First time home-buyer needs some advice

[Dieselboy]

Their are plenty of books on this subject, from plenty of "experts" but i would like to hear some advice from real people.

Me and my wife are renting--been renting for a long time. So many people keep asking "why!" like it's sinful or something. I am well aware that being a homeowner pays in the long run, but i don't want to rush into buying and end up regretting the decision.



However, as of late, we are not liking our current renting situation. We live in a condo community and the landlords are renting to whoever can pay rent. Lately their have been break-in's, theft, graffiti...i don't think i need to go on, we want out of here. It's just that anywhere else in our area is going to be at least 300-400 more per month (our landlord has never raised rent).

We could come up with 5-10k for a down payment (if we wanted) to purchase, but this is where it gets tricky for us...we do not want a hefty mortgage. I am seeing a lot of decent condos within the 75k to 120 range...for us i think it's just gauging how much the mortgage is going to be and figuring out if it's worth it or not.

[tick]

Well, first of all... What area are you in? That will change the cost of the mortgage greatly.

You can find lots of mortgage calculators online, and they can be fairly accurate. However, it is also important to note that your income will greatly effect your ability to get a mortgage as well.

What's your credit score like? If you don't know, then you will want to get one from Equifax. Oh, and don't let them run your credit multiple times, that can also have a negative impact on your credit score.

Figure out what assets you have, and what liabilities you have. Do you have car payments, credit card payments, credit cards that you have never used? Even if you have never used a credit card, but you have one the potential balance is always counted against you when you go for another loan or mortgage.

So, if you have a credit card with a $15,000 limit for example, then you will have that much less to get a mortgage with, even if you have never used the card.

Anyway, you will need all that good stuff figured out, and really the only one who can help you get an accurate assessment is a mortgage broker.

Oh, and you may also consider doing the following, some have done it, and I don't know if it's risky or not.

They go out and get a mortgage, they then go out and get that mortgage for cash buyout. They then pay off their mortgage so they don't have to make any more monthly payments. Now, the bad thing about that sort of arrangement, is that you don't make any payments, but when you do sell your house, you need to pay back what they gave you for it back then, plus it's prime rate plus 5% or some such.

However, it gets you the house, and you don't need to make payments on it.

Another thing you need to consider is that if you actually own the house, instead of renting, you now have taxes to take care of.

So, you wind up buying a $120,000 condo, and you're still going to wind up paying a mortgage AND taxes. So, you might wind up "owning" your home, but paying more per month than you do for rent now. (And depending on the situation, it might be up to double what you are paying now.... )

Just some things to think about...

[Mad Scientest]

There is lots to said for going either route. With renting you do not have to worry about building up keep and maintenance of the grounds. Even routine maintenance of the apartment is typically handled by the landlord, if something breaks you call him and he sends someone to fix it. If you want to move you just pick up your stuff and move.
But for this convenience you are limited as to what you can do to in your apartment and you do pay for it all, as everything is included in your rent payment. Maintenance, building taxes, the landlord�s mortgage & interest payments, plus his profit, etc. etc, it is all there in your rent payment you just never see it broken out and listed.
Thus the only thing your monthly rent buys you is the convenience of not having to worry about these things. However many find that to be reasonable.

But not everyone. Some would rather see that �rent money� go to a long term goal of ownership. But this typically means taking out a mortgage and these monthly payments will include principle, plus interest and property taxes and insurance. But you now have possession of the property and can pretty much do with as you please. Within of course the limits of your city or village codes and ordinances. If you are in a condominium then there will also be additional "association " restrictions as to what you can and can�t do.
Naturally you will be now responsible for all maintenance and repair. But once you get the mortgage paid off you then become the true owner of the property and not your bank (yippy!) providing you keep paying the property tax. At this point if you fall behind in your rent payments to the government (property taxes) and they like any good landlord will kick you out and take possession of your property. Welcome to corporation America where your home is no longer out of the reach of government.

Of course if you keep up with the tax payments and you decide to sell you can do so and providing we are not in a depression, which we are, then you should be able to sell it and make back at least a good portion of what you spent on mortgage payments. This can actually be a pretty good deal if you like a particular area and are willing to stay there for the long hall.
Also if you can a decent mortgage, with the current depressed market, now is a really good time to be a buyer.

[Arrowwind09]

You can look at the cost of paying rent over the next 40 or 50 years (how ever long you think you might live in and need that space) and compare it to the cost of paying a mortage over 30 or 40 years. You might find that the cost is similar.

With rent you dont pay property taxes, at least overtly. Home ownership requires an extra 2 to 4,000 a year in property taxes.

I strongly advise a 15 year mortage and try to pay 6 extra payment a year, more if you can.

Just because you own a house does not mean that you will not be subject to criminal activity affecting your property. We had two cars stolen from our driveway in Salt Lake, and several breakins when we lived in Dallas, on the homes that we and the bank owned.

But now we own outright... and for us it was the perfect move to own homes, but we were also lucky to purchase properties that were not hit by a recession and our buying and selling all worked out well.

Dont get hung up into a purchase that is more than you need. Greed can be the downfall of the common man.

[pinballdoctor]

Buying or renting is strictly a choice, and personally I always thought renting was like flushing money down the toilet... well until recently that is.

A co-worker friend of mine recently sold his house and moved into a two bedroom apartment...nothing special and not alot of room, but the rent was $650 a month, which is quite low, and this includes heat and water.

He was paying close to $2400 per year in house taxes, or $200 per month that he no longer has to pay, and by extention drops his rent to $450 per month. He was also paying about $100 per month for heat, (we generally use equalized payments in Canada so you pay the same each month rather than nearly zero in summer and $300 or more per month in winter) as well as about $45 per month for water/sewer. Since these are both included in the price of the rent, that now drops his rent down to about $300 per month.

He still needs insurance, however since he no longer owns his house, he just requires rental insurance on the value of his personal property, which is a saving of about $50 per month which now drops his rent down to $250 per month, and assuming he sold his house for 200K and gets 1.5% interest on his money, that would be about $3000 or $250 per month, which would drop his rent down to about zero.

The way he explained it, he will basically not have to pay any rent, and there is no maintenance costs, appliances to replace, no furnace to repair, no grass to cut, no painting, and no snow removal... all of which he had to do when he owned a house.

The downside is noisy neighbours, rent could be increased yearly, he won't have a house to leave to his kids, and he has no garden... although he has a small balcony where he could grow veggies.