What sort of perks and help can a first time home buyer get?
anything is helpful.
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What sort of perks and help can a first time home buyer get?
anything is helpful.
actually, with the Florida real estate market chock full of would-be sellers, the state of Florida has all sorts of programs available now to assist would-be first time buyers ...
Yeah I'm looking to buy a house too within the next year or two. I'm waiting for prices to (hopefully) drop some more, and during the time that I wait, I will be paying off the last third of my car loan and saving up a good sized down payment. I'll be a first time home buyer too, but in PA.
Good luck, Lola! :)
1. Check all of your credit reports, order them from annualcreditreport.com. Your mortg. broker can do it for you too, but I'd say do it yourself first. That way, if there are any marks on the credit, you can write letters to dispute and have them removed. This may take some time, so have it done.
2. Make sure your personal financial house is in order. Look at your assets/liabilities, and income/expenses. Also, debt/income. If your net worth is negative, or your monthly living expenses do not allow you at least a couple of grand for savings...then get yourself straight before you go in for a purchase.
3. Homes under $400K aren't as tough to get, don't buy something too big for you!
4. Be prepared to put 20% down. If you don't end up having to do so, you'll need it for furniture, upgrades, and repairs.....
5. When calculating the monthly costs to "own" your home, don't forget about increased utilities, real estate taxes, homeowner's insurance, and maintenance. If you do not earn enough to pay these things AND a mortgage, wait.....
These are some of the things I help get together so ppl can get a great deal on a decent home in a neighborhood that isn't "overhyped." There are many more useful tips, and many more "real estate investing" saavy people here to help. Good luck!
I would hate to be buying a house in Philly. I heard house price had skyrocketed in and around their. My brother used to own a home in Reading, he actually lucked and out and wasn't able to find a buyer and had to keep it for a year, which ended up in him getting almost 15% more.
I'm actually looking to buy right outside city limits(where the taxes are a lot cheaper, and the area I'm looking at used to be "white trash" but is in the gradual process of getting better), but yeah tell me about it!
Remember the cousin who didn't invite me to her wedding?...The 1 thing that makes me feel smug/spiteful is the rip-off price she and her husband paid on their house. They bought their house in a suburb about 20mins outside Philly city limits, right across the river from Trenton, NJ. Their house was worth $170,000 in 2004 and then two years later when they bought it, the house's price skyrocketed up to $285,000(that's a 58% increase in only 2yrs!). They've been living there almost two years and since then, their house price has only appreciated a measly 1%. Don't they probably wish they'd gotten the house two years earlier! Also, their house is in a town that's considered a moderate risk flood zone.
You will also need closing costs on top of the down payment but if the market is soft you can sometimes work the contract so the sellers pay your closing costs. :)
thanks all. Katrine, I printed your post.
the market is so soft here. mushy even. lol.
Also, before you contract on a house, ask the sellers for an approximate dollar amount for the utilities (sewer, gas, electricity, garbage, water, etc). This can make a big difference in how affordable this home is for you.
Go to the bank and get a pre-approval. Whatever $$ amount they give you...stay well below that. If they say you are pre-approved for a $400,000 home, look for a home that's around $250,000. Why? Simply because you are approved based on your NET income...not your GROSS income. Since you pay around 30-40% in taxes off of your NET income, it can make a big difference in what you can afford. Add that with your regular bills, and your new homeowners bills (utilities, repairs, decorating, etc, etc, etc) and the house can become unaffordable very quickly. Your total bills should be at or below 40% of your monthly income. Any higher than that and you run the danger of not affording the costs of living.
Gross / Net interchangable - Gross is before taxes, Net after... unless Im totally misunderstanding the post...
When you say that you should be able to have "at least a couple of grand for savings" after paying for living expenses, are you saying that someone should be able to save up "at least a couple of grand" each month alongside paying each month's living expenses? If so, I don't know how doable that is for a lot of people. The average American income is about $30-35,000/yr -- that's less than $2500/month after taxes -- so how can they save a few grand off an income that is barely "a few grand" befoer spending any of it?
Now if you meant it in terms of simply having a few grand saved up in the bank and being able to live off an income each month without having to tap into the savings, that sounds a lot more reasonable. Perhaps I read it wrong the first time around. :-X
... by NOT buying the house that they could only temporarily afford anyhow due to saving / investing zero plus only paying a 'teaser' interest rate on their trick mortgage !Quote:
The average American income is about $30-35,000/yr -- that's less than $2500/month after taxes -- so how can they save a few grand off an income that is barely "a few grand" befoer spending any of it?
Everyone is different. Housing and mortgage costs vary. I said "couple grand" because if you can't save at least 20% of your income towards goals and retirement, then perhaps its not a good time to get in over your head on a huge mortgage. Or..find something small and reasonable.
For some, its may be $200, for others is may be $2,000. I err on the side of conservatism.
Ive heard the best way to find out if you can afford to own is to find out exactly what your monthlys will be + 10% for maintenance. So, If that will be $2,500 a month. Subtract your rent from that. Rent is $1,000 a month.
Take that 'extra' $1500 and put it into a savings account towards your down payment on the day your rent is due. Do this for 6 months. If you are late or cannot make the 'payment' start over. When youve been able to make this "$2,500 mortgage payment" for 6 months straight, never being late take the savings and buy a house. :)
^ Yeah coincidentally, I was actually looking at doing something very similar to that. As soon as I pay off the remaining balance on my car loan(I've only had it for 2 yrs, but more than 2/3 is paid off), I'm going to start saving $1500-1600/mo towards my house goal for minimum 9 months. That will be in addition to paying regular expenses and the $900/mo I already pay on rent. If I can encounter extra money, I will put it towards the savings. Hopefully I will have enough of a payment saved up by late summer 2009 to qualify for a cheap($100-180K) house.
I'm looking for something VERY VERY small, but I want it to be a Victorian. I've wanted a Victorian house for almost as long as I've wanted a VW Beetle(bought it when I was 16!), basically my whole life! I am willing to sacrifice square footage and yard space for a nice Queen Anne or Second Empire exterior. Basically all I need is a narrow little rowhouse with no more than 2(maybe 3) bedrooms. I am looking at buying in a town that had been slightly trashy for years(I used to live there, and my parents moved us out of there for a reason! lol) but is gradually getting nicer and more gentrified...right now prices are very affordable. I am also willing to buy a cheap house that needs some work, since my father is a carpenter and could not only give me good advice, but has a group of reliable employees that I could hire for a decently affordable price(these carpenters will be less likely to screw up, since screwing up their boss's daughter's house would essentially be "shooting themselves in the foot"! lol).
I really want to get a house before prices start going up again. I've been trying to take on extra waitressing shifts here and there to get extra money towards this goal.
^^^ the 'smart money' is saying that you've probably got until late 2009 or more likely 2010 before there's any need to worry that real estate prices will start rising again in any meaningful way. Their logic is based on upcoming ARM interest rate resets on both subprime and Alt-A mortgage loans that have already been written, but have not yet reset.
As to qualifying for a new home mortgage loan in the $150k ballpark, keep in mind that as a result of new regulatory and creditworthiness standards, without a 'straight job' paying $60k+ it's almost guaranteed that you're going to need to put 20% down plus closing costs to get approved ... or somewhere around $35,000 on a $150k home purchase. If you are able to save $8-900 a month, that will require 3 1/2 years worth of savings - which basically means that you won't need to worry about serious house shopping until 2011.
Thanks for telling me this. If house prices still stay low until early 2010, then I wouldn't mind waiting until end of 2009 or early 2010(winter time) to buy a house. That will give me a few extra months to save more money. Also, I'm wondering if a few extra months of paying loans/credit cards on time will give my credit score a few extra points?...My score is in the low to mid 700s now(it's predicted to increase a good 30pts or so once I pay off a credit card balance, which will happen very soon) but I want to make sure that all 3 of my credit scores are over 760-770, since I keep reading that the top tier mortgage rates are given for people with scores over 760.
Actually, I have a "straight job" that comprises the bulk of my income. I also waitress on the side, which I understand isn't viewed to be as "stable" as a salaried job because it's tips based, but it is a job that has base rate + tips reported on W-2s. I'm not an independent contractor/dancer and I'm not looking at no-doc loans, if that helps at all.
Also, I'm looking to save more than $8-900/mo. I'm planning to save minimum $1500-1600/mo, provided that my income stays the same. If I reduce my monthly allowance for "fun money"(I allow a few hundred per month), then that increases savings too. But I always overestimate expenses so that in case I spend less, I have more money than expected instead of less. I'm not accounting for the possibility of a raise or promotion. If my income increases(it might, since I'm still early in my career and I'm looking at changing companies later this year to get a bigger salary), naturally I will be socking away more than just $1600/mo.
I do know that I'm determined NOT to wait until 2011, which will probably be around the time that house prices start going up again(correct me if I'm wrong). I don't want to get "shafted" for waiting by having to pay a good % increase on a house price. But that doesn't mean I'm looking at something that would get me "too far over my head" either though...don't worry, I'm smarter than that lol.
Melonie, you're giving a lot of good advice about mortgages so far. I like reading your posts because they are informative and have a lot of good facts. Just wanted to clarify my situation a little more to provide a clear picture of where I'm at with the house buying situation right now.
I have also heard we have until early 2010. I think prices will start picking up that summer...
^ Yeah, which is why I wouldn't want to wait until 2011 or 2012, right when prices are skyrocketing. I would feel really annoyed if I had to pay $285,000 for a house that was only selling for $170,000 a year or two prior(ahem, like one relative of mine that did that)...not to mention that you'd need a much higher down payment. 20% of $285,000 is a lot higher than 20% of $170,000. Good thing I have a good plan for paying off the remainder portion of debt(car loan mostly) and saving.
My guy friend seems to think that soon you will need a 50% down payment to get a house, but a few other friends and I disagree. Sure it'll be harder to get a house in the near future(i.e., stricter standards for credit score and down payment), but will it really get as bad as my friend says? Looking at supply and demand, I don't think it'll be in the lenders' best interest to do that, since that'll eliminate most people from wanting or being able to buy, so it doesn't seem plausible.
I dont think house prices will skyrocket like they did. Thats a fluke and is rare. House prices will most likely stop dropping and level out then slowly climb back up but no way are people going to be upside down like is happening now.
50% down? Hes nuts. Mortgage companies make money from mortgages. If people need 50% down nobody will be able to get a mortgage. He has no clue what hes talking about.
^ That's exactly what I was thinking...nobody will be able to get a mortgage with 50% down, which will cause mortgage companies to lose even more money than they already are from last year's subprime collapse.
I honestly wonder if this guy was exaggerating because: a) He wants to buy a house but is really worried about how the market and lenders are going, so he is exaggerating the situation in his mind; or b) He sees me gabbing about wanting to buy a house, so he's trying to humble me a bit. I notice that some of the people who knew me when I was poor, always tend to underestimate how well I'm doing now and keep trying to discourage me from "getting in over my head." Ha that's what people said when I bought my brand new Mustang...yet here I am, only 1/3 of the way through the length of my car loan but I've already paid off almost 3/4 of the car's original price...I'm having it paid off ASAP sometime this year. Shows how "over my head" I was. ::)
Remember that you will need 3 years of verifiable W2 income to qualify for a full-doc loan. Sounds like that should be no problem if you wait to buy until 2009/10.Quote:
Originally Posted by philly
In addition, if you continue to build your credit score, per your current plan, you should qualify for a pretty decent loan on a property around $150K, and should NOT have to put 20% down. I don't recommend that anyway unless you plan to stay in that house forever. And the average american moves houses every 6 years or so.
Thanks Katrine and that's pretty much what I'm planning to do. I'm looking at a Victorian fix-up house, as opposed to a typical "starter house"(e.g., a rancher or basic rowhouse) because I want to keep it for a long time and custom paint the house.
Yeah near the end of 2009, I will have three full years of reported income(i.e., most of the income coming from a taxable job, as opposed to stripping/being an independent contractor).
Right now my credit score is in the low-to-mid 700s, but my Experian score always seems to trail 20 pts lower than Equifax and Trans Union.
By the time I plan to apply for a mortgage, I will have NO credit/loan obligations except $105/mo for my student loan. I will have no credit card debt at all and my car loan will have long been at $0 by then. If they want to look into living expenses, they will see a $60/mo cell phone contract(will I even have it by then though? The contract ends March 2009, so if I can get a cheaper plan, I will), no cable, no Internet, less than $100/mo car insurance, less than $60/mo on gas because I generally take mass transit($80/mo transit pass) to work. With those low expenses, the credit score, and deposit I'm saving up, I'll be *damned* if I don't get a mortgage. Paying $900+/mo for rent with no equity for more than a few years is absolute BULLSHIT.
Your credit score doesn't care about your monthly fixed expenses per say. Lenders do though. As do I, because I see people overextend themselves on mortgages and regret it later.
Re: credit cards. I recommend keeping some open. Or consolidate into one credit card that will give you the highest possible spending limit. Use it once in a while and pay it off. Its good to have available revolving credit. I am not an expert on credit growth though, FTR.
Rules of thumb: once you have calculated all of your monthly expenses (including discretionary spending), make sure you are on your way to saving 4 months into a liquid account earning interest. The amount really depends on you, but at least 3 months is important.
20% of your income into savings for the cash account, home improvement, travel, personal goals, and retirement. Shoot for that. It may not be attainable yet, but all of us young people should be saving at least that much. We are not going to have social security or any goverment benefits to help us out.
You should be in pretty good shape by then.
Yes I am aware of that. Credit scores are only calculated from the info on my credit reports, which excludes utilities or cell phone contracts(unless of course it's a collections account, but I don't have any of those to worry about). But I figure that it's only important in terms of calculating how much money I'm capable of saving, or how much mortgage I'm capable of affording.
ABSOLUTELY! :) From firsthand experience, I am full aware of the detrimental effect that closing all credit cards has on one's credit...I was given horrible credit advice from a rip-off debt consolidation company a few years ago(this was before I started dancing, when I made a shitty income), in which they had me close all my credit cards. That was the easiest 150 pt FICO score plummet I've ever had! >:(
I've already consolidated my remaining credit card debt onto an already existing card that's giving me 3.99% APR until July...and I plan to pay off this debt in full long before July comes around. It's the only card with a balance, and the limit is only 30% utilized, but paying it off in full will allow my score to get higher.
Great idea. I guess all the natural disasters(damage not covered by most insurance companies) such as Hurricane Katrina, and all the job lay-offs, have shown that it's always important to have savings.
Not having social security work out for us someday sucks BIG TIME, especially considering the social security taxes that are taken from our paychecks. But yeah, it's still no excuse not to save in the meantime...so I agree.