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The home ownership bug. I have it. Need Advice.

azith28azith28 Registered User regular
edited July 2012 in Help / Advice Forum

Hi,

About 8 years ago i moved across the country to take a job in Cleveland, OH (Yes i know how odd that sounds). Since then i have been renting, first an apartment, then i moved up into a rental townhouse apartment. Now for a few years, ive been telling myself that I want something permanent, and the market has just been getting lower and lower in terms of interest rates and home prices, so ive been patient, but I'm starting to feel like next year will likely be the best time for me to buy, depending on the election and the economy.

Now I've got a pretty good job, I'm single, and most importantly (to me at least), no debt at all and an excellent credit score. I've used my credit cards occasionally but prefer to pay them off quickly, unfortunately this also means i typically dont have a lot of savings in my bank cause i pay as i go. However i cant help but feel im throwing my money away in rent and if i had bought something 8 years ago i would have about 100k invested in something by now.

So while ive been looking around for a while now, i still havent found the one house that instantly made me want it, and since its a buyers market, I figure i can get what i want. However i have several questions about financial rules and costs that i hope you guys can help me with.

Firstly, How much of a % down payment is pretty much the 'gotta have' at this point? With the interest rates going down, I know the standard 10% figure, while still suggested, is not necessary and i frankly dont have the cash for what im looking for, unless i got a loan from my parents or something.

I'm pretty sure i fall into the range of income where i dont qualify for the most obvious government assistance and i know the big tax break they ran a few years ago has expired but are there any other big obvious ones that i should look up?

An odd thing ive noticed is that new construction homes are almost as cheap as older homes of the same size, with the added bonus of having control of your design, I have to wonder what are the negatives of going this route. When a housing development lists a home price to build, how much hidden costs and upgrades should i expect to inflate that price? (I can do the math, but im sure there is a good bit of 'oh im sorry, did you want wire in that wall? well thats an extra 1k' involved in these things).

If i bought an existing home, i am aware that i should allow for maintenance/repair expenses on top of the price, but should i expect a new construction home to come with enough of a warrenty to give me a few years before i have to start worrying about stuff like that?

Is it a general rule that all property taxes you pay are completely tax deductable? I was looking at this one place that sounded great on paper but i wasnt happy with the design, but the lady i was speaking to about it was talking like the deduction was a complete given fact but it sounded a little too easy.

I've already spoken with the bank ive used for some time to see what kind of loan i could get, but ive seen some online morgage companies with much lower rates....even if they advertised as fixed rate, are these companies in any way reliable?

Thanks for any input.

Stercus, Stercus, Stercus, Morituri Sum
azith28 on

Posts

  • DjeetDjeet Registered User regular
    azith28 wrote:
    Firstly, How much of a % down payment is pretty much the 'gotta have' at this point? With the interest rates going down, I know the standard 10% figure, while still suggested, is not necessary and i frankly dont have the cash for what im looking for, unless i got a loan from my parents or something.

    Good to excellent credit and at least 20%. Banks only want sure things right now.
    azith28 wrote:
    I'm pretty sure i fall into the range of income where i dont qualify for the most obvious government assistance and i know the big tax break they ran a few years ago has expired but are there any other big obvious ones that i should look up?

    FHA is still a thing (can get you into a house w/less downpayment, though you'll have essentially buy mortgage insurance), and the site should help you find state programs (though downpayment assistance is unlikely given the state govt budget situations.
    azith28 wrote:
    If i bought an existing home, i am aware that i should allow for maintenance/repair expenses on top of the price, but should i expect a new construction home to come with enough of a warrenty to give me a few years before i have to start worrying about stuff like that?

    I wouldn't bank on a builder's warranty being worth much. If the builder is in good shape financially then maybe, but a lot aren't. I've heard a couple stories on new construction bits going south (e.g. tile) rather quickly and that defect would likely have already presented itself on an existing home. Though I've also heard of major issues not being discovered in existing homes during inspection, so there's risk regardless of how you choose. New homes tend to be more energy efficient due to evolving code and newer appliances/HVAC.
    azith28 wrote:
    Is it a general rule that all property taxes you pay are completely tax deductable? I was looking at this one place that sounded great on paper but i wasnt happy with the design, but the lady i was speaking to about it was talking like the deduction was a complete given fact but it sounded a little too easy.

    All property taxes as well as mortgage interest should be tax deductable. You need to itemize to get it though, so if you don't normally itemize and if your property taxes plus mortgage interest is less than the standard deduction then you'll see no benefit.
    azith28 wrote:
    I've already spoken with the bank ive used for some time to see what kind of loan i could get, but ive seen some online morgage companies with much lower rates....even if they advertised as fixed rate, are these companies in any way reliable?

    An online mortgage company shouldn't be inherently any mode dodgey than a brick and mortar mortgage broker. Though my co-workers and friends have all gotten the best rates by seeking out the volume broker in the region.

  • Dr. FrenchensteinDr. Frenchenstein Registered User regular
    defintely shop around for mortgages, just be sure you read the fine print and make sure you're getting what you want/need in a loan.

    There are pros and cons to new construction vs old construction, you'd need to make a list to see which you'd prefer. i wouldn't say one was fundamentally better than another though. Watch out for HOA fees in new communities, they can be outrageous and the rules can be stifling.

    I would not count on you having 100k in equity after 8 years, especially recently. I've owned my house for over 4 years and i am quite a bit underwater. with a mortgage you pay a MUCH higher percentage of your interest in the beginning of the loan. like say your payment is $1500, you probably pay about 2-300 in principal, and the rest is interest. this ratio increases through the life of the loan though.

    The old rule of thumb was plan on being in your house 5 years to break even at least. Nowadays I'd give it more like 8 or 10.

  • WildEEPWildEEP Registered User regular
    FHA loans only require about 4% down. But realize that the monthly payments are going to be higher.
    How much do you think you've got to spend exactly? There are a ton of mortgage calculators out there, whats the price range you're looking at? Are you just trying to replace your rent amount with a mortgage payment instead?

  • SammyFSammyF Registered User regular
    NO PREPAYMENT PENALTY. These are three words you should look for somewhere in writing before agreeing to any mortgage. Some places will offer you what looks like a competitive rate, but but but there's a financial penalty inherent in paying off part or all of the balance of your mortgage early.

    "Big deal, I can't imagine why or how I'd pay off my mortgage early to begin with!" you may be saying to yourself right now. This is because you're thinking of buying a house; it hasn't occurred to you to wonder what happens when you sell a house. Don't jump at a low interest rate that comes with an attached prepayment penalty just to watch all the equity you built up get eaten out by that penalty when you try to move in eight years. Otherwise you would have been better off in the long run by throwing your money down a hole in an apartment lease; at least when you rent an apartment, someone else is obligated to take care of fixing all the stuff that breaks.

  • bowenbowen How you doin'? Registered User regular
    Don't buy a house without at least 20% down, unless you're planning on staying in the same house for 30 years.

    There are FHA downpayment assistance programs that will give you part of a downpayment to help too. If you stay in the house for 10 years, you don't have to pay it back (or something like that).

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
  • Dr. FrenchensteinDr. Frenchenstein Registered User regular
    edited July 2012
    it is so painful to see programs they have now for homeownership, having bought a house 4 years ago.

    http://www.fha.com/fha_programs.cfm

    I just realized that is a .com address, and in no way affiliated with HUD. so take those with a grain of salt.

    Dr. Frenchenstein on
  • bowenbowen How you doin'? Registered User regular
    Painful that you missed out or painful that there's less than there was?

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
  • pirateluigipirateluigi Arr, it be me. Registered User regular
    bowen wrote: »
    Don't buy a house without at least 20% down, unless you're planning on staying in the same house for 30 years.

    There are FHA downpayment assistance programs that will give you part of a downpayment to help too. If you stay in the house for 10 years, you don't have to pay it back (or something like that).

    20% is a nice rule, but with interest rates as low as they are, it's not as hard a rule as it used to be.

    If you go with an older home: make sure you set aside funds for things that can (and will) go wrong after you move in. With my house, even though everything passed the inspection, had:
    -Dishwasher died within 3 months
    -Furnace died first week (!)
    -Roof needed replacement (I knew about this one going in)

    Since my house was a foreclosure, I was on my own for these things. Not killer, especially since I was expecting the roof, but it adds up. The furnace repair alone was $500.



    Even with new homes, make sure you account for the different things you'll need that you didn't have in an apartment: Lawn mower, tools, more furniture, etc...

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  • Dr. FrenchensteinDr. Frenchenstein Registered User regular
    You can get a private home warranty, to cover stuff like appliances going up in the first year. i don't think it's that expensive either. i think mine was like $350? i could be wrong about the price, but it's something to think about.

    Painful that i missed out. i got the 7500 tax rebate, but i have to pay it back. and they revised it to $8000 that you DIDN'T have to pay back, like 3 months after i bought the place.

  • badpoetbadpoet Registered User regular
    You can easily secure a loan with 10 percent down (or less, depending on who you go through). I did 10 percent down and got a 2.75 15 year mortgage like 9 months ago through my credit union. We could have put 5 % down and gotten the same deal. We did have to escrow, but we just got our rebate check so it's not a big deal.

  • bowenbowen How you doin'? Registered User regular
    That is insane. The banks/CUs around here won't even loan without 15% at the minimum.

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
  • SammyFSammyF Registered User regular
    I'm sure it's dependent heavily upon the housing market.

  • DarkewolfeDarkewolfe Registered User regular
    The OP could benefit and so could I: Can anyone provide insight on selecting a settlement agent?

    What is this I don't even.
  • The Crowing OneThe Crowing One Registered User regular
    FHA is a crappy product. I won't go into specifics, but they don't like modifying loans if you're in trouble, and the trade off between ease of entry and later costs is just awful (mortgage insurance, reduced equity, poor loss mitigation). If you get an FHA loan, be aware that you need to be able to afford that payment always, and a bank will never work with you, really, to lower it if necessary through a modification.

    3rddocbottom.jpg
  • Dr. FrenchensteinDr. Frenchenstein Registered User regular
    I'm attempting to get a modification on my FHA loan, Metlife is being really weird about it. everything seemed to go smoothly at first and they were saying "oh it looks like you got one, they are just working out the numbers" to the CSR asking me why i needed a modification if i am current on my loan, to the most recent guy telling me "I can't tell you to skip a payment, but you need to be in default to get an FHA modification," which by my research is not true at all.

    I'm supposed to get an answer next month, so we'll see.

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