Looking to Buy my first House, Need some Help/Tips

[CollinEstes]

Alright I graduate next month already have a job lined up making pretty good money considering it is entry level and I only have an undergrad. Anyways I have to move to a new city and my wife and I (she is pregnant due in May) want to buy a house this Janurary. Just curious what price range I should be looking with this job that is paying me 45,000 a year but I expect to be at around 60,000 within 4 years. (The job gives raises ever 6 months for the first four year up to 60,000). We have alittle money saved up but I don't think we have enough to even put down 5%.

Any advice is appreciated, buying a home for the first time is pretty overwhelming.

[Worrots]

Wait till you can put down 20%. Private Mortgage Insurance sucks.

Where are you moving to? How much house you can get will vary widely depending on where you are.

Why are you looking to buy so early/young/poor?

More information, please.

[CollinEstes]

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Wait till you can put down 20%. Private Mortgage Insurance sucks.

Where are you moving to? How much house you can get will vary widely depending on where you are.

Why are you looking to buy so early/young/poor?

More information, please.

[/ QUOTE ]


What about doing a 5, 20, 75 Mortgage or something like that, where you put down 5% and then you have two seperate mortgages?

I am moving to Galveston Texas, but in addition to looking there I am also looking in the Southeast Houston Area along I-45 (Clearlake, Friendswood, etc...)

The amount of house is not too, too important 2 or 3 bedrooms would be fine.

We are just looking to buy because we would like too, if it isn't all that smart we may wait, but convicing my wife that we should wait will be hard.

[joshman1204]

Your best move is definetly to wait ... a house is a lot more than just the payment and you can get in trouble real quick.

[IHateKeithSmart]

Well, with the baby expenses too, it might be too much to tackle at once.

RE: the mortgages, though, I did an 80% mortgage with a HELOC for the other 10% (I put 10% down). If you can get 10% down, this is a good option since all the interest is deductible, and the HELOC rate will only be slightly higher (you can pay interest only on that portion as well if you want).

[CollinEstes]

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Your best move is definetly to wait ... a house is a lot more than just the payment and you can get in trouble real quick.

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Just curious if you could elaborate, I am pretty much clueless.

[Los Feliz Slim]

Plenty of banks, etc, have mortgage calculators that will tell you what you can afford. In brief, the smaller your down payment the larger the loan, hence a larger monthly payment of interest (which is, for the time being, tax deductible). I don't know about the market where you are, but I can't imagine you'd be able to afford much, especially if you don't have $100,000 lying around to reduce the loan amount.

Also, as previous posters have alluded to, you've got property taxes, insurance, and maintenance to think about also. A mortgage broker will factor those costs in, but remember they WANT you to try to buy a house and will play it faster and looser.

[arod15]

Doing a piggy back is not a bad idea (IE 5% then taking a loan) But if you have a small one coming i'd wait. Mortgage payments are a lot to deal with if you have diapers to pay. I'd hold off if you dont have money for at least 5% and 15K plus in the bank. I know interest rates will rise, but you'll quickly see that 45K is not all that much, especially with a baby....

[Worrots]

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What about doing a 5, 20, 75 Mortgage or something like that, where you put down 5% and then you have two seperate mortgages?

[/ QUOTE ]

FYI, I went through this experience this past year also with a pregnant wife.

The less you put down, the more you're going to pay in interest and other fees both every month and over the length of the mortgage. There are lots of complicated schemes to hide this fact, but that's the bottom line. You'll also likely be bearing more and more of the interest rate fluctuation risk the less you put down.

You have a rent vs buy situation. Renting you save up for the down payment, buying you get equity each month. But with so little down, you're not going to be getting much equity at all each month. PMI can bump up your interest payments enough to cancel out the equity you get.

There are budget calculators all over the web, figure out how much you can spend on housing each month. From that figure out how much you can afford to borrow and what price range you're in. Go see the house vs apartment choices in Galveston at $X per month. Bear in mind that closing costs, fees, etc will add to the actual purchase price (depends on local market, don't be surprised if it's another 5%+)

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The amount of house is not too, too important 2 or 3 bedrooms would be fine.

[/ QUOTE ]

Seriously, look into a one-bedroom apartment for a year. Your kid won't need his own room for awhile. You're taking on new (first?) job, first kid, new city (?), and first home all at once? Consider delaying the house a year till you see how the job is, how much the kid costs each month, and you get to know the area well.

[siccjay]

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Seriously, look into a one-bedroom apartment for a year. Your kid won't need his own room for awhile.

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Isn't this just throwing money out of the window?

[CollinEstes]

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Seriously, look into a one-bedroom apartment for a year. Your kid won't need his own room for awhile.

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Isn't this just throwing money out of the window?

[/ QUOTE ]


This is what my wife says to me too.

I am thinking though that I would rather save to get a better house in a year or two plus then I would need to look harder at Schools etc..

[Bulldog]

There are two or three recent threads on this. I know, because I started one in about July. Lots of good info.

[IHateKeithSmart]

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Seriously, look into a one-bedroom apartment for a year. Your kid won't need his own room for awhile.

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Isn't this just throwing money out of the window?

[/ QUOTE ]

No. Here (http://moneycentral.msn.com/content/Banking/Homebuyingguide/P37627.asp) is an article with some reasoning.

Overall, I prefer owning (have owned for a little over a year), but if you are the worrying type (me), it can be difficult. There have been times when I wished I was renting again.

[Worrots]

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Seriously, look into a one-bedroom apartment for a year. Your kid won't need his own room for awhile.

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Isn't this just throwing money out of the window?

[/ QUOTE ]

No, it depends on a number of factors. He's out the equity he would have had from paying a mortgage instead of rent. Have you looked at the pay-off schedule for a 30 year mortgage (as an example)? The equity is disgustingly tiny in the first year, especially if he's only putting 5% down!

And that doesn't account for the property taxes, water bill, higher utility bill, etc, etc he'll get from owning.

Also, in lots of markets these days, the rental market is cheaper for the same housing stock than is owning, don't know if that's the case in Galveston. And he'll be able to make a much more informed (+EV) decision about where to buy after he's lived in the city for a year.

No, it's not just throwing money away.

[pudley4]

Rent. At least for a year.

Many good reasons have been given so far. I think the best is the "unexpected costs" involved in buying/owning a house. You may have appliances you need to buy/repair. You have maintenance costs (lawn/garden, household maintenance - lights/pipes/doors/windows/etc). You have more furniture you'll buy to fill up the place (trust me - even though you say you won't buy any, you will). You will spend a LOT more your first year in a house than you will in an apartment. Plus, that little bundle of joy is going to suck you dry /images/graemlins/wink.gif

Also, since you're brand new to the area, how will you know what kind of neighborhood you're moving into? Are you really going to trust some real estate agent you've never met before to get you into the right area? If you're in a bad area, good luck reselling the house in a year, plus you'll get royally screwed by all the fees/commissions you have to pay when you sell.

By far your best choice is to rent a 1 or 2 bedroom apartment for a year, then reassess where you're at. Saving during this year, which will give you more to put down when you do buy, will actually help you in the long run, because you won't be paying a higher interest rate on the second loan (or paying PMI) if you can get to 20% down. Even if you can't, you'll have a smaller loan to pay off. You'll also be better informed as to where you'd like to live (taking into account neighborhood, schools, commute, etc).

I speak from experience on this one (moved 2x in the last 2 years, once just before having a baby)

[nolanfan34]

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Also, since you're brand new to the area, how will you know what kind of neighborhood you're moving into?

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This is a really, really good point. Having just gone through the house buying process myself, I know that it's an overwhelming process at times. And I'm extremely knowledgeable about the neighborhoods we were looking in, since I grew up around here. Location is just such a key factor.

You have to also think about resale as well. You should be approaching this process thinking about something you can turn around and sell in 5 years or less, if need be. This is your first job out of college - you might not even like it after a year. There's no way to know for sure.

Given that you're starting a new career, and about to have a baby, the stress of the home buying process is really something you don't want to have to take on right now. I just did exactly that, and it's tough to get acclimated to a place while you're obsessed thinking about houses every day. Let alone having to leave work early to check out showings, do the inspection, sign paperwork, etc.

I would strongly recommend waiting at least 6 months. Get a 6 month apartment lease, save some cash, and make sure you can get into something you can afford. We almost bought a house when my wife went back to school, but decided not too because it was going to stretch the budget too much. That was a huge decision, because looking back at it, there's no way I would have been able to afford a mortgage+taxes+other costs of owning a home.

[junkmail3]

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Seriously, look into a one-bedroom apartment for a year. Your kid won't need his own room for awhile.

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Isn't this just throwing money out of the window?

[/ QUOTE ]

Here's a table that shows how much of your 'payment' goes into your house, and how much goes to interest. So, over the course of the first year, you're not really saving too much. I just made the decision to keep renting for now, and this was a big reason why. I just don't have enough to put down right now.

M |Pay | To pay | equity |inters | tot. int.

1 $900 $142,371 $128 $771 $771

2 $900 $142,241 $129 $771 $1,543

3 $900 $142,111 $130 $770 $2,313

4 $900 $141,980 $130 $769 $3,083

5 $900 $141,848 $131 $769 $3,852

6 $900 $141,716 $132 $768 $4,620

7 $900 $141,583 $133 $767 $5,388

8 $900 $141,449 $133 $766 $6,155

9 $900 $141,315 $134 $766 $6,921

10 $900 $141,179 $135 $765 $7,686

11 $900 $141,043 $135 $764 $8,451

12 $900 $140,907 $136 $763 $9,215




This table sucks, but hopefully you can get the picture (and I don't really know you'd be able to afford a $150,000 house).

[nolanfan34]

The flip side to remember though, and something to strongly consider, is that the interest you pay is tax deductable. That's a great advantage even though you're not paying the principal down that much at the beginning.

That alone shouldn't be the tipping point for buying, but it's something to consider as part of the overall package.

[jaydub]

[ QUOTE ]
The flip side to remember though, and something to strongly consider, is that the interest you pay is tax deductable. That's a great advantage even though you're not paying the principal down that much at the beginning.

That alone shouldn't be the tipping point for buying, but it's something to consider as part of the overall package.

[/ QUOTE ]

It's probably not going to be that big of an impact to OP because of a relatively low tax bracket. That tax benefit is at risk (http://www.chron.com/cs/CDA/ssistory.mpl/editorial/outlook/3445163) in a way that may help OP however.

I would add my advice but without a helluva lot more details, I really can't.

[Sooga]

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Seriously, look into a one-bedroom apartment for a year. Your kid won't need his own room for awhile.

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Isn't this just throwing money out of the window?

[/ QUOTE ]

Yea, I don't know why so many people use the 'throwing money out the window' reasoning when they talk about rent. Yea, you're not building any equity, so it sucks in that sense, but like some other posters have said, with virtually $0 down, your equity on a 30 year mortgage in the first couple of years will be very little.

Plus, things cost money. All people need food. Food costs money. All people need clothing. Clothing costs money. All people need somewhere to live. Places to live cost money. Yea, it's a bigger expense than other needs, but it's something you need to get, so you'll have to find a way to make it work. You're not 'throwing it out the window'. Housing is not free.