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Old 08-05-2012, 09:01 PM
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Laurelin Laurelin is online now
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Default House saving advice

I am really stressing over this whole house thing. I'm so sick of renting. Sick of having to ask landlords about everything. Sick of having crappy AC. I really would like to be able to get whatever dog I want too (okay that might be a lot of it).

I'm really stressing big time to the point that any down time I'm thinking about how much I still have to save. I don't even have a clue who I can start talking to about looking at loans or when I should start talking to them.

I need advice on the not stressing.
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Last edited by Laurelin; 08-05-2012 at 09:13 PM.
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Old 08-05-2012, 09:19 PM
Kilter Kilter is offline
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I think it totally depends on where you live. We lucked out and assumed a mortgage here, right before they quit doing them. There's also been some 'condos' that are more like apartments for sale lately, new buildings etc. that cost the same as renting, so that's always an option.

You can also look for something away from the main city and find some good deals, we upgraded to a bigger house and yard, backing onto a park with a garage for less than what our city house was. Yes, we have to drive more but it's kinda worth it to have a smaller town lifestyle.
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Old 08-05-2012, 09:26 PM
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It is very frustrating to think of how much I'm spending in rent and know I could pay less a month in mortgage for a nicer place. Everyone keeps telling me you need the 30% downpayment though. I feel in over my head...
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Old 08-05-2012, 09:29 PM
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All I can share with you is what we did. We rented for 4.5 years after graduating from college (1 year with separate residences, then 3.5 years after we were married). It took that long to get things lined up.

Priorities:
1 - 10% of income into 401ks (in retrospect, I wish we had maxed out the full $16k you're allowed to put in, but we're doing that now at least)
2 - 6+ months of expenses set aside in a savings account (we charge EVERYTHING, so it was pretty easy to see what our costs were--mint.com will give you a good analysis too)
3 - THEN we started putting extras aside into a savings account.

We wanted the full 20% to put down to save on PMI, but it's really a numbers game at this point. Interest rates are so low, and loans are actually pretty readily available if you have decent credit, so it may not be worth waiting until you have that.

There are tons of calculators online so you can approximate what size house you could afford based on your current rent payments. Once we had a number in our head (and it was actually a pretty big range...we said anywhere within a $75k range), we started looking at open houses locally to see if we liked anything in that price range. If they were all dumpy places, then we were going to call off the search and wait until we could afford to up our price range. We found that we really didn't like anything under $xxxk, so that was our magic number we wanted to be pre-qualified for.

Realtors in our area won't talk to you until you have a prequalification number. We had met realtors at open houses and gotten recommendations from friends, so we called our favorite one up and asked what the steps were to get prequalified. He sent us to a mortgage broker who ran the numbers for us and assured us he would be comfortable lending us significantly higher amounts than we were asking for, so we felt comfortable beginning to look. He gave us several different scenarios based on our assumed home price number, showing us what the fees would be if we put 3, 5, 10, or 20% down.

Then we found our house, way blew our expected budget out of the water, but interest rates had dropped enough to make it work. That was around 4-5 months after we started seriously crunching numbers.
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Old 08-05-2012, 09:31 PM
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Quote:
Originally Posted by Laurelin View Post
It is very frustrating to think of how much I'm spending in rent and know I could pay less a month in mortgage for a nicer place. Everyone keeps telling me you need the 30% downpayment though. I feel in over my head...
30%? The standard to avoid PMI is 20%. Interest rates are SO low right now (we're about to refinance and are looking at 3.2%!!!) that if your other choice is to invest the funds, it may be worth putting less down and investing the difference.
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Old 08-05-2012, 09:38 PM
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You don't need a 30% down payment. You need 20% - but technically you don't even need that. If you have less than 20% down, what you'll have to do is get Private Mortgage Insurance (PMI.) It's not too terribly expensive really, and the closer you get to 20% the cheaper it is, IIRC.

I would just go to a bank and talk to somebody. Not necessarily get pre-qualified but have a loan official talk numbers with you. Run all the numbers from your paychecks and see what you can afford. Get what they tell you and then go home, look at your take home (NOT gross which is what they look at), figure out what your monthly expenses are and will be, and what you'd be comfortable with.

It's terrifying for sure, but I was in a similar boat... rent is SO expensive here and I couldn't afford it, especially since I wanted a house with a yard rather than just a studio apartment (about all I could have been able to afford, if they would even let me have Auggie.) My mortgage is going to be pennies compared to what rent would be, even on a less than comparable house. My friends are renting a house, a house I actually looked at buying once! It never sold so the owner decided to rent it. They are paying over three times what my mortgage will be. And would have been had I decided to buy that house. It's just crazy.


You do have a lot of extra costs that go with it... if the furnace dies it's on you to buy a new one. New roof, new windows? Plumbing problem? Electrical problem? And let's hope there's no sick dog or YOU get sick/injured... It's all a bit overwhelming. You just have to make sure you aren't literally living paycheck to paycheck. Pay yourself first... when you budget make sure you leave room to deposit money into a saving's account to save up for disasters.

It's scary but I think you just have to be smart about it financially... and then dive in.
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Old 08-05-2012, 09:46 PM
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Are your friends farmers by chance lol!

3.5% seems to be lowest and FHA is just not doable for us because we want over ten acres. FHA can be picky about things like little buildings on the property that don't have paint and a screen door off a hinge to do qualify for a FHA and conventional.

I went in thinking it had to be 20%. If I want certain properties I'll need a farm loan and it basically will have to be. Some will do farm land and some won't.

I am fine with a half hour drive to work to get a house that is 100,000 cheaper than it would be closer to town. I also hate the city and people do it works for me lol!

Get a good mortage person. It's Sunday and we were on the phone with ours for over an hour.

Know what you want and don't budge. I can wait for it to come up on the market but god help me if I have to ever go through this process again- this will be the last time I move! The market is not one to think you'll only be there a couple years- I've seen the same houses for sale more than five( though not nice ones).
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Old 08-05-2012, 09:47 PM
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I accidentally typed 30 instead of 20. Oops

I feel very over my head any time I think about it. I'm not sure if I'm putting away enough and part of me is thinking 'I spend X on art lessons and X on agility' should I be doing that? But I guess you've got to live some too.

I guess the first step is to just talk to someone to get a starting point.

My rent is not too bad but a mortgage would be cheaper. Probably almost half for a comparable house. That is really frustrating because I feel like I'm tossing money away every month that I could be putting into a house at least.
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Old 08-05-2012, 10:01 PM
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Quote:
Originally Posted by Laurelin View Post
I feel very over my head any time I think about it. I'm not sure if I'm putting away enough and part of me is thinking 'I spend X on art lessons and X on agility' should I be doing that? But I guess you've got to live some too.
Just wanted to chime in and let you know that I'm in the same situation and will be interested in hearing the advice on this thread. I even recently got a second job just to pack away more savings (plus I've had a ton of extra expenses this summer).
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Old 08-05-2012, 10:05 PM
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Quote:
Originally Posted by Laurelin View Post
I feel very over my head any time I think about it. I'm not sure if I'm putting away enough and part of me is thinking 'I spend X on art lessons and X on agility' should I be doing that? But I guess you've got to live some too.
Yes. Live. What's the point of being able to afford the house if it means your life is miserable and you eat ramen and stare at the wall for entertainment for the next year to be able to afford it?

Quote:
My rent is not too bad but a mortgage would be cheaper. Probably almost half for a comparable house. That is really frustrating because I feel like I'm tossing money away every month that I could be putting into a house at least.
You aren't tossing money away. You have to get that idea out of your head. You are paying for a roof to put over your head. That is a very valid use of your money.

As far as a mortgage being cheaper--it might be. We were paying $2100 in rent. For a house in a slightly nicer neighborhood, we now pay $2250 in mortgage/taxes/insurance. Basically a wash--until you take into account that when the fence started to fall down, the cheapest quote to replace it came in at $15k (for a SMALL backyard! And the highest quotes were up to $23k...) When our pipe backed up in the basement and sewage filled our laundry room, it was $1000 to get it snaked out, and then we spent a whole weekend sanitizing, throwing away, and replacing things. We have a couple trees that desperately need to come down, but the quote is $8000 to have it done, thanks to the slope of the backyard. And TIME. OMG the time commitment. We spent 2 full saturdays (like 6 hours at a time) raking leaves and trimming downed branches last November. We finally gave up and paid someone $1000 to finish cleaning up the yard this spring.

So yeah--the check we write each month is the same, but we've spent on average so far an extra $3-500 on house things each month, just keeping it liveable. And this was a house that looked immaculate on a home inspection report. Things just happen.

Real estate is no longer the investment it once was. Financially savvy people often choose to rent over buying because they realize their money goes so much further in the stock market than it does in real estate. Whatever you do, you don't want to regret buying a house you only moderately like, only to find you wish you could move in a few years and be stuck.
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