Just beginning

ramcheer55 · November 2012

My H and I are just starting the home search process. We met with a friend of ours who is a realtor and they are excited to help us get started. In Feb. we will have been in our 1 br 1 bth apartment for 2 years and we are dying to get out! Affording the mortgage is not an issue at all but having enough money saved for the down payment is really difficult for us. We plan to have about 5,000 saved by the time we're ready to move. Our realtor said that we have some options and that with First Time Homebuyers and sellers help, we'd only need about 2,500 down. We also hope to offer full price if the seller will help with closing costs. Our range is 100 - 150k. We found 2 nice townhomes...one at the top of our budget and one in the middle...and then last night we found a single family home at the top of our budget. We are in love with the house!! We'd so much rather buy the single family house where we'd be happier to stay for a longer period of time than we would in the townhouse. It is in a great school district and perfect location for us. But I'm worried because it's only about the end of Nov. and we're stuck in our lease until March. If we are interested, our realtor said that we should plan on making an offer in mid-January due to our obligations with our lease. But I am so worried that if we don't jump on this house, we'll lose it by the time we should put an offer in. The big issue is that if we do jump on it and make an offer and everything, we'd be responsible for paying our rent until March...there is no way we could afford a month or 2 of rent on top of the mortgage payment....Patience is not mine strong suit and my hubby and I are just so excited about this property that we'd hate to lose it do to timing.

Sisugal · November 2012

I am not trying to be cruel, but you do not sound financially ready to buy a house. Owning a home is much, MUCH more than the monthly payment. You cannot manage rent and a mortgage --- but what about all the extras that go with a house?

Closing costs, moving, repairs/renovations,/ decorating/furniture/appliances/ utility deposits/ yard items & tools and tons of miscellaneous!

You NEED an emergency fund of 6 month's expenses when you own a home (what if the roof leaks, furnace dies, water heater dies etc? It happens all the time! What is one of you gets sick, loses their job, the car dies etc?

Get your finances in order - then look. First make a list of must haves in a house, along with alist of wants. Set your budget so that your housing costs are no more than 25-28% of TAKEHOME pay for mortgage+PMI+insurance+taxes+utilities. More than that you will very easily wind up "house poor"

Buying a house is a HUGE decision that impacts your finances for many years - take your time and do not be impulsive nor let anyone pressure you. (realtors and lenders will make commission on the sale, so it is not your best interests that are always in their minds.

Read : House Buying for Dummies and Mortgages for Dummies -- great infor in them for 1st time buyers.

LoveKiss · November 2012

I agree with a PP that having %5k in the bank on closing day is simply not enough. If something breaks the day after closing, you will be responsible for getting it fixed. If one of you loses your job a month after closing, there isn't an option to find a cheaper apartment or move in with family. You have to pay that mortgage every single month. You need an emergency fund that is equal to 6 months of your expenses PLUS your down payment and closing costs and incidentals fund.

I know it sucks to be unhappy in your current home. I lived in a small 2 bedroom townhouse in a semi-questionable neighborhood for 8 years so I could save up money. Was it fun? Not so much. But it was cheap enough that I was able to build the savings that, when combined with Mr. LK's savings, let us buy a nice home in a nice area. Patience isn't my strong suit either, but it had to be done. And it was really good practice for all of the patience and self-discipline I have to have as a homeowner. I really want to replace the nasty family room couch that came from Mr. LK's bachelor days, but it will be at least another year before we can afford it. We have to replace the heating system and fugly kitchen counters first.

cakergirl · November 2012

Right now I think finances will be more of an issue than losing the house to another buyer. Looking for houses is fun but it's easy to get ahead of yourself.

Honestly, even if you qualify for a 0% downpayment loan, there will still likely be significant closing closets, several thousand dollars to cover all the initial fees. And don't count on getting the seller to pay them, many sellers are no better off than the buyers and are often losing money on the home anyway in this market.

Banks often require you to show funds sufficient to cover not only the down payment and closing fees, building/pest inspection, upfront HOA, insurance and taxes, they often require you to show sufficient funds to cover anywhere form 2-6 months of mortgage, insurance and HOA fees. And that is just what the banks require... Personally, I wouldn't recommend buying unless you had a minimum of 6 months all major living expenses saved (mortgage, car payment & insurance, credit card, utilities, student loans etc).

Homeowning is expensive. Ac or heat goes out- $3k easily. Burst pipes in the winter- hundreds to thousands. New (or used) lawn mower and Weedeater- huge range.

Sorry to be Ms Debbie Downer, but it sounds like you need to save more before buying. That's not a bad thing though. Actually having a goal that is tangible makes it easier to be more motivated to save.

LittleLady77 · November 2012

FYI- I lost my job right after we closed. It was terrible but we were just fine because we had plenty saved and I took my time to find a good job. Plus we had to call a plumber and an electrician within the first 2months of home ownership. Take it from me- you need savings. Period.

BBear13 · November 2012

Ditto to everything above. I know being in a small apartment isn't ideal, (DH and I have spent over 5 years in the same apartment to save for our home) but if you are serious about being homebuyers, you should probably plan to renew your lease one more year, and during that year save money seriously and do research on the home buying process and lenders. If your bank or credit union offers home buying seminars, consider attending one.

I know real estate costs vary from state to state, and I live in a high-priced area of the country, but $5000 wouldn't have gotten us anywhere. We had to pay $5000.00 just in earnest money for our offer on a townhome in order to be competitive against other buyers. That's in addition to the other upfront costs you are responsible for (remember, even if the sellers contribute some closing costs, that comes at the end.)

You need to have cash on hand for: Home Inspection (radon also, if required), appraisal fee, etc.

Also, take into account moving costs (movers aren't free unless you can rally some super awesome friends), plus moving supplies (start saving boxes & bubble wrap now!)

As many others have mentioned, home repairs. For instance, after the home inspection you'll discover things that need to be fixed, some for safety reasons. Sellers won't always agree to fix these or to credit you money toward fixing these thinks. Consider the cost of having to replace outdated appliances. Does the house come with blinds? Those costs add up.

Most people I know have had at least one month rental payment overlap with one month mortgage payment. You need money for this.

If you have overlap months, do you have the money to pay for double utilities? Home utilities are going to be different, possibly much more expensive, than apartment utilities.

Monthly mortgage payments are more than just the loan. It's also the taxes, HOA fees, PMI, etc. The less you put down, the more you'll have to pay for monthly mortgage and PMI. Also, some lenders will ding you with "loan adjustment fees" if you don't have a high enough credit score & savings - in some cases this can be thousands of dollars you have to put down at closing.

What would you need to pay up front at closing for escrow?

At closing you'll also need to pay any HOA fees. (More than $300.00 in our case, for the first month HOA, transfer of HOA membership, and document disclosure)

Prior to closing you'll also need to make arrangements for, and in some cases pay out of your own pocket, first year home owners warranty and home owner's insurance.

I don't mean to be discouraging, but buying a home can get expensive before you ever make your first mortgage payment. Buying at the top of your budget is a pretty risky situation as well, especially if you get into a bidding war.

It's easy to fall in love with houses, but I promise, there will be more you will fall in love with. When you first start out, it's easy to be starstruck by "the perfect place" but the reality is there are a number of places that will be good for the two of you.

Even if you had all of your financial ducks in a row, there's no guarantee your offer would even be entertained much less work out to closing. Not everyone gets the first home they put an offer on. If a house is appealing to you, it is probably appealing to someone else who will make an offer, so you'll have to make concessions to be the more appealing offer. Plus, along the way there are contingencies you might need to break your contract over (failed inspection, lower appraisal, etc).

Remember, there will be other houses. It might suck to stay one more year in your apartment, but they year will fly by, it will give you an opportunity to save and start sorting stuff to donate/sell/trash that you don't want to take with you,. Years from now, when you've been in your home for years, what difference will one additional year have made? Good luck!

Just beginning

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