Money Advice Needed (housing)

[cbzdel]

I just had a something like 5 page essay typed out here, when really I can sum it up in a few sentences..

How in the world do you save for a home down payment when all you money is going to rent. We are paying $850 a month total, when if we just happen to have $30k in the bank we could send $850/mo and actually own a home..

Me and fiance (soon to be wife in 2 months) want a house so bad but with all our money going to rent how does one ever save up 20% for the down payment?? We would settle for a $150k home which is not much in our area, but it will make us happy and have a place to call our own..

We are renting a house now just to have a garage so I can work on my car project and store my motorcycle, but are thinking of downsizing to an apt just to have more cash, but then I am worried about leaving my bike out in the apartment parking lot

Any advice for a soon to be newly wed trying to start out???

 

[DefyInertia]

Save more, spend less? If that does not do the trick, then you probably don't make enough.

You can always put down less than 20%....

FWIW, my wife and I rent a 2 bdrm, 1 bath, with one garage spot in the Mission (not an "upscale" neighborhood) for $2,575/month...imagine that!

 

[cbzdel]

we make about $6000 month combined after taxes are taken out.. I mean we could afford to save more, but we put all our extra $$$ on car payments and such.. Because you get more out of seeing the debt numbers drop than the savings number SLOWLY go up..

And we have about $900 a month in bills with (2) car payments and a bike payment and cell phones and car insurance...

Maybe we don't make enough, maybe we just have high hopes haha... Her sister is a real estate agent but lives over on the east cost, we are going to visit her next month so maybe so can shine some light on us...

I guess I need to be schooled on home buying, and not post about it while drinking haha.. I got nothing against renting I just hate my family knocking me for it and how the money is going no where.. Its not my fault your home cost $70,000 when you bought it and you made about the same amount as I make!

 

[DefyInertia]

It seems like your expenses are kinda high for your income level. Do you need two cars? Some people do, some people don't. Did you need to buy cars that required payments? Probably not. Did you need to buy a nice shiny FZ6 that required payments? Probably not. These are all decisions you made...decision that were not in favor of buying a house now.

That's ok...it's just one trade off for the next. You'll get there...you just have to spend less if you really want a home.

Good luck

 

[cbzdel]

EDIT! we make $3000 s month each after taxes.. so $6000 a month total.. and no we didn't have to buy new cars.. my car was $2800 lol its far from shiny.. hers is $20,000 VW lemon! but she bought it before we met I would never buy a any motorized transportation over 10k.. I didn't have to buy my bike but I did because I rode a honda ruckus daily for a year straight even in the winter so I wanted to treat myself I also have zero credit card debt.. the woman has 7k.. she had a 15k when we met and I made her cancel her cards if she wanted to date me so shrinking puts all her money on that.. the only debt I have is with my dad whom I owe for some legal things he bailed me out of...

 

[dean owens]

i don't have a bunch of advice to give you but i will strongly suggest that you pick up the book "total money makeover" by dave ramsey. it is not a get rick quick book. it is a common since book. my wife and i have read it and have now jumped on a plan to pay off all our debt and living differently. it will be a great help to you. trust me. and if you don't trust me enough to buy it. let me know. i'll buy you a copy.

 

[necrotimus]

You can buy a house with nothing down. The most important thing is your credit scores so run your credit report and start cleaning it up.

 

[goker]

i don't have a bunch of advice to give you but i will strongly suggest that you pick up the book "total money makeover" by dave ramsey. it is not a get rick quick book. it is a common since book. my wife and i have read it and have now jumped on a plan to pay off all our debt and living differently. it will be a great help to you. trust me. and if you don't trust me enough to buy it. let me know. i'll buy you a copy.

+1 on Dave Ramsey. He doesn't say anything you probably already do not know, but puts in respective where you can apply it to real life situations. Also, check out and see if you can attend one of his remote seminars (you might be able to get into one through your local church which makes cost very reasonable). He is very entertaining as well.

 

[FizzySix]

How in the world do you save for a home down payment when all you money is going to rent. We are paying $850 a month total

...and you bring home $6k/mo after taxes combined? All of your money is not going to rent; only 14% is, a small fraction. You need to figure out where the other 86% of your money is going. Given your other posts it's not car payments, and it's not servicing other debt? With that kind of disposable income you should be able to save up for a hefty down payment.

That being said, in addition to reading up on personal finance (if you're not ready to get a financial advisor) you should go talk to a real estate agent and a mortgage broker, they're free to talk to. Also, be sure to read the real-estate section of your local paper, read home buying for dummies, attend home-buying seminars, etc. There's a lot to know before you take the plunge. There are options aside from a big down payment, including loans for first-time home buyers with less than 20% down, taking out a second loan for the down, etc. If your credit score and income line up, banks will still lend you money, regardless of the hype in the media right now.

Good luck...home ownership is a joy, and a lot of work! :Flash:

 

[cbzdel]

Thanks for all the advice guys. I just filled out a form that told us where our income is going, and DAMN, I have no idea where it is going!!!

I plan on getting ahold of that book and reading it cover to cover..

Thanks guys, sometimes the simplest answers are right under your nose!

 

[tuningfork]

Don't forget the $8k you can get as a first-time buyer...if you can come up with some down payment by yourself, maybe someone in your family can loan you the $8k, then you can pay them back in full with the tax rebate.

You should be able to get into a place with like 3-5% down and good credit/income. 0% is going to be risky and will probably have crappy rates/fees. The more you have, the better the interest rate. Just remember less than 20% down and you'll pay PMI which sucks but can be done.

I think the quickest scenario for you to get into a house is if you can come up with 10% cash and have good credit and are buying a house that will have a solid appraisal (ie it is worth what you are paying but preferably MORE)...then do a "80-10-10" loan....you put down 10% cash, borrow 80% on a first mortgage, then borrow the remaining 10% as an equity line to cover the balance. This way you avoid paying PMI (because the mortgage is only for 80% and there is no PMI to my knowlege on an equity line). If the house appraises higher than your purchase price you can also borrow against that to cover your prepaids/closing costs (ie you agree to overpay for the house, the seller then credits you at closing = less out of pocket)

For your hypothetical $150k house,this means $15k, plus closing costs ($3-5k), plus at least few months of mortgage payments + expenses in cash in the bank. If your family loans you $8k, you'll just need $7k (plus the other stuff) to make it work. A lot less than $30k and nothing shady about it. Then just be smart about your payments and you are all set.

The risk with this is if the value of the house tanks you've already borrowed your equity and could go "negative"...not an issue if the house rises in value, or if you work to use your excess monthly to pay off the equity line.

 

[goker]

Don't forget the $8k you can get as a first-time buyer...if you can come up with some down payment by yourself, maybe someone in your family can loan you the $8k, then you can pay them back in full with the tax rebate.

Just remember, anytime you borrow money even from family members, it counts as you "borrowing" money on the whole deal. This may effect what interest rate you will get for the loan. More you borrow for the house, higher the interest rate will be because you will be higher risk. I know this seems backwards, but, it is what it is.

 

[FZ1inNH]

Another thought... some lending places here allow you to take out two loans. One for 80% and the other for 20% which is a "home improvement" loan or something along those lines. So long as you have great credit scores, most are willing to do this. This also relieves you of the PMI burden. You will have to have closing costs and maybe a point or two at closing but it should be less than the 20% you'd have to save.

I have a co-worker that just bought a condo using this method and he put out very little cash out of pocket. His credit wasn't all that great either so he did end up with a slightly higher interest rate but he will refinance the two loans into one in a couple years, once he has 20% equity in the condo. He bought it really low and the value has gone up with development around his area.

Check into the local banks and credit unions. Talk to some loan officers and/or get pre-approved. We were pre-approved for a lot more than I wanted to spend. We could have bought a BIG house but we chose to buy something smaller that we could afford even if one of us was out of work for any length of time. Thank God we did because a few years ago, I was out of work for 5 months! Actually enjoyed it though!

Good luck!

 

[99vengeur]

I don't know if you said this or not, but will this be the first home you have ever purchased? If so, you should be able to qualify for a first-time home buyer deal. It's known as a FHA mortgage. That's what my wife and I did and we only make $40K combined in a year. What's nice about the FHA loan is that it only takes a 3% down payment instead of 20%.

I don't know if you have done this yet, but talk to a mortgage company and find out what you qualify for. This will give you an opportunity to see what's available based on your credit, price range, estimated down payment, etc. You should be able to find something that works.

 

[Tremulant]

What 99vengeur said is true. My wife and I are going to be buying a home soon, and as first time home buyers you don't have to have much of a down payment at all. In fact, in Utah right now first time home buyers can get a home with no down payment at all.

Ok, seriously, $6000 a month and you can't make it work? My wife and I make a combined total of about $3000 a month after taxes and we're going to be buying a house shortly...you need to seriously re-evaluate your budget. I use Quicken Online to do my budgeting.

And by the way, that $8000 dollar first time home buyer thing is just a tax credit. Don't borrow against it, because it may only come out to a few thousand dollars once you run your numbers next spring.

 

[Cuba]

I just went through the process and these members all have good advice. As a first time homebuyer you have the $8K tax credit- you can immediately ramp up your savings by maxxing out your tax exemptions at work (taking this credit early, essentially) which should help a lot. You can get the FHA loan like I did- your closing expenses will be 3% down on the home, $3-4K closing costs, plus your escrow (taxes, insurance, etc.) which can add up, but for me my total cash expense was almost exactly 10% of the purchase price. Still a big chunk of cash, so my offer included a large amount of sellers' assistance. The total purchase price on the house was higher but I got almost 50% of my closing expenses paid for by the seller. I paid a $2K down payment when they accepted my offer, closing wasn't for another 2 months so I had additional savings during that period, the seller assistance happens at the closing, so I only had to write a check at the closing for around 3.5% of the total purchase price.

Make an offer with a high sellers' assistance number. The seller doesn't care whether you take out a slightly larger mortgage, the net price is the same for them if you buy it for $150K or at $158K with $8K sellers' assistance. There are limits to the amount the bank will allow, so talk to a mortgage officer to find out. Good luck, it's very exciting. The worst part I think was inbetween the acceptance and the closing, you just want to be moved in already. Get a good buyers' agent and enjoy it, it's a great time to buy.

Oh also- the bank looks at your total income and expects your mortgage/tax payment to be less than 33% of that, but they also look at all outstanding liabilities (your car/cc payments, loans, etc.) and expect to see a cushion in your monthly expenses. Don't make the mistake of over buying and becoming house poor. The bank will be willing to lend you more than you want to spend.

 

[tuningfork]

I just went through the process and these members all have good advice. As a first time homebuyer you have the $8K tax credit- you can immediately ramp up your savings by maxxing out your tax exemptions at work (taking this credit early, essentially) which should help a lot. [\QUOTE]

great idea, that could help you avoid the borrowing from family aspect. As someone else mentioned above, just run the numbers though to make sure you qualify for the full credit! :thumbup: