Any advice before I become house poor?

So I'm currently 23 and still living with my parents. I have been looking for a house for some time now, although I have not been serious about it since I know I cannot afford anything. But, our neighbors house 1/8 mile up the road just got foreclosed on, and it's something I might be able to afford at $119k

It's a 4br, 2.5ba house built in '85 on 1.6 acres. Back yard and side yard border county property that cannot be touched. Has a recently-built 2-car detached garage, enclosed carport, a couple storage sheds, basement, 3 porches (2 of which are screened in).

However!...This would be a house I live in for 5-6 years and then move on. It does not have the acreage I desire, the house style & build is not exactly what I want, the land is on a steep hill (so most of it is unuseable), and there is no place to build my dream garage without extensive earthmoving...if even possible.

Now, I bring home about $2k in a good month. I have a $400/mo truck payment, and $150 in auto & motorcycle insurance. Other than that...just gas/fuel for trucks, maintenance items, and some food here and there. Do you think I will be able to afford the mortgage payment on $119k (depending on interest rates, and such...but a ballpark figure), and still have enough left over for food, electric, internet/TV, truck parts, etc...?

I'm going to call the realtor and maybe go to the bank tomorrow and see what I can do. Any advice and tips would be great I know absolutely nothing about buying a house...

 

$119,000--got a down payment?

10% would be good.

$11,900?

That leaves you $107,100 plus the fees, taxes, etc etc.

So say you end up financing $120,000.

30 year fixed at 5% gets you a payment of $644.19

Mortgage Calculator


Add that to your other expenses, plus taxes and insurance on your new dump, and you are well over 50% of your net. That may not fly given the current climate for mortgages.

You got a bank you deal with? Their mortgage guy or department can steer you closer to reality on that, and on down payment requirements.

Also ask about the socialist/communist/government waste/welfare-for-the-rich first time buyer programs, if any. Might as well use it, just don't brag it up...

 

A thousand years ago when I was buying houses, they wanted your PITI (payment -- taxes included) to be no more than 20-25% of your income. $644.19 is over 30%,

Don't know what the standard is these days, but you could have a tough time with the payments that you already have.

Not trying to be a downer here, but that's what I think.

I strongly encourage you to save for a down payment. They were doing 100%financing for a while, but I don't think that they're doing it now. Even if you can get it, mortgage insurance costs will be substantial.

Good Luck,

hj

 

A 25 year old house is nearing the point where it needs it's first set of maintenance and upgrades.

How is the roof?
Builder's grade windows, doors and siding?
Plumbing?
Electrical?

There's no way you could know these things with out a home inspection and a walk through.

I believe that based on your income and debt ratio, you may become over extended and unprepared for eventual and probable issues.

Hope this helps a little.

 

Be careful of foreclosures.........lots of times, they have a very hard life right before being vacated.......A fresh coat of paint hides a multitude of sins, that manifest themselves later.

 

Find a rich girl.....

 

If you are still living at home with your parents take every spare dime and save up for a down payment.

 

If you might be able to afford it....then you cannot.

 

Very sound advice this......Plus you need to get rid of that truck payment.

Oh and one more thing....Some more input from a someone twice your age. Don't be in a hurry to settle down. You're young. Enjoy while it lasts. You could get a wild hair tomorrow and want to do a 4 month backpacking trip of Europe or anywhere for that matter. If this was 1995 or 96 I'd say buy it. Not now. We haven't seen the bottom yet.

Oh to be 23 again...................

 

My first hunch advice is to slow it down a bit. I don't want to dampen your enthusiasm but I can give you a quick heads up on what you're going to run into here.

The best rates on home mortgages are going to be offered to folks who have a credit score of 740+. That's with a minimum down payment of 20-30% in most markets. People with lesser credit scores or greater loan to value ratios can get done but at higher rates and greater fees.
Additionally, REO (Real estate owned by the lender) often requires a cash purchase or, less often, the ability to procure your own financing. Many banks will simply not accept a contract subject to the purchaser obtaining financing.
Appraisal standards have changed dramatically over the last year. The 200k house down the block might only see an appraised value of 140k or so right now. Appraisers are also looking very carefully at foreclosed property, oftentimes further devaluing already depressed numbers.
Smaller down payments also require PMI (Private mortgage insurance) to protect the lender in the event of a default. It is a second underwriting procedure and more difficult to qualify for than the loan itself. I think your debt ratios are going to be too high for most lenders with the possible exception of FHA (Federal Housing Authority)......but FHA is unfriendly to foreclosed property, unless it's on thier books.

That said, It sounds like you're responsible and well on your way to a bright future. Take a deep breath and slow down. SAVE as much as you can toward the home you really want. Pay all of your bills on time. Get a free copy of your credit history from each of the 3 major providers (Equifax, TransUnion and Experian). You're entitled to one each yearly. Correct erroneous information. Did I mention SAVE?

If you're not sure if you can afford the house payment (don't forget real estate taxes and property insurance plus utilities) it really means that right now you can't. It would be a shame to spend all of this time and money to find out your debt load is too great.

Good Luck and be proud of what you've accomplished thus far. And be patient. Housing values are going to remain depressed for quite a while offering you good value when you're ready.

 

I would have agreed with everything all the old farts here have said, but my daughter is getting ready to buy a house and she was approved for a bigger loan than I think she can afford with less of a down payment than I thought was possible. Luckily she's trying to find a house for less than she was approved for.

The good news, interest rates are low. The bad news, a house means you'll have to give up a good bit of social life you can no longer afford.

 

Hmmmm, takes one to know one Chris.

 

Exactly. That's why I'm allowed to say it.

 

One thing would to get prior approved for a loan in writing. All good points in above replies. Yes some banks and realtors try to get you in over your head. Some banks will end up selling your mortgage to another company. Some will want to have an escrow account for payment of taxes which is added to your monthly payment. If you can come up with a good down payment and are approved for a loan, you don't have to pay the asking price. Banks don't like REO properties (real estate owned). Depending on the condition...maybe offer $90,000 or less. Then there are usually title fees, septic and H2O inspections, any liens on the property etc. Do you know what the assessment on the property is? There are some tax breaks but, even the Feds don't know for how long. You may build some equity in the house, but, property values have been dropping. Not assessments. Some ramblings lots of thoughts to digest and a big under-taking. A home inspection would also be a must and should uncover problems listed in above replies. If you need the place to have a good looking over and can't find anyone in the area let me know and I'll make a road trip.

 

This house was taken care of. The owners were older, and pretty decent "carpenters".

A home inspection will be done on any property I put an offer on. I have not had a close look at the house yet, but after talking to the realtor and looking at ~25 properties...this one is still the first one I would put an offer on.

And I do believe I will be stretched financially. If something unexpected came up...my parents would be willing to help, however I really do not want to rely on them for anything. After all...the reason to move out is to become more independant...right?

Yes...thats what my plan was until this house came up for sale. I'm afraid that if I wait 2-3 years (when the truck is paid off), that the market will rebound (and it is heading that direction according to our realtor) and I will not be able to afford anything other than a toaster box in the city...


Thank you! My credit score is around 765 averaged between the 3.
I was approved for $110k @ $700/mo taxes and insurance included (4.5% fixed 30 year).
PMI is $3800
Closing costs would be $4900 (possible that bank/owner pay)
Only $1k down required.

Good for her! I was always told to set your limit at 70-80% of what you are approved for. For me, however, that would leave me looking into apartments and houses in the ghetto!