Buy my first house?

[Deetso]

I'm a 27 year old attorney. I have been planning on buying my first house in about a year from now. To that end I have been paying off debts and thus my savings are at a minimum at this point. The debts are going away but I dont have all that much saved for a house right now. I have about $5K that I could use- (1.5 is in DRIPS which I was planning on just holding forever).

I have found a house for sale just a few blocks from me that needs cosmetic work and seems like the perfect kind of house I was planning on buying... a year from now.

The problem is just that Im not sure I have enough money right now to put myself in a house- but I could try and force myself in. (force my way in by doing things I wouldnt necessarily recommend to other people- 100% financing etc) Its not all that serious yet- but its a problem that has been intriguing me.

The house has lots of potential from what I have investigated so far, its mostly cosmetic- an older man who couldnt take care of it died and the agent picked up the house. (I havent had an inspection nor have I asked for the seller's disclosure). Im torn between just holding off for a while longer and keeping with the plan. But this house is in our ideal neighborhood and is a great price and is what I was looking for, I want to have it work, im just not sure how good of a move it is.

I guess Ill just let you all give me your advice and respond as necessary- Im sure Im leaving something out that would let you give me better advice.

 

[JohnDoe]

One of the quickest ways to get in the hole and never get out is to over extend on a house. I see it all the time. Not saying that is what you will be doing - just pointing it out.

Don't forget buying a first home comes with a lot of extra cost like furnishing it, fixing it up,added utilities and taxes and insur.

Do you have an emergency fund setup? Did you figure out what the taxes and insur would be on top of your P&I payment?

I would consider waiting. I think rates will hold steady or drop in the next 12 months and something better might come along. Mortgaged @ 100%, you won't be building equity that quickly and would probably have to take a 2nd mortgage to get around PMI insurance.

You know your situation better than any of us. Just giving you some things to think about.

JD

 

[MasterBlaster]

There is always a great deal to be had in housing. So if this deal passes there just may be another one a year from now (or 10 years from now).

Also, If I were to make a bet, I'd bet that houses cost less a year from now. So what's the rush ?

 

[lets-retire]

My advice is to come up with a very clear goal, then a plan. Do NOT deviate from the plan unless it is in compliance with your goal.

From what you have written, you set a goal of owning a house a year from now. That is a good start on a goal, but it is not very clear and that is where your problem arises. If your goal was to have a four bedroom 2000 sq/ft house on 1/4 acre financed at 80% and $5000 in the bank after closing then you are getting closer. The figures I used are for example purposes only.

 

[saluki9]

I think it's ok the stretch a little bit on the income side, but I would not budge on having an emergency fund.

My wife and I moved into our first single family home last month and it has been shocking to us all the extra expenses we have had despite our planning. Despite paying $400 for a good home inspector we got hit with $2500 in plumbing repairs during our first week in the house. In addition, moving, furnishing, etc costs more than you might think.

Don't try to push it too soon, you could put yourself in a very bad situation

 

[DRiP Guy]

Model Aviation: Don't fall in love with your trainer (it's gonna get whacked)

Relationships: Don't marry the first girl you bedded just because you did so 1

Hot Rodding: Don't build up the car some family member gave you, just because you have it available. The world does not need a chopped and lowered K-car.

Houses: There is always a better deal, and you will be able to get it when you are ready. Never be hustled or rushed just because something is available now.


1 obviously, if you were the exception to wait for s*x until you knew she was 'the one', then you are excused from this.

 

[MasterBlaster]

Model Aviation: Don't fall in love with your trainer (it's gonna get whacked)

Relationships: Don't marry the first girl you bedded just because you did so 1

Hot Rodding: Don't build up the car some family member gave you, just because you have it available. The world does not need a chopped and lowered K-car.

Houses: There is always a better deal, and you will be able to get it when you are ready. Never be hustled or rushed just because something is available now.


1 obviously, if you were the exception to wait for s*x until you knew she was 'the one', then you are excused from this.

Dripguy:

It seems that houses and relationships are actually treated the same !!

 

[DRiP Guy]

Dripguy:

It seems that houses and relationships are actually treated the same !!

heh heh heh....

One of my old bosses was a bit more cynical than me, and so his take on females was: "They are like buses... miss one, and fifteen minutes later, another will be along..."

 

[cube_rat]

One of my old bosses was a bit more cynical than me, and so his take on females was: "They are like buses... miss one, and fifteen minutes later, another will be along..."

Oh yes, us ladies say the same thing about you men The difference between the male and female bus analogy, is us women can refuse to get into the bus and send you on your merry way.

 

[DRiP Guy]

The difference between the male and female bus analogy, is us women can refuse to get into the bus and send you on your merry way.

 

[SteveR]

I have lost money on houses and I have made money on houses. The trick is to know which one is which before you buy and to keep yourself leveraged with somebody else's money.

100% financing is a disaster waiting to happen. If the market turns south and you are in too deep you will take a loss. Don't ask how I know this....but it has to do with Austin, TX in 1988 if that is a clue.

My sage advice is to wait until you can put down no less than 20% and make the loan payments without resorting to living on peanut butter and saltines. Life is too short to spend it being enslaved to a house.

 

[cube_rat]

Hey DG - you must be laughing at my feeble attempt to be cute and humorous. Obviously, I didn't proof read my post cause it made no sense I always manage to screw up the punchlines...

 

[DRiP Guy]

Hey DG - you must be laughing at my feeble attempt to be cute and humorous. Obviously, I didn't proof read my post cause it made no sense I always manage to screw up the punchlines...

I have zen auto-humor detection -- we don't need no stinkin' punchline to know what you meant!

 

[Nords]

(it's gonna get whacked)

I think that's pretty much the punchline for all your metaphors, not just the first one!

 

[HFWR]

"Bailiff, whack his pee-pee..."

 

[cube_rat]

"Bailiff, whack his pee-pee..."

I actually edited my post because I referenced "small pee pee's" (I didn't want to offend Drip Dude) I'm assuming my comments were read by some folks before I whacked it

 

[DRiP Guy]

(I didn't want to offend Drip Dude)

Hey, are you working from insider info, there?

 

[spideyrdpd]

Everyone thats not a real estate person always focuses on the down payment . I have to wonder why since its not the important part of the equation.
Having 10k more to put down is going to make less than a 100$ difference in what your going to have to pay monthly.

Its more a question of your income and what the new costs will be.
Whatever you guess repairs will cost add 25%
You would then look at all costs of homeownership. The mortgage, taxes, hoa, trash and furnishing the place. The nice thing is you will get a nice tax break. I recommend changing your w9 at work to get more money in yer paycheck. rather than loan the money to uncle sam interest free.

 

[Nords]

Everyone thats not a real estate person always focuses on the down payment . I have to wonder why since its not the important part of the equation.
Having 10k more to put down is going to make less than a 100$ difference in what your going to have to pay monthly.
Its more a question of your income and what the new costs will be.

I think the lender gets to decide what's important.

It used to be that the size of the down payment determined whether you got a lower interest rate and whether or not you had to pay PMI. It might even determine the boundary between a "regular" mortgage and a "jumbo" mortgage.

However today's no-doc zero-amoritization variable-interest loans have kinda blurred the down-payment lines. I don't think most lenders care about limiting your payment to 26%/38% of your income anymore, either.

 

[DRiP Guy]

I think the lender gets to decide what's important.

It used to be that the size of the down payment determined whether you got a lower interest rate and whether or not you had to pay PMI.

Having the VA loan benefit helped me on my first house with those two concerns [bolded]. No PMI for me, and I got a good rate, with the VA. Mortgage broker kept trying to tell me they had 'better' products than the plain vanilla fixed rate, but I am glad I did not buy into those scams creative finance options that put more money in the loan marketers pockets. I can't imagine what shape some of those people are in these days who were convinced to "buy more house" by using interest-only, reverse amortization, balloon payments, etc type loans. Simpler is almost always better for me.

 

[WM]

Deetso, how long have you been seriously looking at houses in your area? We bought our first house quickly and it all worked out well for us, but after moving in and living there realized there were always a few for sale in the neighborhood. So I wonder whether this one really is as good a deal as it seems, or is it just the first one you've really noticed?

 

[SLC Tortfeasor]

Here's my experience, for what it's worth: I bought my first house in 2002 when I was a brand new (26 year old) lawyer. It was the first and only house I had looked at in the neighborhood, and in fact it was the only house I had looked at in its price range. So in a lot of ways, it was not very prudent of me to pounce on that house.

When I bought, I only had 5% to put toward a down payment. But I had a relatively high income, and I got a roommate to live with me and pay rent for several months.

I'm glad I bought it, because appreciation in the neighborhood has been some of the hottest in the state. I paid about $170K for the house in December of 2002, and sold 3.5 years later for $260K, having put about $10K worth of work into it in the meantime. And on top of it all, I really loved the house. Last year I used the proceeds from the old house to pay a 20% downpayment on a bigger house on a nicer street in the same cool neighborhood.

I guess the moral of my story is, it may actually make sense for you to buy the place if you totally love it and can afford it. Also, it helps to be able to predict the future and know that real estate values will continue to rise there.