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PLEASE HELP! FREAKING OUT ABOUT BUYING HOME!!!!!
I've been having SO much anxiety about buying our first home for weeks now. We have an accepted offer, have filled out all the paperwork with our lender, and close a the end of this month.
I must go into details about our financial situation so I can get full help from those who are willing to take the time to work me through this. Please don't judge, I am somewhat insecure about it.
We were pre-approved for about $137,000. Our initial loan amount is approx $129,500. To me right there that is scary, I wanted to find a home for around $100k (mistake #1). It gets scarier. We don't have a down deposit and haven't been saving much for this purchase (mistake #2) and we are financing the up-front costs from his dad (gave us about $3,000). Our rent right now is $675 and so the mortgage is estimated to be about $955 (a jump.... but we've had no problems paying rent thus far.... we've also been paying all of our own utilities) but now I'm finding that our homeowners insurance may be much higher than anticipated, about double annually than was first quoted to us and I don't know how or why!? And of course, utilities will be higher because we'll be in a 2 story home w/a full basement, etc... We, together, have almost $500/mo car payments not including car insurance which is $100/mo, and I have a stud. loan. We don't have any kids yet, but want to eventually. Now for our income... His averages, without overtime, $2400/mo, but he frequently works overtime. My paychecks vary, they range anywhere between $600 biweekly to $900 biweekly. I also make tips, which range between $200-$450/mo depending on how busy I am. When I calculated things out, I came up to having $300-400 leftover at the end of the month.............. I didn't calculate play money into it at all.. just bills. *cries*
Based on everything (hopefully I'm not leaving anything out...) is my DH valid in saying we will be OK, or do we need to find a way OUT before it's too late? HONEST and STRAIGHTFORWARD answers is what I need to hear right now from people who are going through/have gone through this process. I feel like I can't bug my family or friends about my worries anymore. PLEASE HELP! Thanks in advance...
Re: PLEASE HELP! FREAKING OUT ABOUT BUYING HOME!!!!!
I have to agree with PPs. With nothing saved you are definitely not ready for a house. There are so many more things that just the mortgage payment involved, not the least of which is yard work. And things will break and they will be expensive to fix.
You were right to not want to go by the amount for which you were preapproved. You need to decide on a payment that you are comfortable with and go from there, but you also need to have at least 3-6 months expenses set aside for that rainy day that will come. And that is in addition to the down payment that you should have as well.
If you can't back out I think you will need to consider getting a second job to bring in more income.
Good Luck!
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I would walk away from the house and start saving money for a down payment as PP have stated. If you wanted a house around 100,000 then you should have been looking in that range. Did you take into effect property taxes and PMI? Those will add to a mortgage payment.
Also, a cost that some people forget is the deposit for utilities. If you do not have utilities in your name, you will have to put a deposit down.
Plus, you have been living in an apartment, so you will need stuff to take care of the yard and maybe need some appliances. In your budget did you account for accidentals, food, savings? I think you should have enough saved for 3-6 months and then have a special account for money saved for car repairs. Do spend time looking over your budget and see where you can cut spending.
Our personal experience: We originally was approved for a lot more, but we capped the houses off at 130,000. I looked at our budget and figured out everything with that monthly payment. We would only have $100 left over a month. That is not enough for anything especially with a car repair. We probably could have made it but it would have added a ton of stress. We decided to go for a house that was less than 100,000 ( a foreclosure) and the payment is more than we originally expected because of property taxes. Property taxes are about $200 of our monthly payments. We did shop around for homeowners. We ended up bundling our car and homeowners and that dropped our homeowners down quite a bit.
Talk to a insurance agent about homeowners. They can explain why it doubled. It could do something with lenders requiring a lower deductable. We had this problem. What I was quoted was based on a higher out of pocket deductable, this made the payment low. But the lender wanted a lower deductable and thus homeowners went up.
I would put on the breaks...finances aside, your GUT is telling you to stop and you are not happy with this process. If you aren't happy and at peace now, why on earth would you be happy and at peace once you were in the home???
Get out of the contract. People get divorced over this sort of financial stress. People get sick over it and people go bankrupt over it.
Then, buy and read Home Buying for Dummies.
Next keep these guidelines in mind...
In mid to low cost of living areas, housing costs per month should be no more than 25-28% of your take home pay (after taxes). In a high cost of living area that percentage is 30-35% of your take home pay.
Your housing cost is made up of rent, utilities, and renter's insurance (if you're in a rental) OR mortgage interest, mortgage principle, home owner's insurance, PMI (if applicable), property taxes, and major utilities (gas, water, sewer, trash and electric) if you are buying your home.
For example, if you and your DH make $40k after taxes then at:
25% your cost per month should be no more than $833
28% no more than $933
30% no more than $1,000
35% no more than $1,166
If your costs are higher than this, you are buying too much house.
If you cannot find a decent, suitable home for this cost range, than you can rent, get better paying jobs, look in a different area, or save up more cash to use to buy a house you desire while keeping these monthly costs low.
You seem to have 2 options. Go with the house and live paycheck to paycheck, unfurnished, and barely hanging on (but at least you'd be in the house) or walk away and reevaluate your financial means. Good Luck!!
Thank you very much for your honest responses. This is very helpful.
When I calculated everything up, I think I got just about everything. Total mortgage (including house payment, insurance, and property tax), all utility bills, our current debts and insurances, grocery, and $200/month going into our savings account. Right now we do have $1,300 in our savings account. It's not a whole lot, but I'm really hoping it will add up when we continue saving little by little and not touching it except for emergencies.
We are planning to cut our cable/satellite to see how that goes, and we may try to find a less costly phone provider (those are soo pricey!!) I may have a way to pay off my student loans (still have some stocks tucked away that I always forget about!). Also I looked into some local insurance companies for our homeowners. It was better, but still a little higher than anticipated (was estimated $600, it's almost $900, eh?) So I'm getting a quote for car insurance and will see if bundling would save money.
Our credit union doesn't require a down deposit. I know it would have been better to have one as it would make our payments lower, but this is something we will need to remember if we decide to purchase in the future. Live & learn.
I'm definitely worried about something unexpected happening, but that is life and anything could go wrong at any moment. My husband is confident that his stable job with good benefits could support us if something were to happen with me or my job (we'd figure out the rest when it came.) We do have most things to furnish our home but absolutely no lawn care items. Hopefully I can borrow from my parents or skip a few lesser important items for a while!
Technically, I do have two jobs (once/month at a local restaurant) and I wasn't factoring in the cash tips with my income. I also didn't add in my other tips. So I suppose there is a little extra spending??!? *silver linings!*
I guess as of right now, there is no way I can walk away. Although my head is like "AHHHH!!!" my heart knows this is something I need to do, good or bad. I was freaking out when we started renting our townhome too.
Does this clarification and a little more positivity help at all? Or is everyone still worried? Your responses are still much appreciated!
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I don't think she was being judgmental. She was stating fact...many posters at BAH come from the line of thought that if you have to borrow from family to buy a home, than you aren't ready to buy a home in the first place. Many posters come from the perspective of waiting until you can stand on your own two feet financially before buying. It's not being judgmental, it's just fact that people think this.
Ultimately, you will do what you want. But it seems like you came here searching for answers to the emotional obstacles you are facing over this process.
It is a valid point, and I do agree with it. And I definitely came here searching for answers... And I really am getting good feedback. I didn't realize until now that the down deposit is a pretty important part of buying a home..I was told I didn't need one, and I didn't question it. I should have. Everyone here agrees that a down deposit is necessary to be sure you don't get yourself into trouble. I should have also looked into the up-front costs so we could have saved up for it when the time came to buy. The money from the father-in-law was meant to have been going towards our down deposit, but I wasn't aware of those pesky out of pocket expenses. So we were back to having no deposit, and I didn't think it was a big deal. We qualify for 100% financing, but I didn't know what it meant until I researched. I didn't know what an upside-down mortgage actually meant until today.
The moral of the story... Don't do what I did.
I am underprepared, I admit that. But I hope I am not in too deep. I am determined to work hard to keep what I have, and in questioning things now rather than never, I am less underprepared than if I wouldn't have been freaking out. At least now I'm not completely oblivious and if something goes wrong I won't wonder why it happened that way. I believe I am making myself prepared for things to come. Maybe so I can help prevent the bad things from happening the best I can.. Whether that means walking and waiting, or dealing with our decision and making it work.
I'm learning a lot, and I still have more yet to learn.
It does sound like you may be biting off a bit more than you can chew but, I can respect that you are going to give it a go and make it work out. So I will leave my advice for trying to maximize income and minimize bills. Try to build that nest egg to save for a rainy day. Set a budget and cut out most of the "luxuries". That includes eating out, even for lunch at work. A plethora of low cost and delicious recipes are just a google search away.
Lots of cell phone companies nowadays have $40 unlimited plans...maybe cut out the home internet completely and use that?
Make extra money, either through an additional part-time job or side income. Like good finds in Goodwill stores or garage sales that can be flipped on Ebay or Craig's list. It takes a little research and practice to do that, but not much. And again, lots of articles all over the net on how to do that.
Last, but not least, on your homeowner's insurance...ask about "dwelling" insurance instead of homeowner's insurance. It is LESS insurance for you...make no mistake about that...but it is a good bit less money and will be fine for your mortgage company. The difference is basically that "dwelling" insurance as opposed to homeowner's is ONLY coverage for the house. It does not cover you for personal injuries that occur on the property or if your dog bites someone or for your property in the house, etc. I'm not saying it is the right option for you, but most people are not aware of this type of insurance and I think it is at least worth looking into. Lower insurance costs will BOTH lower your closing costs and lower your mortgage payment (assuming your insurance and insurance escrow are rolled into your mortgage payment).
Also DIY projects! My husband is going to make me a pot rack (the one that you place on the ceiling) out of a toddlers spring bed. Also the crock pot will be your best friend! Through some onions, carrots potato's seasoning and chicken or beef and you got a nice hardy stew. Corn, onion, milk and seasonings and you got yourself a simple corn chowder!
Also like other's have said goodwill and craigslist are my go to places for cheap. I have a side job working at dunkin donuts. It's not the greatest job, but it is a job where I just show up, work and go home. The tips alone pay for my gas.
Also stay in more. With my kids I make gourmet popcorn, make the living room extra dark, make either a fort or put out their sleeping bags and have theme movie nights. We did a harry potter movie weekend and got cheapie stuff form the dollar store (wands, glow sticks) and we dressed up like witches, and wizards.
And now that the holidays are coming up we collect leaves, branches, acorns and stuff to decorate the house.