Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
First time buyer
My DH and I want to buy a house. We have no idea where to start, but have been looking at some homes in our area. In our area, $150k can get a nice little starter home.
We make about $50k a year, currently pay $625 in rent ant $70 in utilites. I work part time and my DH works full time. We have no student loan debt, no credit card debt, and $9,000 left to pay off on his car. The payments are $200/month.
Should we make the jump to buying a home, or wait until the car is paid off?
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Re: First time buyer
The ladies over on Money Matters are much better at these types of questions.
Usually they ask for more detail like monthly groceries, toiletries, fun expenses, savings etc.. You just need to list out every expense that you have to be able to see where you stand.
We would need some more details. That being said, no one can tell you to "make the jump", but it's a good starting point.
We went and talked to a mortgage loan officer at our bank first thing. We brought in all pay stubs and statements and a list of our expenses for each month. The bank will look at everything, including credit, and determine how much you are qualified for...but you always want to stay below what they say you can afford, just to be on the safe side. I wouldn't worry too much about the car loan. Right now is a buyers market, so you can get a great deal on a nice home. Not to mention interest rates are super low...we locked in our rate at 4.25% just a couple weeks ago!!
How much you have in savings/checkings is a huge factor too. The gal that posted from GA is correct in saying that if you dont have 20% to put down you have to pay PMI. You can still get an FHA loan for 3.5% down, but just have a little bit higher monthly payment.
Good luck...house shopping is a lot of fun!
This is usually true, but not always. There are some loan programs where you won't have to may PMI with a down payment of less than 20%. VA or USDA loans are examples. Or some banks/credit unions offer things like 80/10/10 loans.
It seems like your current expenses are pretty low for your income, so hopefully you've been able to save some money for a down payment, emergency fund and set-up costs for a house.
Buying a $150k house will increase your housing costs quite a bit, you'll probably be paying about $1k a month on a mortgage (incl. taxes, interest, insurance), and you're used to paying $625 now. Your utilities might be higher too, especially if you're currently in an apartment and you move to a single-family home.
I would advise putting together a budget that includes all your monthly expenses (utilities, cell phone, car payment, car insurance, gas, groceries, clothing, entertainment, gifts, household supplies, savings, etc.). Then compare with your income and see how much money you can comfortably spend on housing each month. Use that number to determine what price range you should be looking at when house shopping. Also consult a bank/mortgage broker, but they will usually tell you that you can afford more than is realistic. Don't let anyone talk you into spending more than you feel will be comfortable.
Mr. Sammy Dog
No amount of education could convince Betty to be nice to possums
The usual recommendations are to buy something 2.5 times your income or below (so $125k) and/or 25% of your take home pay monthly, including taxes and insurance. I don't see that happening with you and a $150k house, unless you put down substantially more than 20%.
If you put down $50k you could get your monthly payment to around your current rent payment, including taxes, but not insurance, according to this calculator:
http://www.mortgagecalculator.org/
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You guys have really awesome advice - and I appreciate it
thanks for going to such lengths to educate me about this, but at the same time it is sad because it confirms what I already knew, at least about our financial situation.
We both have a 401k plan but wouldn't dip into that for a down payment. We have no savings. We have no money for a down payment. No family to help us out. Essentially, we shouldn't even be thinking about purchasing a home. It's kind of a stupid dream that seems even more stupid the more time goes on. I almost think we'd be smarter just shelling money away once we get the car paid off, instead of buying a home.
Then I look at my DD and think of how much she deserves a nice little yard to run and play in and I feel guilty all over again. There is no winning with this LOL.
I would set up a separate account (we used ING) that we deposited a little extra money each month into in order to save up for the house down payment. Having it in a separate account helped us to not look at the money or be tempted to spend it on anything else that may have come up. Look at your monthly budget and see how much you are generally saving at the end of each month.
No amount of education could convince Betty to be nice to possums
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