Home Ownership?

[jasphair]

Greetings all,

I hope this is the appropriate forum for this.

I’m a 22 year old IT Professional, whom until last year, was renting, but am now back at home. I moved home to pay off the credit cards, which I’ve nearly done. My parents, however, will be moving next year, and have asked that I find other living accomodations by the spring or summer.

I’ve narrowed down the area in which I’d like to live, however, the cost of renting would likely be MORE than the cost of owning (e.g. $1200/mo + utilities). I have nothing in savings, as I’ve been putting every check towards paying off the debt. I have no money for a down payment, or anything like that, though I’ve heard that through federally funded loans, down payment may not be required (e.g. first time home buyer).

I’m so lost as to what to do. I mean, I’ll have a few months next year to stockpile my checks (assuming I don’t get laid off or anything) to use to put down on something, though it won’t be much. I’m not sure how to go about finding a small little place for sale, through private, or professional realtor. I don’t know what kind of mortgage I’d be eligible for, or anything like that. I know absolutely nothing, and it’s sort of scary.

Can someone please point me in the right direction?

Thanks!

 

[puzzleannie]

use the time to research the housing market in your area, the true cost of home ownership vs renting, and the nuts and bolts of home-buying, mortgages etc. It used to be standard advice that buying a home was a good investment for a young professional with no debts, but in this market that may no longer be the case in your town. It depends also on a lot of other factors: can you handle the expense, how long do you expect to stay in this area (should be longer than 5 years) and so forth. Do the research but there is no better way to learn than to take the plunge. Stay away from fixer uppers unless you have limitless income and lots of friends who know how to do the work.

 

[kristie_m]

Might also check into foreclosed homes, and with the Department of Housing and Development (sometimes called HUD homes). These may fall under the category of fixer upper, which someone has already warned you about, but they can be good resources. I would, as a general rule, stay away from manufactured/mobile homes. You end up paying for both a mortgage and land lease and the homes only depreciate in value. (I know, I’m stuck in one!!) Good luck!

 

[Em_in_FL]

Assuming we’re towards the bottom of this “global/national recession” this would be a pretty good time to buy!

 

[Sure]

With an FHA guaranteed loan you’ll still have to have 3.5% down payment plus $1,500 or so in closing costs. Depending on the price of the home, you could probably save it in a few months if you’re living with your parents.

It is a good time to buy. Pray that the first time homebuyer tax credit is extended. That would probably more than cover your down payment right there.

Also, in this economy put down the minimum down payment. If you have extra put into savings. As an IT professional, you might find yourself out of work. So, I would try to have at least 3 months (maybe more) of money to cover your mortgage payments in case something bad happens.

 

[Liberanosamalo]

Renting is more carefree, and if you can get someone to rent with you it only costs half as much.

Owning has benefits… more stable neighborhoods, usually, you can get some equity if the market doesn’t continue to fall, and you aren’t subject to being evicted and your payments stay the same.

There are hidden costs to owning. When the banks tell you what your estimated loan payments are, they are telling you what the principle and interest are. They aren’t telling you what the taxes and insurance are. {PITI is what they call it…} So if you think you get a loan for $100k and your PI is going to be $648, technically that looks like half what it would cost to rent. But add in property taxes and insurance, you could be paying more like $1000 a month.

You also are responsible for your own maintenance when you own. Leaky sinks, fridges, broken air conditioners, etc.

Sometimes when you buy, things like washers and dryers and fridges don’t come with the property. So that is your expense.

On the upside, you get to paint the walls whatever color you want, and sometimes you get a better class of neighbors and are in areas of lower crime. And big upside… when you do your taxes (unless they stupidly change this in the future) you can deduct your mortgage interest and taxes on your income tax and it lowers your tax base. When you rent, you are paying someone else’s interest and taxes and you can’t take that credit. It can be a big deduction each year on your taxes.

It all depends on how much time and energy you have to maintaining lawns or property and how long you plan to be somewhere.

 

[iluvmybabies]

My fiance just bought a house, it’s a fixer upper and foreclosure…He paid for it in cash…Insurance made the rebuilt price of the home at 123 grand…Here in central illinois that’s pretty average for a good sized home…It’s 1100 sq ft with a few problems… He got really lucky and I mean really LUCKY! It’s a 3 bedroom, 1 half bath home…The last owners were trying to remodel it, but instead made a huge mess out of it!!! LOL He had to fix gas leaks but has a friend whom knows about that stuff so they both worked really hard for a week to fix that, then water problems- with the bathroom since the last owners were trying to remodel… With 800 bucks he made the house livable…Of course he’s investing little by little now that he works he can do it you know?! He doesn’t have a mortgage, and most of the other stuff he’s been able to fix himself…Like the hard wood floors, painting, fixing holes in walls, etc… The plumbing and electrical he’s had the need for help on that but one of his friends fixes houses up and helped him out…

Next year he hopes to make a major investment in the house, brand new ac/electrical heating, newer energy efficient windows, make the all ready there bathroom into the master bath attached to the bedroom-which will be the master bedroom, add a second bathroom shower and sink and toilet only, and brand new siding, new plumbing and electrical wiring-which are the biggest jobs…the roof is only 3 years old, and the gutters are perfectly fine just need cleaning… and of course new appliances… the house itself is in great condition, it’s 1948 built woodland cottage styled home, it’s adorable it looks like a doll house…lol But it’s worth it…He had saved as much as possible for himself, when he used to work…He had a great job, he is a computer lover, lol, without degrees or anything and had a decent job before, then he lost it and then got into a car accident, his world turned upside down and was begining to take a toll on me… He practically lived with me! It became a bit of a burden for a few months but he snapped out of it…Now is working again, minimum wage and all but it’s better than nothing and a janitor which is not what he wanted to do but now-a-days it’s better than nothing! LOL So while he had his really good job, he saved some money, little by little though he was spending it while he was unemployed…I tried to help him put a stop to it and that’s when he was like someone I had to support!!! It was frustrating but at least I got him to stop spending his money…this house was forclosed at 30 grand, he didn’t have that kind of money…He waited and waited and there was another house about 30 mins away from here in the country in a tiny little town, I mean tiny!!! But it was perfect! A gorgeous house with little work to do at all and 2 acres of land, the perfect place!! And because the realtor he was working with didn’t care much for foreclosures she didn’t tell him and it was only 12 grand, it was sold within 24 hours after it was out on the market!!! HE was disappointed and very upset with the realtor…

I started to put my 2 cents in his research and decided to help him out with another realtor whom specialized in foreclosures specifically HUD homes…He showed him many houses and even the one he bought, by then it was down to 20 grand…Still he didn’t have that much cash, but was willing to give it a shot… made the deal on it for a lot less, I mean a lot lot lot less…They took it and he owns his own home… Just has to pay property taxes for it! I believe it was GOD’s blessing all around it! Instead of him spending all of that money, it was a small sacrifice I made to help him and he owns his own home…A really big plus for us for when we get married…

 

[iluvmybabies]

So the best thing for you to do is get a quick preapproval…from a bank with low interest rates… See how you come out on that…Another thing you can do visit your city or county they have first time home buyer programs which give you the down payment of the house as a grant for free, some give it as an additional .01% interest loan that you pay off in 30 years… Also if you live in Illinois. there is a program by the state treasurer which is called “Our Own Home” I think they changed the name to “Finally Home” but if you look for the treasurer website all the info is right there…THey guarantee 10% of the loan amount as down payment or even as a quarantee for the loan…So that helps too…

Also many banks that go through Fannie Mae also have great programs that help with down payment if you meet credit criteria…The higher your credit score the better… My parents bought their first home 13 years ago with a credit score of 720 and because there were no programs available then they had to give 10 grand down…Now with a 720 score and first time home buyer programs, you can move in there with almost nothing out of your pocket!!! Except first mortgage and sometimes not even that!!!

It’s not that difficult to decide even now-a-days. My parents haven’t had any major problems with their house except they decided to remodel a 15 grand investment, but their 2100 sq ft home has an office, a finished laundry facility, an extra apartment in the family room, and finished car garage…2 full baths… So it was worth it for them…

I know that with interest rates so low right now you might get into a 100 grand mortgage and only pay 900 bucks a month for it including insurance and taxes… And you don’t need to start out with a dramatic home, one that is move in ready, has had enough rennovations and upgrades is good enough to give you a pretty good return with a small amount of investment…

My fiance’s friend told my fiance if he invested another 6 grand into the house he would be able to sell it close to what the rebuild value is on the house…making a tremendous profit…So he didn’t do a bad thing for his first home!

Owning a home is a big step, and you have to be willing to put in the work even if the house is brand new! Maintaining it and having insurance on everything is important no matter how pricey it seems. Contact a local bank with low interest rates and see if they can give you a preapproval, or contact a realtor and see if he/she can help guide you more with the home search and the positives of owning versus renting…

GOD bless and good luck!

 

[nodito]

Hi Jasphair,

It is a good time to buy right now, but only if you have the money. The reason we are in the economic situation we are in now is that people were encouraged to buy houses that they couldn’t afford. Many of them didn’t have any downpayment. Then, when the housing market softens up, they have no equity in their house.

I live in a city with very high rent. We recently signed a new lease and most of the 1 bedrooms we toured before finding our place were around $1200. But if you go on craigslist, it’s definitely possible to rent a room from someone or get a roommate for less. As a newly married couple, my husband and I wanted our privacy, but if you’re single it would be a great option. You definitely could get a room with another young professional (or several) for $500-$800.

God bless.

 

[Imryl]

Might also check into foreclosed homes, and with the Department of Housing and Development (sometimes called HUD homes). These may fall under the category of fixer upper, which someone has already warned you about, but they can be good resources. I would, as a general rule, stay away from manufactured/mobile homes. You end up paying for both a mortgage and land lease and the homes only depreciate in value. (I know, I’m stuck in one!!) Good luck!

We bought a mobile home when our daughter was born as and waited until we could buy a house after I graduated. We bought it for 40k 6 years ago, and sold it for 65k about 6 months ago. Not bad imo!

 

[Imryl]

It is a good time to buy. Pray that the first time homebuyer tax credit is extended. That would probably more than cover your down payment right there.

You don’t get the credit until after you purchase the home, so while it may “cover” the down payment, you would still need the down payment to begin with.

 

[samovila]

A home is an excellent investment. I bought my first home on my own when I was 24. I just sold that home in June to a young college student. He requested seller help as part of the sales agreement so that he could have enough money towards his downpayment and closing costs. We ended up giving him around $7000 as a part of the deal. I think it’s possible to buy a home with no cash on hand. It’s important as a previous poster mentioned to know the real cost. Principal, interest, taxes, escrowed costs, utilities, etc. can all add up. To help afford everythign, I rented a room out in my house for a couple of years to a student at a nearby college. It was a wonderful arrangement.

If I were you, I would read as much as I could on the buying process and on home ownership, contact a realtor based on recommendations from family and friends, and contact reliable, real bank mortgage companies about getting pre approved for a mortgage amount.

 

[Maria65]

You might also want to talk to a realtor. You do not pay him/her anything when you are a buyer - they split the commission with the seller’s realtor. They can help you find homes in your area and figure out what you can afford.

A townhouse, if there are any available in your area, might be a good choice. I have a two-bedroom townhouse that is plenty big enough for two people, has a front and back yard, but they are very small (and the back yard has a deck) so there is little maintenance, and my monthly mortgage payments (with the homeowner’s insurance and property tax added in) are actually less than what the nicer apartments around here cost. And like a poster above stated, I painted every room in happy colors! No more white walls for me!