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Bud Fuggins
Bolete picker



Registered: 09/11/14
Posts: 251
Loc: I used to live in Little ...
Last seen: 8 years, 2 months
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Buying first home
#22209575 - 09/08/15 09:36 PM (8 years, 4 months ago) |
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So I want to buy a house; my apartment people are getting on my ass about signing a new lease which I'm refusing as they no longer offer 3 month leases. I want to stay under $130k which is doable and I want like one or two acres which also seems doable farther out from the cities. I just need some advice on the process and the finacials involved.
I don't really have much saved but I've been paying down student loans about $800 per month, and credit cards $250 per month so that's where most of my extra income goes right now. I am paid ahead over a year so I can actually stop paying on these loans for a while. My income is variable but usually between about $25-$30 an hour. My rent currently is $707/month. I'm expecting a large tax return in february. I also am a veteran and can get a loan through the VA, but I don't know what the advantages are of that really.
Can you talk people down on a house and get lower than listed? What are some things I should know before getting into this? Its daunting.
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Sun King



Registered: 02/15/14
Posts: 4,069
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Yes, you can talk them down. You might want to get pre-approved at a bank and they will tell you how much you can borrow. Your student loans and credit card debt will factor into this. You will probably need a down payment.
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LunarEclipse
Enlil's Official Story


Registered: 10/31/04
Posts: 21,407
Loc: Building 7
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If you buy a house now, you'll likely be buying very near the peak of the market. It doesn't sound like you are ready on an income basis. The lack of a down payment is also a problem, and you have appraisal costs to satisfy the lender, inspection fee, title fee, recording fee, and then you start paying property taxes. Then, unless a miracle happens, you need to start taking care of deferred maintenance, maybe pay for a new roof, etc. etc.
So, if you aren't even ready to "settle down" for a year lease, maybe they are even offering 6 months?, what makes you think you are ready to buy a house?
You aren't.
Besides, the demographics are horrible for real estate, and the fundamentals are also currently horrible but the mainstream media keeps telling us how great real estate is doing. It's seriously in a bubble, check out the 2 million buck "starter" homes in S.F. 2 br 1000 sf.
-------------------- Anxiety is what you make it.
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Confucian
...


Registered: 03/31/09
Posts: 1,741
Loc: USA
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1 part of the equation is credit history and score. The other part is work history and income.
Sounds like you have the income down. What is your credit score?
They had really excellent first time home buyers programs for the last 8 years, not sure if they are still around. They are called FHA loans through the Federal Housing Administration. You only need 3% down so on a $130,000 loan that is $3900.
You should also look into an income based repayment plan on your student loans. $800 seems absurdly high - you might be able to save several hundred a month, but look into the details, you might have to pay for a longer term.
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LunarEclipse
Enlil's Official Story


Registered: 10/31/04
Posts: 21,407
Loc: Building 7
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Re: Buying first home [Re: Confucian]
#22210933 - 09/09/15 07:00 AM (8 years, 4 months ago) |
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There are USDA loans with 0% down, and he could still end up overpaying for the house and going broke and foreclosing later. With no money down, and no buffer for any problems financially, an unsteady income as already stated by OP, it's a truly horrible time for OP to buy.
-------------------- Anxiety is what you make it.
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Bud Fuggins
Bolete picker



Registered: 09/11/14
Posts: 251
Loc: I used to live in Little ...
Last seen: 8 years, 2 months
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Well I make $13 hourly plus commission that's usually between $1500 and $3000 monthly. I also receive $800 monthly from a brain injury. I am paying $800 per month on my higher interest unsubsidized loan not because I have to (i have to pay like $70) but because I can. I'm paid ahead until Oct 2017.
I wouldn't call my income variable I've been #1 here for a year. I've had the job a year and a half and am in the highest position you can get without being in management. I could easily save $1000 monthly instead of making these huge payments, but that would mean I end up paying more in interest down the road.
VA offers loans with 0% down but not sure what parameters if any. So eondering should I save and sign 6 mo lease or get house sooner?
My credit is 760
Edited by Bud Fuggins (09/09/15 01:07 PM)
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Sun King



Registered: 02/15/14
Posts: 4,069
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You should pay down debt and build up savings before buying a house. The bank will look at your total debt vs assets and your income before loaning you money.
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LunarEclipse
Enlil's Official Story


Registered: 10/31/04
Posts: 21,407
Loc: Building 7
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Quote:
Bud Fuggins said: Well I make $13 hourly plus commission that's usually between $1500 and $3000 monthly. I also receive $800 monthly from a brain injury. I am paying $800 per month on my higher interest unsubsidized loan not because I have to (i have to pay like $70) but because I can. I'm paid ahead until Oct 2017.
I wouldn't call my income variable I've been #1 here for a year. I've had the job a year and a half and am in the highest position you can get without being in management. I could easily save $1000 monthly instead of making these huge payments, but that would mean I end up paying more in interest down the road.
VA offers loans with 0% down but not sure what parameters if any. So eondering should I save and sign 6 mo lease or get house sooner?
My credit is 760
FME the bank wants three years of tax returns. If you have worked for a year and a half with less income before or no income that may not be good.
I think the current debt to income ratio is about 28% for the bank. Based on your 130K house at a low interest rate of 4% for 30 years with payment of $630.19 a month with zero down, you aren't there yet. Commissions are nice, but there's no guarantee you will be #1 next year in the banks mind. Also you have the other debt and that works against you as being at least the $70 payment.
Get your six month lease, you need time to pay off that debt and save some $$ for the other expenses associated with home ownership I partly detailed earlier.
You're doing well in your job, don't screw it up buying a house you lose later and suffer all that aggravation. Housing is nearing a peak, wait at least 2 years my advice.
-------------------- Anxiety is what you make it.
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Rorta
Stranger
Registered: 03/13/13
Posts: 20
Last seen: 8 years, 1 month
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Try to save a large deposit together if you can. I am in the same position as you, except I have a huge amount of savings in cash and investments. If I was to use all my savings to buy a home with a mortgage tomorrow I would be looking at borrowing a comparatively small amount of money and significantly less than my deposit and I would be much more likely to get a loan than if I placed down a standard deposit which in the UK works out at about 15-20%.
-------------------- It matters not how strait the gate, How charged with punishments the scroll, I am the master of my fate: I am the captain of my soul.
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Stonehenge
Alt Center


Registered: 06/20/04
Posts: 14,850
Loc: S.E.
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OP, you have gotten some good advice in this thread. Now is not the time for you to buy, i'll summarize the main reasons
1. prices are high right now, might be a bubble, no one knows. 2. you need a down payment plus closing costs which can be hefty. Watch those numbers the lenders like to rip you off. 3. your work history is a little thin, banks don't like that. 4. unexpected things often happen and your cushion can deflate fast.
I think your job situation sounds good, as has been said, but a year and 1/2 is not long. The 800 a month is guaranteed, it sounds like. Those are good things. You haven't said how your credit is, you can look at your report from the big 3 for free. They won't give you a fico number free but you can see if there is any negative info and challenge it if wrong, and it shows the length of your credit history up to about 7 years.
The va sounds like your best bet. I'm pretty sure they want a down payment too so start saving. Start looking at homes, go to open houses, drive by a few to see if you like the neighborhood. At an open house you can make a verbal offer to the owner if he is present. The agent wants it in writing with earnest money but you can always say "wouldja take..." and see what he says.
Sign that 6 month lease, that gives you time to look around and get educated on the subject a little. Haste not only makes waste, it can cost you plenty and even ruin you. Jobs can be lost, companies can go under if the economy tanks or they get bought out and the new company closes your store.
Consider offering to buy directly from the owner and make payments. A lot of people are looking for that so its hard to find but it could happen. A sizeable dp can make or break the deal, ask them how much cash they need now and where will they invest the rest if they sell for all cash. Rent to own exists too, usually that means part of the first year's rent goes toward buying the house if you exercise your option before a certain date. I've done that a few times on my rental properties. That way you try it before you buy it. It also gives you time to save up money.
-------------------- “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.” (attributed to Alexis de Tocqueville political philosopher Circa 1835) Trade list http://www.shroomery.org/forums/showflat.php/Number/18047755
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Bud Fuggins
Bolete picker



Registered: 09/11/14
Posts: 251
Loc: I used to live in Little ...
Last seen: 8 years, 2 months
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I have $16,000 in student loan debt and $1,000 in cc debt. I am appreciative of everyone's advice but I am confused about the saving aspect. Isn't it better to pay debt off than to save?
My commission this month was $2240 and $89 went to 401k, and $560 went to taxes. I am claiming 0 and will get a big refund back; I know its an interest free loan to the government, but I just didn't want the temptation of access to that money and know I will be able to get it all at once in a year. So it left me with $1500 plus the $600 I still have from my hourly pay check. My disability goes straight to rent. Right now, after paying my car bill, my credit card bill (I'll make another post about how I handled this), my insurance, and my minimum student loan I have $1500 left in the bank.. (so in other words, bills took what was left of my paycheck before I got my commission and I banked the $1500 with nothing left but a phone bill with my second hourly check later this month.)
So I can easily bank $1000 and live off $500 until next friday... But isn't it better to use it to pay off debt than to save it or am I missing something? It feels discouraging to see that $16,000 debt while looking at apy rates for savings...
I don't need a down payment for a VA loan, it's guaranteed and federally backed. My credit is 732. I don't need to worry about unemployment, I can get a job in a heartbeat within my field as they are ALWAYS hiring due to ridiculously high turnover. Of course I would take a huge pay cut if my company went under while I built up my numbers at a new place, but I would also get a sign on bonus since I'm in the top 1% nationally in my field; (lowest earners make $22k yearly and highest paid make $49k yearly, I make about $55,000)
So I might just do the 6 month lease, but idk if I want to keep making these enormous student loan payments or to open a savings...
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LunarEclipse
Enlil's Official Story


Registered: 10/31/04
Posts: 21,407
Loc: Building 7
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Why not go to Wells Fargo or a mortgage broker and talk to them about your situation? It will cost you zero to find out what amount of mortgage they may be able to offer you. Potential buyers do this to get what's known as a pre-qualification letter form the bank to say that the buyer is able to borrow "x" amount. This way the buyer and seller both know that financing is basically in place.
Here's the basic scenario. You see a house you like, make an offer, negotiate back and forth, then agree and sign a contract. The contract usually stipulates you have 10 days to get a $500? inspection. This is usually done first then if there are items needing correction allows either the seller an option to do it, or the price could be reduced to compensate. Then the buyer pays an appraiser to do the $600? appraisal which "verifies" the bank will or will not be willing to loan your accepted price amount. They do comparables in he neighborhood of similar houses and evaluate the condition of the one you are buying. Once the inspection and appraisal contingencies are removed it proceeds to closing.
The VA loan is obviously your best bet for a number of reasons I won't detail.
The bank can tell you whether they will finance you based on your debt and income situation. Go ask them, don't cost nothing to ask...
-------------------- Anxiety is what you make it.
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Stonehenge
Alt Center


Registered: 06/20/04
Posts: 14,850
Loc: S.E.
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Student loan debt is not looked at the same way as cc debt because it does not indicate someone who spends more than they can afford. Lots of people have that. No, it is not better to pay it down if you want to buy a house in a year. As I said, you need a down payment and closing costs plus fix up costs and an emergency fund. Paying down your student debt will not improve your credit picture or ability to get the loan as much as paying everything on time and having a nice down payment. Without the dp you simply will not be able to get it unless the va has extra generous terms.
There are other govt programs like "first look" or "home path" in which you can get a very low interest rate loan with a low dp but in many cases its for a foreclosure which you will have to fix up. They may offer that on other properties as well but all the times I saw it was on foreclosures owned by fannie mae or some other govt agency. Its just another possibility available only to first time home buyers.
-------------------- “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.” (attributed to Alexis de Tocqueville political philosopher Circa 1835) Trade list http://www.shroomery.org/forums/showflat.php/Number/18047755
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crazybean
Stranger

Registered: 01/12/15
Posts: 95
Loc:
Last seen: 2 years, 11 months
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You have already proved to yourselves that you can save money by early repayment of the student loan. Use that argument when talking to the bank.
-------------------- Cranching numbers
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