you can) and refi to a traditional amortized mortgage. That is just an option if you really want to but now.

We have indeedy considered HOAs and property taxes - together those alone are about $250 a month, and we are tacking them on to the mortgage payments in our heads as we figure affordability. That's one of the reasons we're being extra stingy about how high we are willing to go with the payment.

I honestly don't know too much about the interest only loans. It's not like we are in desperate need of housing, since we like where we are and it's a freakin' steal, so if it won't work with a traditional mortgage I think we'll just push it back to a time when it would work with a traditional mortgage. We don't plan on being here more than 4 more years or so, and if we're going to go to the trouble of buying a place we'd like to build as much equity as we can in it to take with us when we leave. What are the benefits/drawbacks to the interest only mortgages?

Deuce · Dooney & Bourke

Intrest only loans are mostly for getting the lowest payment possible. You are usually banking on the fact that the property will go up in value, in order to gain any equity. Then you would refi later. I have mixed opinions on this, where I live I am not sure if property is going to hold its value (way inflated). But if you are in an area that is growing, it may be a good idea to do this, because you are gaining equity and only paying similar to what you would pay in rent. Also the intrest is tax deductable. HTH

Elle · Hermes

Thanks so much for everyones advice (I feel like I'm saying that alot today ). I think we're going to wait for now.

We checked into various mortgage scenarios, and found one that would put us only about $150 a month over our 'ideal' payment. But because we'd be closing just a month or two after the wedding, we'd have to borrow money from FH's grandparents to cover some of the down payment and the closing costs. We've decided it's close, but no cigar. We've also found that if we save for an entire year and put that money down on the house we'd actually have more equity right off the bat then we would if we bought now and paid on the house for that year.

I think we can still get into the tail end of this community since they're only about half done building it, so right now we're thinking that we could get into something around this time next year with relative ease since we'd have an extra 6 months to save and therefore could make a larger down payment and not have to borrow money for closing. I'm sad because the place is really cute, but hopefully we'll still end up there, if a little later than hoped.