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First time home buyer
UncleSporky
Registered User regular
Registered User regular
I know this thread isn't terribly unique, I've read the other house-buying threads I could find in H/A but I figured it couldn't hurt to throw this out there and see if anyone has any other thoughts.
I have a realtor and I have looked at a number of houses. There is one that I really like. It is fairly small (832 sq. feet, but not including the finished basement) and expensive for the size (asking $100,000) but the thing is that most everything in it is new, just a year or two old. Furnace, water heater, appliances, roof's only 4 years. The more I've looked around the more I've realized it's important to me to not have a lot of expenses just getting the place livable.
I will probably be getting an FHA loan. People are advising me to pay the minimum 3.5% but I really want to pay more than that...but I don't have a lot. I have about $11,000 in the bank now, by the time this is done I could have up to $14,000 or so. I have to do this fairly quickly too in order to finish before the gov. deadline. I don't know how much is appropriate to keep for myself, considering extra things like closing costs (which I will probably ask them to pay but y'know). I don't have furniture and such but I can live without it for as long as I need to.
We ran some budget numbers, and with everything factored in - the house payment, electric/gas, home/car insurance, groceries, eating out, internet and more - worst case scenario I've got a buffer of about $150 per pay period. Does this seem like enough or is this considered a stretch? That's not a lot I can save, especially if I want to pay off the mortgage faster.
Basically, what do think of my situation, can I handle this, should I move forward? It's hard to pull the trigger.
I have a realtor and I have looked at a number of houses. There is one that I really like. It is fairly small (832 sq. feet, but not including the finished basement) and expensive for the size (asking $100,000) but the thing is that most everything in it is new, just a year or two old. Furnace, water heater, appliances, roof's only 4 years. The more I've looked around the more I've realized it's important to me to not have a lot of expenses just getting the place livable.
I will probably be getting an FHA loan. People are advising me to pay the minimum 3.5% but I really want to pay more than that...but I don't have a lot. I have about $11,000 in the bank now, by the time this is done I could have up to $14,000 or so. I have to do this fairly quickly too in order to finish before the gov. deadline. I don't know how much is appropriate to keep for myself, considering extra things like closing costs (which I will probably ask them to pay but y'know). I don't have furniture and such but I can live without it for as long as I need to.
We ran some budget numbers, and with everything factored in - the house payment, electric/gas, home/car insurance, groceries, eating out, internet and more - worst case scenario I've got a buffer of about $150 per pay period. Does this seem like enough or is this considered a stretch? That's not a lot I can save, especially if I want to pay off the mortgage faster.
Basically, what do think of my situation, can I handle this, should I move forward? It's hard to pull the trigger.
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Sporky, it sounds like you're stretching yourself a little thin without knowing your lifestyle and future job prospects, but now is a good time to buy a house for a host of reasons. I'd take a hard look at the lifestyle you want to have and decide based on that. Some people really don't like being house poor and some don't mind. If you're a homebody that enjoys tv, internet, etc... and not spending much on traveling, it might work out.
The fact that you've actually considered your budget though shows you're paying attention and will probably be able to manage it. Beyond that, they should come off the price a little or pay for your closing in this market. Regarding the down payment... if you aren't putting down 20% then you are generally going to have mortgage insurance required by your lender, so the paying a little more than 3.5% is just personal preference as far as how you want to allocate your money for the future.
Take this all with a grain of salt though... my cushion is about $2,500 a month but I'm a biiiiit conservative.
Buffer of $150 would be a bit too close for comfort for me. There are "surprise" costs of owning a house that come up periodically, as I've discovered since I bought my home in March. And since you haven't got furniture, as much as you can have the attitude of "I don't need furnishings", you'll be tempted to pick up some stuff to make the house more homely. I know I was. For reference, I have a buffer of around $400-$500 a month, and I feel a bit of stress some months...
Does your "more" include fun money per month? I know it has helped my wife and I a lot to be on an allowance system. We each get money from the ATM every 2 weeks. If we can afford it on cash we can buy it. If not we have to talk about it and usually decide against it. If you're a big online shopper you might consider just direct depositing $X into a separate checking account every week or something instead. Regardless, knowing that I can't just go buy every new shiny thing I want like I could when I was single and living in a studio apartment took a little getting used to.
Something else to ask about - does the house you're looking at have an HOA fee associated with it? If so, what does it include? Does the house you're looking at have a yard? Does the HOA (if you have one) or builder's covenant expect you to have a yard put in by X date? If so they will most likely fine you if you don't have it in on time.
Oh, and did you budget for expected property taxes? And since you're not putting down 20% does your estimated cost account for PMI?
Here's a list of random shit I've had to pay for in the 3 years I've owned my house that I didn't budget for. Made me really grateful for the extra I throw into saving every month.
- Wife's car needed a new control arm after her curbing it real good one winter.
- Wife's car needed a new bumper after taking out a mailbox in a (successful) attempt to avoid killing a dog.
- Wife's car and my car both needed new tires.
- Wife's car needed new tire after she curbed it and punctured the sidewall.
- Dog needed to go to the emergency vet (~$350 after tests and whatnot). This one has happened three times.
- Needed to put in a yard (builder covenant) - doing it myself cost $600 or so for sod that I had to cart around and lay myself.
- Watched utility prices rise and stormwater enterprise get invented to take a little more money each month.
Pay the 3.5% and save your money. As another posted said, you have to reach 20% for it to make any difference.
[SIGPIC][/SIGPIC]
Yeah, it's the $8,000 first time home buyer thing. You have to close before December 1st. Probably cutting it too close for someone who hasn't really started looking.
I'm not really looking for higher-paying jobs, partly because the one I have now is very steady and unlikely to change. I know situations can change but essentially I can't be downsized.
The numbers I was looking at were really a worst case scenario, $400 groceries and $150 eating out every two weeks for a single person. But there may be other things I underestimated too. I am confident I can make do with less than this, but I don't know if I should, or if I will want to tolerate it for years.
I am totally a homebody though, all I need is a nice TV and computer, maybe a game console and I'm set. I won't be buying boats and ATVs.
A little more about the house - the owner is a realtor herself, bought it two years ago for $94,000. It almost seems like a two year flip, improving everything inside and then asking for more than you bought it for in this market. She started last May at $105,000 and has gradually come down to this price. My realtor and I are worried that she won't want to drop much, estimating $95,000 in the end also minus closing costs.
I just calculated it and the mortgage payment alone will probably be about 27%.
I need to look at the budget numbers again because we did it really quick ballpark last night. I bet I could do $200 a pay period for groceries most of the time which would put me at a $250 buffer ($500 a month). And I already had "$100 misc." for small emergencies.
Spoken like an apartment dweller
I can drop 100 a month at Home Depot without even breaking a sweat. And my house is far from a McMansion or anything. Having a lot of new components will help mitigate the risk, but it sure as hell won't eliminate it.
$14,000 banked seems cutting it close on your emergency fund when you account for closing costs and the like. I closed with about that, but in retrospect it was stupidly risky. If I had gotten laid off or something Bad had happened I would have been pretty screwed. Unless you have a seperate e-fund, then disregard.
It would help if you had a comprehensive list of what your current expenses are. From there you can figure out what your house payment would be. Tack on any PMI, home insurance, and property tax costs. Then you need to add in heating/cooling costs, sewer, trash pickup, and any potential HOA dues. There are a lot of charges you don't think about if you have only lived in an apartment. Right now it seems like you are just spitballing costs. I'd do more than that with a $100,000 liability on the line.
I would seriously sit down and see what you've spent in the past 6 months on things, and make an educated decision/budget from that. A more accurate budget will let you know if you're making a smart decision or not.
Link to Housing and Urban Development: http://www.hud.gov/news/release.cfm?content=pr09-072.cfm
$100k sounds *insanely* high for 830 sq. feet, but I guess it depends on where you live. Using my costs as a comparison, though, puts your cost-to-close at ~$7k. That leaves you with $7k in the bank. Add on the $8k from the government, and I think you're doing okay.
It might be worth figuring out whether your budget is realistic. Does your budget include any savings? If not, $150/mo seems really risky. If it helps your budget be anymore realistic, my PITII (Principal, Interest, Taxes, Hazard Insurance, and Mortgage Insurance) ends up being a bit under $1200/mo. If you've been using one of those internet mortgage calculators, this is probably significantly higher than what you've seen. They're only calculating principal and interest, which ends up being only $850/mo or so for me.
In the end, though, it's a risk either way, whether you have money in the bank or not.