Moving to a new state and buying first condo, need advice

Vi Monks

So here's the situation. My fiance has spent the past year working and applying to graduate schools. Currently, we live in Austin, TX. At the moment, it looks like we're going to move to Atlanta, GA in the fall so she can start her PhD program at Georgia Tech. We're probably going to be there for roughly five years. Right now, we live in an apartment, and we've never owned our own place, so we're still figuring things out.

Our biggest issue right now is making a budget. For now, our finances are in pretty good shape. We have about $20,000 in a long-term investment account, and we have about $30,000 to either put as a down payment on a condo or invest, depending on which looks more viable. However, we're estimating our yearly income for the next five years to only be around $20,000. Obviously, two people living in Atlanta for five years on that salary is tricky.

So here's where I need help. I'm sure there are costs associated with owning a condo that I've not yet considered. I know obviously that there are mortgage payments. What about condo owner's insurance and association dues? How significant are those fees? I've done some research on it, but I'm getting a lot of mixed information about insurance in particular. Are there any other expenses I'm overlooking?

Furthermore, any advice on our financial situation more generally would be appreciated. Would we be better off making a large down payment or investing? Feel free to suggest any other options I've not considered as well.

Deebaser

Vi Monks wrote: »

What about condo owner's insurance and association dues? How significant are those fees? I've done some research on it, but I'm getting a lot of mixed information about insurance in particular. Are there any other expenses I'm overlooking?

You're missing property taxes. "Association fees" can be anything. It really all depends on what amenities the building has for residence and the cost of upkeep.

Furthermore, any advice on our financial situation more generally would be appreciated. Would we be better off making a large down payment or investing? Feel free to suggest any other options I've not considered as well.

Large downpayment, but YMMV. Debt gives me chest pains and I like to minimize it as much as possible.

a5ehren

First of all: What program is your fiance doing? I'm working on my MS in ECE at GT (also got my undergrad here and work on campus) so I can probably answer any questions you or she may have about the school in general.

Second: If you're estimating your income at $20K/year, you are going to have a hard time getting a loan no matter what your down payment is. While home prices here are relatively sane (outside of Midtown and Buckhead, anyway), they are above the norm for the region. You may be able to find a short sale or foreclosure for cheap, though.

Monoxide

Knowing you are going to move in 5 years, why are you planning on buying a Condo rather than renting an apartment?

Improvolone

If you're going to move in 5 years, don't buy. If you think you can stay for 10? Go for it.
However, I don't think you'd get a loan with 20,000 a year no matter your savings (unless you also have fucking drop dead perfect credit, then maybe).
Great, you bought a condo and budgeted perfectly! What if your stove breaks? Can you afford a new one?

Straygatsby

If you don't think you be staying in Atlanta permanently, I wouldn't buy unless the circumstances were perfect. Also, does she have an internship year? Have you considered looking into married grad housing at the school? Many, many major universities have that these days, and it's often either included in her package or hella cheap comparatively.

I was in almost the same position 5 years ago when my better half started her PhD in the southern city we now live in. I wasn't a big fan of buying (I'm NOT a southerner and never will be), but we found a unique situation that served to both make for cheap "rent" and serve as an investment (it's a 2 unit building, so we rent the other apartment to another student to cover our mortgage).

But now we're in a terrible market, she's coming up on an internship year where she could get offers anywhere in the country, and it's more like an anchor than an investment.




I guess my TL,DR is unless you are financially well ahead of your time, I wouldn't buy while one or both of you are still in the chaotic flux that is school.

mts

well to be honest, i wish we had bought when I first stated grad school. First off, a Phd is going to take longer than wht you think. second there is always the chance of staying around there. thirdly you can likely turn the property into a rental if you decide to leave.

ceres

If you aren't going to be there for more than 5 years, don't buy.
If you do buy, don't buy a condo.
You will be so much happier renting (as long as you can find somewhere not run by a slumlord) than you will buying, dealing with a mortgage, dealing with association fees (and assessments, don't forget assessments!), property taxes, and then when it's all done trying to get rid of the place. When you're renting and ready to move, you tell them that you are leaving an appropriate amount of time in advance, and then you leave. When you own you sit on the market for a few months to a few years and pray.

adytum

Really good advice for buying a condo is don't buy a condo.

They're the first to lose value and the last to gain it, and the housing market is still uncertain.

On a 5-year timeline it's a doubly bad idea.

Vi Monks

@ Deebaser

Right, property tax. Any idea how significant that is?

@ a5ehren

She's going into human factors psychology. She just recently spent a weekend at the school talking to professors and students, so she knows a fair bit about it, but I'll ask her if she has any other questions. I hadn't thought about the difficulty of getting a loan. We actually were looking at foreclosure sales, which are around $50-75k. Are there any differences when buying foreclosed place?

@ Monoxide and Improvolone

The main reason we're considering buying is due to various calculators (primarily this one from the New York Times). Not the best source, obviously, but it was our jumping off point. We were hoping that, with a large down payment, we could get a relatively low monthly mortgage payment -- but if getting a good loan isn't really an option with our income, then we'll have to reconsider. Our credit history is very good, but it's not particularly long (five years for each of us, approximately -- we're still in our early twenties). We also have about $10,000 in an emergency fund that we would keep to buy a new stove or whatever else breaks. Don't know if it's enough, but it's a start.

@ Straygatsby

No internship year, unfortunately, and I can't remember the details on grad housing. I know one of the schools had decent deals on it, but I can't remember if it's this one. I'll ask when she gets home from work. We were hoping to just sell the place after she got her PhD unless she got a very good job offer in Atlanta. Our reasoning was that if we make a large down payment (30-50%+), we'll be able to pay very little interest on our loan and then sell the place when we're done and get a significant portion of our investment back. But if, as you are all saying, we can't get a good loan, then our whole plan might go out the window, unfortunately.

Spudge

Do they have mobile homes in Atlanta?

Stigma aside, this may be a route to consider. A 5yr loan on a small trailer + lot fees may be less than renting, plus you still get to own something. Or for $30k you could buy a decent one outright and have money left over

That way, when you move you could either just sell it outright (probably for what you paid or more depending on work done) or rent it out. Or move it

Dr. Frenchenstein

With that level of income, you probably wont be able to get a loan that isn't borderline predatory. you would likely be MUCH better off renting. Put it this way, when i bought my house, within a year i had to put 15k into it. with your salaries, that would have taken half your savings. Condos are notoriously hard to get rid of as well.

Darkewolfe

General condo tip: When looking at a condo building, ask the management how many "subsidized" condos there are in the building. Subsidized condos are sometimes mandated by local law or policy, and are places where the residents pay less of the condo fees (which go toward maintaining the building, grounds and amenities). If you're living in a building with a larger number of subsidized condos, you're paying more people's fees than just your own. Shopping around to find a building that had a lower subsidy requirement will mean you're spending more of your money on your own share of the upkeep, rather than someone else's.

Vi Monks

Thanks for the condo advice, guys. I'll talk about it with my fiance. I also found out from her that her parents are willing to co-sign on any mortgage loan we apply for, and they are very financially stable. Will that make our plan more viable (though maybe not necessarily the best route, of course)?

Darkewolfe

I just read down a bit. YOU DO NOT WANT A CONDO IN A BUILDING WITH FORECLOSURES. You are going to be paying a massively larger amount of upkeep fees, and you're never sure if the company managing the building is going to go bankrupt. If the company goes bankrupt, the value on your condo is likely to drop significantly. Hello underwater mortgage.

a5ehren

Spudge wrote: »

Do they have mobile homes in Atlanta?

Stigma aside, this may be a route to consider. A 5yr loan on a small trailer + lot fees may be less than renting, plus you still get to own something. Or for $30k you could buy a decent one outright and have money left over

That way, when you move you could either just sell it outright (probably for what you paid or more depending on work done) or rent it out. Or move it

The closest mobile homes to downtown Atlanta (that I know of) are probably 45 minutes away. Despite being "the south", it's a real city.

OP, GT has family housing for grads, but I'd hardly call it affordable. $1164/mo for a one bedroom. The location is obviously good, but there are tons of options around the city for less money.

Also, I'm about to go on vacation for a week (woo spring break), so any GT-related questions for me should probably just be sent as PMs.

NailbunnyPD

Don't forget assessments, or rather, expect assessments. If any extraordinary expense to the building comes up, you will be assessed to cover the cost. This could be anything from a new roof, major system failure, or just a replenishment of reserve funds.

Your low income and short time frame scream rent to me (as a condo owner myself.) Most of your mortgage payments over those 5 years are going to be paid towards interest rather than principle. When you sell, you are going to have to come up with closing costs, and may even have to pay the buyer's (because a lot of first time buyers don't have a lot of cash and a condo is an easy entry to home ownership.) Unless the housing market makes a significant come back, and condos follow suit, its likely to cost more than renting.

Deebaser

Darkewolfe wrote: »

I just read down a bit. YOU DO NOT WANT A CONDO IN A BUILDING WITH FORECLOSURES. You are going to be paying a massively larger amount of upkeep fees, and you're never sure if the company managing the building is going to go bankrupt. If the company goes bankrupt, the value on your condo is likely to drop significantly. Hello underwater mortgage.

This is solid advice, but it can be situational. In a complex with 50 units, 2 or 3 foreclosures aren't a very big deal. However if the complex has only ten units, its something to avoid for the reasons above.

VisionOfClarity

Oh sweet god don't buy here until you have lived here and know if you plan on staying. Also, ATL is BIG and it's not so great to live in one part and work on the otherwise of town thanks to traffic. Buying in general is just a bad idea when you have almost no money.

VisionOfClarity

Also, depending on what you do the job market isn't so hot right now. And unless the housing market picks up if you buy you could be stuck with that condo for a long time. And if you rent it out you have a lot of crap to learn on the legal side of being a landlord, your taxes will change and you'll likely end up instead paying a management company to deal with it which could cost you money.

illig

i think the biggest item you're missing (besides taxes already mentioned) is maintenance... in a condo, your association fees will cover the exterior walls, etc. but you're responsible for appliances, heating/AC (in most cases), etc.

Spudge

a5ehren wrote: »

The closest mobile homes to downtown Atlanta (that I know of) are probably 45 minutes away. Despite being "the south", it's a real city.

I made no allusions to Atlanta's reputation by making that comment even "real cities" have mobile home parks sometimes

I posted the idea because it's exactly what my fiance and I have done. We're in town for a while for school and we bought a 2bed 2ba trailer for $10,000. $200/mo "mortgage" and in 5 years we own. Can rent, sell, move it, whatever we want when we're done

Improvolone

Vi Monks wrote: »

Thanks for the condo advice, guys. I'll talk about it with my fiance. I also found out from her that her parents are willing to co-sign on any mortgage loan we apply for, and they are very financially stable. Will that make our plan more viable (though maybe not necessarily the best route, of course)?

If a good loan officer will not extend a loan to you, then trust their math. Don't buy a house if you need a co-signer!

dorin

Is your fiance going to Georgia Tech for free, because if not, that's going to suck up a lot of your money. With only $20,000 combined income you will have a hard time affording anything beyond living with your parents. I would recommend against having her parents cosign unless they plan to pay the mortgage for you. If the bank rejects you for a loan, then you most likely can't afford it, or have a bad credit history.

Don't get a condo. OMG, don't get a condo. The association fees alone could be hundreds of dollars. Not to mention all the arbitrary rules the association will impose on you.

A good rule of thumb is to not get a mortgage that is going to cost more than 30% of your gross monthly income. For you, that comes out to $500, including taxes, insurance, association fees, and other fees. That's a pretty low monthly mortgage, but even if you could find such a condo, consider this: assuming you pay about 30% in income tax, that would only leave you $666 per month to cover food, clothing, utilities, car, school, internet, entertainment, gas, etc. Honestly I don't see how you managed to save up $50,000 on only $20,000 a year. Maybe you know some crazy voodoo money magic that I don't, but I don't see how a condo could possibly work out well for you right now.

You might also find this page useful.

Improvolone

My guess is his wife was working and left to pursue a degree

Vi Monks

Mostly, we're just frugal. Right now, we live on about $1500 a month, including $700 rent, and we could cut back a little bit more if we needed to. And she is going to Georgia Tech for free -- in fact, that's where the $20,000 yearly income is coming from. My income is extremely sporadic, so we're budgeting without it. Anything I make is a bonus, but there's a good chance I won't make anything in the next 6-12 months, so we're just working with what we know we have.

On the plus side, since our income is based entirely around my fiance's schooling, we don't have to pay much in the way of income tax. But I'm talking over all the advice in this thread with my fiance. We're going to talk to our financial adviser and probably a realtor, just to get some more concrete numbers. Feel free to keep the advice coming though. Thanks, everyone.

adytum

A realtor doesn't have your best financial interests in mind. Neither does a mortgage broker.

They only make money if you spend money.

Keep that in mind.

Improvolone

There are good ones out there. I was going to buy a house but the mortgage broken I was working with said, "look, dude, I just can't qualify you based on your income and credit. I know you have a lot saved up but it wouldn't be a good idea to put yourself in that situation. Sure you could find someone to give you a loan, but it would not be from someone you want a loan from."

adytum

Yes, I'm sure there are some number of honest realtors out there who will look out for their clients at the expense of their livelihood.

It sounds like the guy you talked to knew he couldn't place you in a loan anywhere, so it wasn't worth his time to try. You're lucky, he was honest! There were scores and scores of realtors walking people through the process of securing liar loans.

I sure wouldn't place my financial future on any specific realtor being honest without figuring out the numbers myself is what I'm saying.

Improvolone

He and the realtor I was working with are also part of another company that helps people who've gotten into trouble with predatory loans. So they're like, seriously the good guys.