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Too good to be true?
DH and I started saving for a house back in March. We don't make a whole lot, a little less than 60k combined before taxes. Despite this, we are good savers and have managed to save up about 11,000. We were going to continue to save to have an emergency fund as well has enough for a small down payment and buy whenever we were ready. However, this past week we discovered a neighborhood that qualifies for a USDA loan, so we went and explored the area and homes.
The houses are brand new, great quality, etc. We absolutely LOVE one of the floorplans. The builder would pay all but 1,000 of the closing costs, plus they have agreed to throw in blinds, washer and dryer, fridge, upgraded lanscaping, PLUS they are going to re-do the flooring downstairs in the house. The house is finished already, and DH and I do not like the floors that the builder put in, so they are agreeing to put in a different material. The house has been sitting, built and ready to go, for 90 days. We didn't ask for $$ off the total price, but rather the extras I mentioned above.
We are seriously considering going forward but I can't help but ask if there's something we are overlooking. Are USDA loans a bad idea? Should we still try to negotiate a lower price on the house even though they are throwing in all the extras?
Thanks,
Beth
Re: Too good to be true?
Government loan programs are fine. (Although earlier this year I read on here that USDA had run out of money. Anyone know if that's still true? Will it kick over for the fiscal year on 1 Oct?)
And getting extras instead of lowering the price sounds like a good deal, as well.
The real question here is whether you and your DH are financially ready to own a home. You guys only take home maybe $40k. With that kind of income, you don't have lots of room to cover unexpected expenses. Normally, the landlord takes care of lawn care, the broken microwave, the dishwasher when it floods and ruins the flooring, the bad electrical in the laundry room. There's no landlord when you own. You have to take care of those things. And I bought a good quality new home last year by a good builder and all those things I listed happened to us last year and coming up with the cash at every crisis was annoying. What I'm saying is don't fall into the "oh, look, this mortgage is the same price as renting" trap because it's not true.
My Pinterest
The Googlesites Paint Bio
Thinking of doing cosmetic updates to a dated home? These were our costs.
Your builder's warranty didn't cover the microwave and the bad electrical? Ours had a 2 year warranty on all plumbing, electrical and settlement cracks + a lifetime structural. I would also think that your homeowners insurance would cover the dishwasher flooding, I know they covered my BF's when her washing machine flooded and ruined all of the flooring on her lower level.
What do you take home every month and do you have any other debts (SL, car, CC)? What are the payments on the house going to be?
There is absolutely nothing wrong using a government funded loan, but make sure that you can really afford this. Owning a home is a lot more expensive than renting, but with new construction you don't have to worry as much about a lot of repairs because most warranties do run for 2 years. I do, however know A LOT of people who's AC went out as soon as their warranty expired. I'm not as cautious about having huge down payments, etc. if you are buying well under what you can afford. Without at least a 6 month efund I wouldn't buy anything that you couldn't afford if one of you lost your job.
Our month-to-month income varies slightly because we both have self employment jobs in addition to our regular jobs. In July we took home 4,390 dollars, in August it was 6,333. Our 12 month average of take home pay is 5,363 ... so I guess I underestimated our income with I orignally said 60k before taxes. I like to be conservative!
The house payment would be 1,134 dollars. This includes our property taxes and insurance. We are currently paying 940 dollars a month in rent and it's killing me because I hate to not be paying towards anything. I know owning a home will come with more expenses when it comes to repairs and utility costs, but the builder does have a great warranty so we should be good in that regard for a while.
We have zero debt. No car loans, CC bills, medical debt or student loans. We are definitely blessed in that area!
While I don't argue your overall point, everyone should be aware of the extra costs. I would like to say that their income is very middle of the road and that many with that income own a home just fine.
census data ME US
Homeownership rate, 2005-2009 72.8% 66.9%
http://quickfacts.census.gov/qfd/states/23000.html
Edit: sorry for the poor formatting first number is my state, second is the nation.
You can definitely afford this house, so good luck - just keep saving and don't rack up CC debt with new furniture, decks and grills!
Not too good to be true! It's a wonderful opportunity that FI and I are exploring now. We have an excellent realtor who we trust who told us that the USDA loan program was completely legit and she had at least one other client who was going through them also. It's amazing that our dream of owning a home could be a reality much sooner than we thought and I sincerely wish you luck!