Moving in April/May. First Steps?

abharrel

My husband and I currently live in a 2 bedroom apartment. I'm finishing up college (this Spring Semester will be my last!) and my husband is currently commuting an hour and a half to work and an hour and a half back. Our lease is up in July and his employer covers early termination fees on the apartment, as well as giving us help on packing, and moving etc. We already have an agent and have already gone to a few houses (we have a city in mind to move to). We're working on getting pre-approved and we have a little over 5,000 saved for a downpayment. When should we make our final decision? There are a few houses that I like now but I'm not sure if now is too early.

musictchr25

If you can financially handle the mortgage of the house and the rent of your apartment, I would say that an overlap of the two would be ideal. 

If you're looking at a fixer, then now is definitely not too early to think about buying. Even not having a fixer on your hands, having the house before your scheduled move will allow for a deep clean, painting, and time for any minor repairs that need to be done before you start adding in your belongings.

Depending on what you're looking to spend, $5k is not a lot for a down-payment, so make sure that you know about PMI and how it works with mortgages. Also make sure that you have enough money for your emergency fund, closing costs, insurance, and first time homebuyer purchases, like tools, yard gear, shovels, cleaning materials, etc. There are some great posts on here on the process of buying a home and how to make sure your finances are in order. If you just look through the first few pages of this board, you'll find a lot of great information.

Sisugal

Liking a house is good, but definitely not enough reason to buy it!
$5K will be gone in a flash -
Make sure you have a GOOD down payment - the more the better.
Home inspection costs
Have closing costs in hand
Utility deposits,
(Moving costs covered by DH's employer)
Repair and renovation costs along with decorating/additional furniture/appliances/ladders and basic household tools saved for.
Outdoor items
Patio items

After all that - you still NEED at least 6 months of expenses in an emergency fund.

Keep your housing costs to no more than 25-28% of your TAKEHOME pay.  That means:  Mortgage+PMI+insurance+taxes+HOA+utilities = 25-28% of takehome pay.

Utilities will be much higher in your house than apartment.

Other considerations:
Do you have consumer debt?  IF so - then pay that off
Will you finance this home based on one or two incomes?
Do you plan to have a family in the future (figure child care costs into your future budgeting or plan to Stay at Home - then loss of your income)

Read Home Buying for Dummies and Mortgages for Dummies - some great information in both of them

Do NOT rush into buying a house until you are financially ready. Rent a cheap apartment and save, save, SAVE first if you need to do that to be ready.

abharrel

Edit:: I don't think we can afford both the apartment and home. Both are roughly the same in monthly payments.

Thank you both for the responses. We've lived in this apartment for almost a year, this July will be almost two years. We have 5000 saved for the down payment but we're saving still (portions of hubby's paycheck go towards the down payment fund) We also have 1000 saved for emergencies. Right now it's only based on my husband's paycheck, but after I graduate in May I will hopefully have a job to help with everything (his paycheck is enough to cover everything as of right now) We'll also have my student debt to pay back (we've already started paying back some interest on one loan). We're hoping we won't need much for the house since the majority that we're looking at are brand new homes. 

jtmh2012

abharrel said:

We also have 1000 saved for emergencies. 

....
 

We're hoping we won't need much for the house since the majority that we're looking at are brand new homes. 

Please for your sake reconsider this.

Think of all the things your landlord does for you now.  You will need to handle those things.  Either by fixing them yourself or calling someone.  $1000 doesn't even begin to cover the things that could eat up an emergency fund.  In one year, we had to replace a hot water heater and the HVAC system (they were tied together).  $1000 for the hot water heater and another $6400 for the HVAC.  Two years before that, it was $3900 for a new roof.  Even something like a washing machine or a dryer going is $500-1000 depending on what you buy.

Do understand, I'm not anti home ownership.  I'm not on my second home and if I move again will buy another one after this.  And yes, having a newer home may negate some of the expenses, but maybe not.  If you're going to try to go this with such a small emergency fund, you may want to at least look into a home warranty.  It should help with some of the larger expenses.

Sisugal

I would highly recommend taking a year to live on your DH's salary and save your paychecks to add to your financial preparedness for home ownership.
If you do not currently budget - then start tracking your spending - ALL of it. Know where your money is going - every dollar. Then sit down and figure out how much you can reasonably afford. (Will you need to give up vacations? Eating out? Other non essentials? in order to afford your home? 
Do NOT overspend (no more than 25-28% of your TAKEHOME pay - or you will be house poor in no time.
Get a job first - move closer to your jobs and rent a year - and save more.  You will not be sorry.
$1000 rent =/= $1000 mortgage.  There will be much much more you will be financially responsible for with your house.

simplyelise

I'd really encourage you guys to find an apartment or place to rent in the dream city while you finish school and look for a job. What happens if you guys get this place, you only have a couple thousand in the bank, you have trouble finding a job, and your SL payback starts? Then while your dealing with that, your water heater breaks/refrigerator breaks/tree falls on the roof. Or your car breaks down?

From the information you've given so far, you guys would be house-poor if you bought right now. You absolutely want to have six months of expenses saved up in case of emergency. You also don't want to base what you can afford on your expected income.

Waiting one year would completely change your standing and would give you both a better idea of the expenses and costs of utilities in the dream city.

abharrel

jtmh2012 said:

abharrel said:

We also have 1000 saved for emergencies. 

....
 

We're hoping we won't need much for the house since the majority that we're looking at are brand new homes. 

Please for your sake reconsider this.

Think of all the things your landlord does for you now.  You will need to handle those things.  Either by fixing them yourself or calling someone.  $1000 doesn't even begin to cover the things that could eat up an emergency fund.  In one year, we had to replace a hot water heater and the HVAC system (they were tied together).  $1000 for the hot water heater and another $6400 for the HVAC.  Two years before that, it was $3900 for a new roof.  Even something like a washing machine or a dryer going is $500-1000 depending on what you buy.

I should have clarified sorry. When I say 'have all the things we need' I mean, I don't see the need to redecorate, find new flooring, new furniture, etc. when all the houses we are looking at are brand new.

We really would like a house because the houses we've found that we like are within the 120,000-150,000 range, and we've discussed another apartment. we particularly don't want an apartment because we're tired of living in one (being surrounded by others, no fenced in area for our dog, terrible apartment staff currently) as well as the closest apartments would be in a terrible part of town. We've been married for a little over a year and we're just ready to move. We also wanted to start trying for a family sometime next year after we move but by the sounds of it we need another year for that lol

Sisugal

You WANT -want, want  but you do not sound financially ready.
House, +  baby? . Show us your budget.
The financial stress of getting in over your head can quickly kill a marriage.

jtmh2012

abharrel said:

jtmh2012 said:

abharrel said:

We also have 1000 saved for emergencies. 

....
 

We're hoping we won't need much for the house since the majority that we're looking at are brand new homes. 

Please for your sake reconsider this.

Think of all the things your landlord does for you now.  You will need to handle those things.  Either by fixing them yourself or calling someone.  $1000 doesn't even begin to cover the things that could eat up an emergency fund.  In one year, we had to replace a hot water heater and the HVAC system (they were tied together).  $1000 for the hot water heater and another $6400 for the HVAC.  Two years before that, it was $3900 for a new roof.  Even something like a washing machine or a dryer going is $500-1000 depending on what you buy.

I should have clarified sorry. When I say 'have all the things we need' I mean, I don't see the need to redecorate, find new flooring, new furniture, etc. when all the houses we are looking at are brand new.

My point was that even with a brand new (you're the first owners) house, stuff can and does go wrong.  Some of it, the builder may take care of.  Some of it, they won't.  Like I said, I'm not anti home ownership.  I even fully support people wanting to build a house.

My concerns are these:

1) Even with a fixed rate mortgage (and I do NOT suggest getting an ARM)....can you afford for the property taxes and insurance to go up?  Odds are that at a minimum, the property taxes will go up.  Ours just jumped $51.69/month.  Haven't even had the mortgage a year.

2)  Do you have 6 months to a year worth of living expenses socked away somewhere?  The mortgage company expects to be paid whether you have a job or not.

You may even want to talk to a few banks and see with your assets if you'll even qualify for a loan.  I really think you and your husband need to put more away in savings before buying.  Yes, apartment living sucks.  I hate it with a passion.  Had to live in one for six months between houses.  However, people do have children while living in apartments.

Also, if you haven't yet found jobs in the new city, the bank at a minimum will want to see a firm offer of employment to prove that you'll be able to pay your new mortgage.

simplyelise

Just in case you need to hear it from some other people besides us, check out these:

http://moneypropeller.com/know-youre-financially-ready-buy-home/

http://www.dailyfinance.com/2014/09/05/home-buying-are-you-ready/

Renting sucks. I've been renting for seven years. But it really could turn out badly if you go into a home purchase before you're financially ready.

abharrel

Sisugal said:

You WANT -want, want  but you do not sound financially ready.
House, +  baby? . Show us your budget.
The financial stress of getting in over your head can quickly kill a marriage.

Not sure if you were being rhetorical or not but here is the app we use to track our money. It's called EEBA (Now GoodBudget I think) It shows how we plan for each section such as gas, grocery, gifts, etc. The bottom number is what is added each paycheck (every 15th and 30th of each month) The top number is how much is currently in that section. We also made an excel sheet with a planned cost of each baby item (crib, diapers, clothes, etc) we had an estimated cost of 11,000 for the first year (not including the hospital visit).

jtmh2012 said;

Also, if you haven't yet found jobs in the new city, the bank at a minimum will want to see a firm offer of employment to prove that you'll be able to pay your new mortgage.

My husband already has a job but his commute for one day is about 3 hours to and back. This is kinda why we wanted to move to a different city. The city and community we have in mind would cut his commute by 2 hours. I would be the only one without a job at the time. 

We've already been pre-qualified for way over our ideal house price. 

Because of all of your ideas though I have been reevaluating my search in our ideal area, trying to find a decent apartment.

Sisugal

If you can save 11K for a baby, then I would recommend saving an additional 11K for the house first - and postpone the baby.

NoneForUs

You aren't ready to buy a house yet. I have never seen a home that required such a small down payment. You also have student loans to pay off and you may not be able to find a job right away. When you do find a job, it would make sense to work there for as long as possible so that you can get mat leave. 

I know how it feels to want to move to the next stage in life. However, you will be far less stressed if you take the time to save more for a down payment and an emergency fund. There is no rush to have babies either. Is it possible for you to wait to start a family until you have paid back most of your student loan? 

short+sassy

abharrel said:

jtmh2012 said:

abharrel said:

We also have 1000 saved for emergencies. 

....
 

We're hoping we won't need much for the house since the majority that we're looking at are brand new homes. 

Please for your sake reconsider this.

Think of all the things your landlord does for you now.  You will need to handle those things.  Either by fixing them yourself or calling someone.  $1000 doesn't even begin to cover the things that could eat up an emergency fund.  In one year, we had to replace a hot water heater and the HVAC system (they were tied together).  $1000 for the hot water heater and another $6400 for the HVAC.  Two years before that, it was $3900 for a new roof.  Even something like a washing machine or a dryer going is $500-1000 depending on what you buy.

I should have clarified sorry. When I say 'have all the things we need' I mean, I don't see the need to redecorate, find new flooring, new furniture, etc. when all the houses we are looking at are brand new.

We really would like a house because the houses we've found that we like are within the 120,000-150,000 range, and we've discussed another apartment. we particularly don't want an apartment because we're tired of living in one (being surrounded by others, no fenced in area for our dog, terrible apartment staff currently) as well as the closest apartments would be in a terrible part of town. We've been married for a little over a year and we're just ready to move. We also wanted to start trying for a family sometime next year after we move but by the sounds of it we need another year for that lol

A compromise between these two is instead of looking to buy a house or rent an apartment (which doesn't sound ideal from your description) is to rent a house instead.  It's a lot of the niceties of living in a home instead of a complex, but without the hassle and expense of home ownership.  I also agree that it sounds like a better bet for you all is to wait until you're settled, have more money saved, and you have a job before looking to buy a house. 

Sisugal

Are you planning to get a job?
The budget you posted only shows 10 categories when I opened it -- surely you have more.
Utilities are much, much more in a house - and you will pay for ALL of them.
Rent a place closer to your husbands work and continue to improve your financial situation. (We saved for 6 years before buying our first home - I know how hard it is to wait) 
You will not be sorry if you wait and save more get yourself into sound financial circumstances and you could be very sorry you bought too soon.
Prequalified amount is not the amount you can afford. Remember all those foreclosures a few years ago  (and still) that happened when people bought houses based on prequalified amounts and low (or no) down payments?  You do not want to be another foreclosure statistic.