My wife and I need some advice....

[TODD 2000 V6 CAMARO]

Ok, my wife and I are thinking about buying our first home. We have been renting for the past 6 years since we got married. I have been trying to find someone who can give us professional advice on whether or not we can reasonably afford to take that plunge. We aren't having much luck. It seems like everyone just wants a crap load of money for their advice. I have always been very protective and conservative with my finances and with my credit, so I have very good credit. However, being that I moved to Canada and lived there from 2002 till Jan of 2006, and didn't make very good money while I was there, we have no money saved for a downpayment. Not to mention, we are both fairly new to our jobs, although I am advancing pretty quickly at mine.
The thing is, it looks on paper like we should be able to afford an $1100 mortgage payment fairly comfortably. But paying $730 in rent every month right now, we don't have that much of a cushion left over. Could we rise to the occasion and learn to manage our finances well enough to make that mortgage payment, or would we be screwed? It is such a buyer's market right now and the rates are so low, we just don't want to miss out on the deals that can be made right now.
Anybody have any advice or know of a professional that I could talk to that wouldn't want to charge me an arm and a leg to dispense some wisdom? I know there are some smart people here, so that's why I am willing to ask a question about such a personal issue. That and the fact that we are all like family here. So, whadaya think?

[raroZ28]

nice foreclosure homes in my city here in MI are going for like 60k. A lot of people are paying 400 for their mortgage.

[DJ Taso]

I would help you but I'm still renting lol...

[Black97]

You don't say if you pay for your utilities where you rent or if they are included.

Buying a house brings other costs like property taxes and maintenance costs and all the utilities that are sometimes included in the rent.

To put an offer in on a house you usually have to make a small deposit.

Before you get yourself into debt, run a trial for several month. Figure out what all you would have to pay on a monthly basis. Then keep paying your rent and faithfully deposit the rest of the money you would have to spend and see if you can make it.

[Jeff_in_Atl]

The one you need to talk to is "Jay 02 TA ws6" but he has not been on here in several months. http://www.f-body.com/forum/member.php?u=89

[Gary94Formula]

The old formula used to be the following.. No more than 28%-30% of your gross monthly income should go toward your mortgage payment. Now, that all depends on the house and what repairs may be needed in the future.. If the house if brand new and you know it's covered under a warranty for a few years, then you may decide to gamble and go a little higher. Also figure out what your credit score is. If you’re at 720 or higher, you'll probably qualify for a low interest mortgage. You could also go to a bank and get pre-approved for a conventional mortgage.

I would go in with at least a 5% (preferably 10%) down payment and some closing costs saved up. I would get pre-approved for a mortgage and then you can figure out your payment and for the next 4-6 Months, save the difference between your rent and your projected mortgage payment in the bank. Also take into account if you aren't currently paying all the utilities where you rent.

Go to bankrate.com and use some of the calculators to work through this..

http://www.bankrate.com/brm/rate/calc_home.asp

Good Luck.

[Dave-S]

Don't forget to factor in Mortgage Insurance as well. As far as I know, unless you have a 20 percent down payment, all lenders will require it.

What you can do now (to at least get you started) is visit your bank and have them prequalify you for a loan. They can give you all the qualifing data and you will at least know what price range home you can afford given your own personal financial situation. Also when examining your personal finances, don't forget to factor in the affect of the mortgage interest deduction you will get on your income taxes because that puts more money back into your pocket every year.

As far as advice goes, I think you can probably do a lot of the math on your own. If you know how to create a spreadsheet using Excel, you can then do some planning and forecasting to help you decide if what you want to do is realistic. I went thru the same decision process many many years ago so I understand your concern.

[Steel2686]

The best thing you and your wife can do, is go to a reputable mortgage broker or bank. Get pre-approved. It doesn't cost you anything, and it will give you an idea of your price range.

Most seller's will require only pre-approved buyer's to put an offer on the house. The bank/broker will take into account homeowner's insurance, property taxes for the area, average monthly expenses such as utilities, etc...

Just make sure the bank or broker is reputable.

Good luck!

[thomas]

there are actuallysome programs for down payment assistance. Aminly for 1st time home buyers. check state and fed funded programs. my wife was a first time home buyer and they ended up giving us 7k for a down payment. we have to live there for 5 years or else we have to pay a penilty for selling but hey it really helps

[Joe K. 99 Zeee!!]

Research, research, research....

My wife and I just bought our first house. Read a lot about it before taking the plunge. Double check to make sure you're taking into account all the costs.

I tried to get a whole picture view before we decided to buy. Here's a list of some various things off the top of my head to think of:

-Home Insurance vs. Renters Insurance
-Mortgage Insurance if your down payment is less than 20% (some lenders will waive this)
-Utilities (larger living area will need more power to heat & cool, also check water & trash services)
-Property Taxes (note that this is also tax deductible)
-Home Owner's Association Fees (may or may not apply)
-Auto Insurance & Gas will vary at a different location
-Mortgage Interest (this is tax deductible)

There are other various calculators online that can help. The ones at www.nfcu.org (Navy Federal Credit Union) are decent.

When checking tax savings make sure you take the difference between the standard and itemized deduction.

It's a big decision, but it can be worth it. All told, we're only paying about $250/mo more than our previous apartment.

[Dave M]

I've been through this situation before. I've bought two houses now without making a down payment and I would NOT reccomend it. If you need to wait a year or two in order to get even 10% down, do it. When you come into a loan without a down payment, you get worse rates and you may get stuck in some God-awful mortgage that has the whole industry in trouble right now. Even with good credit, coming to the table with no money down is a turnoff to mortgage companies right now.

Also, others have said it, but it bears repeating. You'll incur a lot more costs when owning a home than just the nigher monthly payment. there are always repairs and upgrades that need done, taxes that need paid, utilities, insurance, few of which you pay as a renter. If you are not financially comfortable paying your current rent, I seriously doubt you can handle another $400/month on top of it, before all those other payments.

I know patience can be hard when it comes to home ownership, and maybe the wife is pushing for a place, but you'll be much better off if you wait until either your income inceases or your down payment does. Either that, or buy a more affordable home. Just because the paper says you can afford $1100/month doesn't mean you need to pay that. There's nothing wrong with finding a starter home that's cheaper and building a nest egg for a few years, then upgrading.

And whatever you do, DO NOT, I repeat, DO NOT, get an adjustable rate mortgage. I speak from experience here.

Good luck to you!

[TODD 2000 V6 CAMARO]

Thanks for the advice, Guys. I definitely won't go for an adjustable rate mortgage. The only thing I will look at is fixed rate. We would most likely be using an FHA loan, which is fixed rate and allows for no DP. I do qualify for the lowest available rate, as my credit score is over 740. From what I have learned, the mortgage companies here quote payments with the taxes and insurance included. That, they say, usually comes out to 1% of the value of the loan. So, if we were to buy a $120K house, the payment would be around $1200.
We do currently pay for electric, water, and phone in our apartment. So we are used to that. I've been told that new homes these days are much more energy efficient than most apartments and that new home owners experience power bills that are very similar to what they had in an apartment. This is according to the Realtor that we have been talking to.
I have been pre-approved by a couple of banks for up to like $200,000. LOL I was like...uhmmm....you sure? The $1200 number I mentioned was just from the average of what the houses we are looking at go for. That will get you about 1300-2000sq ft, 3-4 bedrooms/2 bath/2 car garage/central air, brick, garden tub w/ seperate shower, ceramic tile, fireplace, etc etc. That is why we want to buy soon, because we are afraid that once the market takes an upswing, even if we save 10% down, that 10% will only be like 4% of the future value of the same house when we finally get done saving. I don't know. Maybe that is unrealistic. I am still learning all this stuff. Once again, thanks for the input and advice. Keep it coming, I am taking it all into consideration.

[BrdWAtti2d]

One thing I didn't expect when I moved into my first home was all the side costs associated with going from an apartment to a house. Lawn equipment, garbage cans, and all the stupid stuff you need to keep up a home. You think keeping up with your f-body can be a chore, just wait. It sounds inconsequential but it really added up at a time when I was already stretched too tight. Home Depot will be a regular weekend stop.

[sneitzel]

Home Depot will be a regular weekend stop.

And/or Lowes etc.

Those are evil places for the wallet but I LOVE to find an excuse to wander the aisles.

[Joe K. 99 Zeee!!]

You wouldn't go into a car dealership without knowing as much as you can and a car is only $25,000. This is several orders of magnitude higher. All the advice above is good and true.

Get some insurance quotes. Check to find out the property tax rate for your county/local govt.. The more you find out the better a decision you can make.

I did find a no down payment fixed rate mortgage from my credit union, but they aren't without sacrifices. I paid a funding fee of 1.5% and slightly higher interest rate. It was cheaper than paying mortgage insurance and I have money in the bank in case of emergencies.

Track your spending, income, and monthly savings. Budget for the things mentioned above. Don't assume your home value will rise...however, the longer you stay there, the better an investment it will be.