House saving advice

Discussion in 'The Fire Hydrant' started by Laurelin, Aug 5, 2012.

  1. Laurelin

    Laurelin I'm All Ears

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    I am really stressing over this whole house thing. I'm so sick of renting. Sick of having to ask landlords about everything. Sick of having crappy AC. I really would like to be able to get whatever dog I want too (okay that might be a lot of it).

    I'm really stressing big time to the point that any down time I'm thinking about how much I still have to save. I don't even have a clue who I can start talking to about looking at loans or when I should start talking to them.

    I need advice on the not stressing.
     
    Last edited: Aug 5, 2012
  2. Kilter

    Kilter New Member

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    I think it totally depends on where you live. We lucked out and assumed a mortgage here, right before they quit doing them. There's also been some 'condos' that are more like apartments for sale lately, new buildings etc. that cost the same as renting, so that's always an option.

    You can also look for something away from the main city and find some good deals, we upgraded to a bigger house and yard, backing onto a park with a garage for less than what our city house was. Yes, we have to drive more but it's kinda worth it to have a smaller town lifestyle.
     
  3. Laurelin

    Laurelin I'm All Ears

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    It is very frustrating to think of how much I'm spending in rent and know I could pay less a month in mortgage for a nicer place. Everyone keeps telling me you need the 30% downpayment though. I feel in over my head...
     
  4. CaliTerp07

    CaliTerp07 New Member

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    All I can share with you is what we did. We rented for 4.5 years after graduating from college (1 year with separate residences, then 3.5 years after we were married). It took that long to get things lined up.

    Priorities:
    1 - 10% of income into 401ks (in retrospect, I wish we had maxed out the full $16k you're allowed to put in, but we're doing that now at least)
    2 - 6+ months of expenses set aside in a savings account (we charge EVERYTHING, so it was pretty easy to see what our costs were--mint.com will give you a good analysis too)
    3 - THEN we started putting extras aside into a savings account.

    We wanted the full 20% to put down to save on PMI, but it's really a numbers game at this point. Interest rates are so low, and loans are actually pretty readily available if you have decent credit, so it may not be worth waiting until you have that.

    There are tons of calculators online so you can approximate what size house you could afford based on your current rent payments. Once we had a number in our head (and it was actually a pretty big range...we said anywhere within a $75k range), we started looking at open houses locally to see if we liked anything in that price range. If they were all dumpy places, then we were going to call off the search and wait until we could afford to up our price range. We found that we really didn't like anything under $xxxk, so that was our magic number we wanted to be pre-qualified for.

    Realtors in our area won't talk to you until you have a prequalification number. We had met realtors at open houses and gotten recommendations from friends, so we called our favorite one up and asked what the steps were to get prequalified. He sent us to a mortgage broker who ran the numbers for us and assured us he would be comfortable lending us significantly higher amounts than we were asking for, so we felt comfortable beginning to look. He gave us several different scenarios based on our assumed home price number, showing us what the fees would be if we put 3, 5, 10, or 20% down.

    Then we found our house, way blew our expected budget out of the water, but interest rates had dropped enough to make it work. That was around 4-5 months after we started seriously crunching numbers.
     
  5. CaliTerp07

    CaliTerp07 New Member

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    30%? The standard to avoid PMI is 20%. Interest rates are SO low right now (we're about to refinance and are looking at 3.2%!!!) that if your other choice is to invest the funds, it may be worth putting less down and investing the difference.
     
  6. Beanie

    Beanie Clicker Cult Coordinator

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    You don't need a 30% down payment. You need 20% - but technically you don't even need that. If you have less than 20% down, what you'll have to do is get Private Mortgage Insurance (PMI.) It's not too terribly expensive really, and the closer you get to 20% the cheaper it is, IIRC.

    I would just go to a bank and talk to somebody. Not necessarily get pre-qualified but have a loan official talk numbers with you. Run all the numbers from your paychecks and see what you can afford. Get what they tell you and then go home, look at your take home (NOT gross which is what they look at), figure out what your monthly expenses are and will be, and what you'd be comfortable with.

    It's terrifying for sure, but I was in a similar boat... rent is SO expensive here and I couldn't afford it, especially since I wanted a house with a yard rather than just a studio apartment (about all I could have been able to afford, if they would even let me have Auggie.) My mortgage is going to be pennies compared to what rent would be, even on a less than comparable house. My friends are renting a house, a house I actually looked at buying once! It never sold so the owner decided to rent it. They are paying over three times what my mortgage will be. And would have been had I decided to buy that house. It's just crazy.


    You do have a lot of extra costs that go with it... if the furnace dies it's on you to buy a new one. New roof, new windows? Plumbing problem? Electrical problem? And let's hope there's no sick dog or YOU get sick/injured... It's all a bit overwhelming. You just have to make sure you aren't literally living paycheck to paycheck. Pay yourself first... when you budget make sure you leave room to deposit money into a saving's account to save up for disasters.

    It's scary but I think you just have to be smart about it financially... and then dive in.
     
  7. joce

    joce Active Member

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    Are your friends farmers by chance lol!

    3.5% seems to be lowest and FHA is just not doable for us because we want over ten acres. FHA can be picky about things like little buildings on the property that don't have paint and a screen door off a hinge to do qualify for a FHA and conventional.

    I went in thinking it had to be 20%. If I want certain properties I'll need a farm loan and it basically will have to be. Some will do farm land and some won't.

    I am fine with a half hour drive to work to get a house that is 100,000 cheaper than it would be closer to town. I also hate the city and people do it works for me lol!

    Get a good mortage person. It's Sunday and we were on the phone with ours for over an hour.

    Know what you want and don't budge. I can wait for it to come up on the market but god help me if I have to ever go through this process again- this will be the last time I move! The market is not one to think you'll only be there a couple years- I've seen the same houses for sale more than five( though not nice ones).
     
  8. Laurelin

    Laurelin I'm All Ears

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    I accidentally typed 30 instead of 20. Oops

    I feel very over my head any time I think about it. I'm not sure if I'm putting away enough and part of me is thinking 'I spend X on art lessons and X on agility' should I be doing that? But I guess you've got to live some too.

    I guess the first step is to just talk to someone to get a starting point.

    My rent is not too bad but a mortgage would be cheaper. Probably almost half for a comparable house. That is really frustrating because I feel like I'm tossing money away every month that I could be putting into a house at least.
     
  9. lizzybeth727

    lizzybeth727 New Member

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    Just wanted to chime in and let you know that I'm in the same situation and will be interested in hearing the advice on this thread. I even recently got a second job just to pack away more savings (plus I've had a ton of extra expenses this summer).
     
  10. CaliTerp07

    CaliTerp07 New Member

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    Yes. Live. What's the point of being able to afford the house if it means your life is miserable and you eat ramen and stare at the wall for entertainment for the next year to be able to afford it?

    You aren't tossing money away. You have to get that idea out of your head. You are paying for a roof to put over your head. That is a very valid use of your money.

    As far as a mortgage being cheaper--it might be. We were paying $2100 in rent. For a house in a slightly nicer neighborhood, we now pay $2250 in mortgage/taxes/insurance. Basically a wash--until you take into account that when the fence started to fall down, the cheapest quote to replace it came in at $15k (for a SMALL backyard! And the highest quotes were up to $23k...) When our pipe backed up in the basement and sewage filled our laundry room, it was $1000 to get it snaked out, and then we spent a whole weekend sanitizing, throwing away, and replacing things. We have a couple trees that desperately need to come down, but the quote is $8000 to have it done, thanks to the slope of the backyard. And TIME. OMG the time commitment. We spent 2 full saturdays (like 6 hours at a time) raking leaves and trimming downed branches last November. We finally gave up and paid someone $1000 to finish cleaning up the yard this spring.

    So yeah--the check we write each month is the same, but we've spent on average so far an extra $3-500 on house things each month, just keeping it liveable. And this was a house that looked immaculate on a home inspection report. Things just happen.

    Real estate is no longer the investment it once was. Financially savvy people often choose to rent over buying because they realize their money goes so much further in the stock market than it does in real estate. Whatever you do, you don't want to regret buying a house you only moderately like, only to find you wish you could move in a few years and be stuck.
     
  11. Beanie

    Beanie Clicker Cult Coordinator

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    It's all a matter of what you want to make a priority and what is important in your life. There are wants and then there are needs. Be brutally honest about what is a "want" and what is a "need." I almost got into this discussion with my aunt when I told her I bought a house, and instead of being happy for me, she proceeded to try and **** all over it by tell me all the things you "need." Hint: everything she told me you "need" is actually a "want."
    Can your NEEDS be met? Then how much room is there for the WANTS? And are there wants you will give up so you can have these wants instead? Or, like lizzybeth, are you willing to put extra work in to make room?

    There's also a lot to be said for doing work yourself and learning how to do things. My to-do list for the house is not a short nor simple one, and not a single item on the to-do list involves paying somebody else to do a darn thing. It's again about priorities and how much work you're willing to put into things. And that's just something you have to figure out for yourself... nobody else can decide for you.
     
  12. CaliTerp07

    CaliTerp07 New Member

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    Yeah, we do a time vs. money calculation for just about everything. Figure out what you value your time at (an easy starting point is your hourly rate at work). I'll come up with a rough ball park of how long I think it will take to do something (read: I call my dad and ask him how long it takes him, then double it) and then see if I think it's worth my time or not when compared to the quote from the professional. Sometimes it is, sometimes it's not. Some things I'm not willing to chance screwing up (reroofing, hanging cabinets, etc), other things that we expect to have to do repeatedly are worth learning how to do, because we'll save money every time we can do it ourselves (landscaping, replacing broken tiles, etc)

    Sometimes the legalities of doing something yourself aren't even close to worth it. No way I'm taking down 60 foot trees myself, when the distance from my house to the neighbor's is less than 60 feet. If I sneeze wrong and the tree falls in an unexpected place, people could die or houses could be smashed. I will hire professionals and happily pay them!

    You also have to figure out what you enjoy. Some people enjoy projects. I don't. The stress of having part of my house torn up makes me miserable, and I would rather pay than have a messy house for months. Everyone's tolerance for that is different though!
     
  13. Doberluv

    Doberluv Active Member

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    1) Go see a loan rep at a mortgage company. (I think better than a bank) Call first and ask what you need to bring with you. (income/expense info, savings history, job history, etc) You might qualify for an FHA loan, which could give you a zero down payment. The loan rep is a very valuable resource and can steer you in the right direction. They also are familiar with realtors in the area because they work with them and can help you find a good one.

    2) Find a good realtor.

    3) Keep your expectations reasonable since this is your first home. Don't expect to get everything you want the first time around. No house has everything you want. Do try and focus on things that can't be changed, like square footage and lot size. Cosmetic fixes that aren't too expensive, you can live with and modify over time. Major repairs or renovations can be very expensive. The loan company will require an inspection, but be sure and get a feasibility study if there are repairs to be made before you commit. (in the purchase and sale agreement, stipulate a time frame that you need to get a contractor to give you an estimate on anything you need to have done) A good realtor will advise you of this and other important matters.

    You can often get a big bang for your buck with a town home vs. a single family or even a condo. Often, not always, they have no HOA dues, which condos usually have.

    If you're going for a single family home, the further away from the heart of town, the less expensive. So, weigh the pros and cons and decide how far away from town you can live and expect that if you want to be close to town, you'll have to settle for less square footage... or less up to date or something in need of repairs.

    Don't permit this to stress you out too much. It should be an adventure and you should be proud of yourself for even branching out and looking into being a home owner. Just remember, maintaining a home has it's ongoing costs and work, where renting is the landlords problem. Some people prefer renting for that reason. I've made money buying and selling houses over the past 4 decades or so. Most of the time, that happens. But lately, with the economy being what it is, what it may come to, that may or may not happen. But I think you'll get a lot of satisfaction from owning your own home. :)
     
  14. ~Jessie~

    ~Jessie~ Chihuahua Power!

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    Living in the area you're in, I don't think that having a 20% downpayment and perfect finances are as important.

    My husband and I bought our house 3 years ago. We lived in an apartment and planned on renting a house... but we decided that it would be better for us to just buy a house instead. We ended up getting the $8,000 tax credit, a 5% mortgage (we're going to look into refinancing for a lower rate!), and a decent price on our house. It costs us about $500 more a month for our mortgage than we paid for our apartment, but it is cheaper than renting a house.

    The first thing we did was contact a mortgage broker from a company with good reviews. He took care of everything and walked us through the whole process.

    For me, I LOVE owning a house. Of course, we've had to dump some money into it (~$7500 on landscaping, for example), but it's totally worth it. I don't have to ask permission from anyone before getting pets, I can do whatever I want to the inside of the house, etc, etc.

    Good luck, Laur!

    ETA: Generally, a down payment for an FHA loan is 3.5%, if you want to go that route instead :)
     
  15. Snark

    Snark Mutts to you

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    Just putting $25 aside a week will give you $1600 at the end of the year for emergencies. Sis and I have certain amounts we set aside out of each paycheck for various 'wants' and then we have a set amount budgeted per week for gas/groceries. We pay cash for day to day expenses - it's a great way to keep yourself from buying things you don't really need when you only have a certain amount to work with. (We also cut up the ATM cards, it was too easy to nickel and dime ourselves to death.) If there's something one of us really wants, then money gets set aside for that 'want', too. Even Riley has a fund for agility lessons/fun stuff, etc.
     
  16. -bogart-

    -bogart- Member of WHODAT Nation.

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    Just go to mortgage co and sit down and ask. With the market they are dieing to sell. A lot of places have programs for single woman or other some such that helps with down payment or other such things. The market is very buyer right now and I do not doubt you would be approved. Don't hold back the worst thing they could do would give you a plan to follow if for some dumb reason you weren't. Then at least you would know what is what. Just do it.
     
  17. stardogs

    stardogs Behavior Nerd

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    Some really good advice here, but just two things to add:

    - You'll likely get approved for way more than you think. We got preapproved for almost double what we had figured out we could spend on a house - frankly I was kind of appalled since this was *after* the housing market tanked and they were supposed to be being more careful about loan amounts!

    - When you do look for a house look at any HOAs (home owner associations) associated with the property. I've had several friends who have had major issues with their HOAs over pets, fencing, even what car sit out in the driveway and for how long. Just owning your house doesn't necessarily mean that you will have the freedom you need.
     

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