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Buying My First Home/Condo
Robes
Registered User regular
Registered User regular
I graduated college in December 2010. I have had a full time job since May of 2011, and have saved up about 15k, mainly due to living with family. There is no pressure from my family for me to move out. I've never really been out on my own except for my two years at a university. I've decided recently that I've saved up enough money to get my own place. I'd personally prefer to buy a condo, as I feel now is a good time to take advantage of the low prices. Condo's in my area typically go for 40k-100k depending on SQ footage and location. I'd prefer to buy my own place instead of renting, as I feel renting is wasting money, though if you guys really think renting would be the better option in this market i'll consider renting instead.
Seeing as I've never done this before, I'd like to get your thoughts/experiences on the process of purchasing a home and maintaining it. Any tips/advice would be appreciated, such as what Realtor, if any, to use, or if I should hire someone to do an inspection/appraisal of the home I want/ etc. My biggest fear in all this would be losing my job for whatever reason and eventually being unable to pay the mortgage and defaulting on the loan.
Thanks in advance!
Seeing as I've never done this before, I'd like to get your thoughts/experiences on the process of purchasing a home and maintaining it. Any tips/advice would be appreciated, such as what Realtor, if any, to use, or if I should hire someone to do an inspection/appraisal of the home I want/ etc. My biggest fear in all this would be losing my job for whatever reason and eventually being unable to pay the mortgage and defaulting on the loan.
Thanks in advance!
"Wait" he says... do I look like a waiter?
Robes on
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What area are we talking? are townhouses and single family homes completely unaffordable? I'd also rent for a while until you are absolutely completely sure you will be in the area for at least another 5 years.
-definitely hire an inspector, get him to come twice if a lot of stuff had to be repaired. it's worth the cost.
-realtors vary individually so ask around your area. nobody can really tell you a company to go with.
-check the permits, especially if you end up buying a rehabbed home. it is very easy to get away with fixing up a house, never getting it inspected, and then selling it. Saddling YOU with any necessary inspections and repairs to get it up to code.
-drive by the neighborhood when you AREN'T being shown the house, drive around for a while. things tend to be different at night sometimes.
are you planning on living alone? 1 bedroom condos are even harder to get rid of than multiple bedroom ones.
They'll give you a number - that's a good place to start, but don't forget that on top of the loan payment, a Condo is going to have Condo fees. You've got to add both numbers together to know your monthly cost.
This is extremely area dependent, as you allude to.
In higher cost of living areas, this is more true, but in lower cost of living areas townhouses and small houses can be extremely cost effective and easy to turn.
Also one thing to be aware of is that in many areas 'condo' is used in place of 'townhouse' for actual townhouses, which can be confusing.
I've already mapped out a monthly budget, including things such as homeowners insurance, condo association fees, and the mortage payment. I am capable of affording these monthly fees on top of my student loan.
Usually not. I don't mean to dissuade you, but understand that this is money you are committed to paying for ~30 years (note, likely 6 years longer than you've been alive thus far) regardless of what happens. Especially if there isn't a huge rental market, don't be in a rush.
I don't know If i want to do this. Rent would be $800 a month, excluding cable/phone/food if I didn't have a room mate, which is $9600 a year. That's a down payment on a house right there. I could see renting for maybe a shorter period like 6 months, just to get a feel for things, if i could find a place that would do six month lease that sounds feasible.
I don't plan on moving far. The condo's I'm looking at are right in the same city/county as my family. I have family, friends, and a job here so I don't plan on moving that far away from them.
So keep in mind that if you decide on a Condo, you're going to have to pay your Mortgage Payment, Condo Fee, any Utilities not covered in the Condo Fee (Water, Electricity, Cable, Telephone), and you'll likely be required to buy a certain amount of Insurance as a requirement for your Mortgage.
Also, somebody mentioned contacting your bank to find out what kind of amount and rate you'll qualify for. Don't forget to talk to your bank's competition as well, many people settle for the lowest rate their bank will offer and miss out on lots of savings (even a few tenths of a percentage point on a long term mortgage equals thousands of dollars over the life of the loan).
Purchasing a property is a great idea, but unless you are certain you have no desire to move (100% want to stay where you are, don't have any other considerations such as a wife and additional children, have your dream job and considerable job security) I wouldn't look at houses until you have achieved all of those situations. Once you get the house, assuming you qualify, you should assume you will be stuck there for 5-10 years with the way the market is working currently in the USA (especially with condos).
One last note on condos: they are terrible investments unless you are looking for a vacation property or live in a place like NYC where they are the only housing option. With a condo you get all the negatives of a rental property with none of the positives of home ownership. Your ability to build or change the condo is vastly restricted by the building management, your neighbors will likely be renters as often as not, there will be considerable bass and noise pollution, your unit can be adversely effected by other people's mistakes (your upstairs neighbor floods their bathroom? Looks like its raining in your house!) and so forth.
10k is a pretty small investment compared to 100+
Where's your market? What has it been doing the past 5 years? What's the foreclosure/occupancy rate of the condo places? What is your upward mobility in your job, does it require moving to a home office?
Just understand that who you are and what you want now are not necessarily going to be who you are in 5-10 years.
Also, if you've never lived alone, you have no idea what to look for in a place.
I'd like to add that you would be right if you were talking about this back in 2004, when selling a property was a matter of months rather than years and there was a lot of credit to be had. Now this mentality simply isn't workable with how difficult it is to even qualify for a property or lose it once you move out.
I live in basically the far north west burbs of Chicago, IL. The definition of a condo here is I own the unit, but pay association fees that typically cover things such as outside repairs/maintenance, garbage, etc. Association fees range anywhere from $170-$250, depending on the location of the condo complex.
As an example, this would be my ideal unit: http://chicago.condo.com/Condo-For-Sale_CRYSTAL-LAKE_60014_Brandywine_B_2-Bedroom_1-Bathroom_47731632
Location wise, I don't really plan on moving to any other counties or states. I kind of see this as an investment, in that in 15 years after I pay it off(in optimal circumstances, I should have this paid off in 15 years), hopefully, by some miracle, our housing market won't be terrible and my condo will appreciate in value.
I'll talk about my job later tonight.
If you are this sold on it far be it from us to tell you no. I would suggest a single family home over a condo for return on investment and general livability, but I'm not familiar with Chicago so your miles may vary.
Also keep in mind that the seller won't always agree to fix problems that the inspector finds. So if you find a place you really like, you very well may wind up paying a contractor a few hundred bucks to fix some minor issue that the seller wouldn't spring for. Sometimes this is worth it if you don't think you'll find a better place.
Furthermore, I don't know how much 'house stuff' you have at your parents' house, but expect to drop some money on appliances, furniture, yard equipment, tools, etc. Be ready to do this sooner rather than later. Especially with a cheap, old place where stuff is going to break a lot. Going a few weeks without a fridge is no fun. Neither is borrowing your dad's drill a dozen times a month.
Basically what I'm saying is, if you have $15k to your name and you wind up cutting a check for $10k on closing day, that $5k cushion will shrink very fast. Home ownership is fuckin expensive. I would be more comfortable saving up another $5k and going in with $20k total.
Also, yes condos are hard as hell to get rid of. Most of the people I know who have bought them have either had to sell them at a loss, or rent them out to a property management company at zero profit. But do what makes you happy at the end of the day.
When i was looking at houses, all the 2 bedroom condos i could find were like $225-250k (granted this was 4 years ago).
Allow an extra 5-10% (or around $10,000, whichever is higher) of the purchase price of the home to spend in the first year of ownership on things that you will want/need to buy for it.
Let's assume a 20% down, which would be around $10k your adjusted loan amount would come to about $40k assuming you end up with a convention, 30 year fixed mortgage (there aren't too many other products out there) at the base of about 5% (I'm always conservative, and the rate is around 4.5% right now) you're looking at a monthly payment of about $215. That's just the mortgage. Property taxes come to $1,204 reported from last year, which is another $100 each month through escrow. Homeowner's insurance shouldn't be too bad, but let's average for a unit like that around $100-150 per month. Now this gets a bit tricky, because sometimes a condo/association fee can include "forced" insurance. $250 is a good bet for a condo fee, generally, so we're now at a total monthly cost of somewhere in the range of $650-700ish. That gets pretty close to your rental figure.
Now you also need to take into consideration out of pocket costs for upkeep and repairs, etc., which is a crapshoot depending on the state of the unit at purchase. That kitchen looks to be on the older side, and I'd assume the unit isn't featuring brand new appliances.
I took a peak at Zillow for that unit (Zillow should always be used with a huge grain of salt) and the value range they're reporting is $40-70k, or so. The property has also, over the last five years, shown a steady decline in value. Recently there was an uptick, but it still reports well under the average value for the area/comperable homes.
It sounds like a good idea, and the fact that you've saved $15k is a hugely awesome sign that you could do this. On top of the costs above and costs of closing (would wipe out your $15k pretty fast) you're going to want another $10k in the bank for emergencies. Need a new stove? if you clean yourself out in origination you're SOL.
Take a look at the unit. It strikes me in pictures as a maybe-crummy place that's been cleaned until it shines. One of the biggest things to look for in condos, especially cheap ones, is that often the walls tend to be very thin, which gets really old really quickly. I also always caution against anything with an association or condo fee as they basically have you by the throat. If they decide to raise fees (and they do, often, especially in this environment) you're, again, SOL. I've worked with many homeowners who were pushed over the edge by huge condo/HOA increases.
You've got the absolute right idea, and I think buying a property would be a great next step. However I'd suggest saving a bit more (try to get close to $20-25k or find a 10% downpayment product. I'd also look at non-condo/HOA properties, because if you can find what you want without an association being able to make demands of you you're in better shape.