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Message
First time homebuyer... was told to come here
Posted on 12/7/17 at 8:38 am
Posted on 12/7/17 at 8:38 am
As the title says, I am looking to buy my own house and would love some insight.... google really hasn't been my friend on this one as there is lots of conflicting stuff.
We are in our 20's and each have about $10,000 in savings. My main concern is with the downpayment/closing costs, as the note would likely be less than we pay in rent.
I have heard I should expect to pay 20-30% down, but have also seen I could pay as little as 3%. What is the norm? Are there pitfalls to a low down payment other than a higher note? What the hell am I doing?
TIA
We are in our 20's and each have about $10,000 in savings. My main concern is with the downpayment/closing costs, as the note would likely be less than we pay in rent.
I have heard I should expect to pay 20-30% down, but have also seen I could pay as little as 3%. What is the norm? Are there pitfalls to a low down payment other than a higher note? What the hell am I doing?
TIA
14
Posted on 12/7/17 at 8:52 am to scott8811
A good rule is too put as much down as needed to avoid PMI, b/c that's basically wasted money. Closing, depending on where you live and how much the house is can run from 3k-15k.
Posted on 12/7/17 at 8:55 am to scott8811
Depends on how much you plan on spending. Might want to hold off, nothing like buying a house that you can't afford to furnish.
Posted on 12/7/17 at 9:01 am to scott8811
I would hold off and build up your emergency fund. Buying a house is great, until the AC goes out, or some other big expense comes up.
Posted on 12/7/17 at 9:02 am to scott8811
quote:What area are y'all looking in?
Shreveport
I assume y'all do not have kids yet - if you plan on buying a starter home that you won't keep for too long, I would advise continuing to rent until you're ready for a kid-friendly home that you can stay in for a number of years.
I speak from experience - we bought a 1500 sq ft house when it was just the 2 of us, and only stayed in it 4 years - we started having kids and it got super tight in a hurry so we had to upgrade.
The first years of a mortgage are heavily weighted toward paying interest, not principal - so you won't be building up much equity at all. Add in the closing costs, realtor costs (if you have to upgrade in a few years), and all the costs associated with owning a house (it will be way more than you think), and we took an absolute bath on that first house.
I was super anxious to own a home at the time, but if I could go back in time, I would have rented a started house until we were ready for a bigger one.
*Also, since you don't have a 20% down payment, you'll be paying PMI for 5 years unless you are a vet or otherwise qualify for something similar - so that's even more wasted money.
This post was edited on 12/7/17 at 9:04 am
Posted on 12/7/17 at 9:15 am to NaturalBeam
quote:
What area are y'all looking in?
Not sure tbh...we're in the very beginning stages. We are really looking to pull the trigger in maybe 6 months at the soonest.
Posted on 12/7/17 at 9:20 am to scott8811
If you don't have 20% down you will pay pmi which is insurance until you have 20% equity in your house.
I wouldn't advise buying until you are fairly sure you will be there for 5 years. You want to be at least 3 years or you are probably better off renting.
I would also say to go two ways, buy something you can rent out in 3-5 years and move up or buy a house slightly bigger then you need that you can grow into. Being so young, you'll want more house fairly quickly especially with a kid or 2.
Take your time. Too many people get tired of renting and buy a house quickly just to buy something, then they are stuck for 2-3 years because it wasn't quite what they expected and financially they can't get out of the situation right away.
I wouldn't advise buying until you are fairly sure you will be there for 5 years. You want to be at least 3 years or you are probably better off renting.
I would also say to go two ways, buy something you can rent out in 3-5 years and move up or buy a house slightly bigger then you need that you can grow into. Being so young, you'll want more house fairly quickly especially with a kid or 2.
Take your time. Too many people get tired of renting and buy a house quickly just to buy something, then they are stuck for 2-3 years because it wasn't quite what they expected and financially they can't get out of the situation right away.
Posted on 12/7/17 at 9:22 am to scott8811
There are a lot of options, and a lot of advice that’s either archaic or impossible for most first time buyers.
General guidance implies the larger the down payment, the better. This reduces the mortgage payment, may allow you to finance for shorter terms, and minimizes the interest paid. Anything over 20% also reduces the need to pay Private Mortgage Insurance (PMI).
However, a home is an illiquid asset. You should not empty your savings to meet the down payment criteria, particularly any sort of emergency fund. I’d recommend to put down as much as you can comfortably afford, keeping in mind you’ll also have to pay closing costs, and general “first time homeowners” costs.
General guidance implies the larger the down payment, the better. This reduces the mortgage payment, may allow you to finance for shorter terms, and minimizes the interest paid. Anything over 20% also reduces the need to pay Private Mortgage Insurance (PMI).
However, a home is an illiquid asset. You should not empty your savings to meet the down payment criteria, particularly any sort of emergency fund. I’d recommend to put down as much as you can comfortably afford, keeping in mind you’ll also have to pay closing costs, and general “first time homeowners” costs.
Posted on 12/7/17 at 9:46 am to scott8811
i have a question too. i rent a condo for $1300/mo and ive been considering buying a house. i hate paying that much rent and getting nothing out of it, but it's pretty nice not having a roommate so I've kept my 2nd bedroom empty
is it a good idea to buy a house while single? if i got one, Id probably go 3br/3.5ba so i wouldnt have to get another house down the road, but im worried i stay single and have too much house
is it a good idea to buy a house while single? if i got one, Id probably go 3br/3.5ba so i wouldnt have to get another house down the road, but im worried i stay single and have too much house
Posted on 12/7/17 at 9:51 am to Carson123987
Honestly if you are single, a great way to make tax almost free money is to have a roommate situation that works for you and pays your bills. Get a home where you are living on separate floors or otherwise have plenty of space, and where you don't need a roommate to afford the house. Plenty of homes have a bedroom and living space separate from each other.
I've known married couples to have a roommate, sounds odd. But there's house situations where you have your own space but you have someone to watch your house and pets when you are away, plus pay your bills.
Eta: the other thing about having a house like that, is you can move out and find a new roommate to share with your other roommate. Makes it less permanent for you. I know multiple people that have done that, basically turned their first home into a rental slowly.
I've known married couples to have a roommate, sounds odd. But there's house situations where you have your own space but you have someone to watch your house and pets when you are away, plus pay your bills.
Eta: the other thing about having a house like that, is you can move out and find a new roommate to share with your other roommate. Makes it less permanent for you. I know multiple people that have done that, basically turned their first home into a rental slowly.
This post was edited on 12/7/17 at 9:54 am
Posted on 12/7/17 at 9:52 am to Carson123987
That's a pretty large house for a single man. There's a lot of variables here really. Do you plan on being in BR or wherever for a good while? Do you have a decent chunk in the bank for down payment and extra to keep on the side?
I'd very highly consider buying. You can probably get a mortgage for the same price or less depending on what your range is. Considering you are paying 1300 a month by yourself, I'd imagine you can handle buying a house. 3/2 is probably the easiest size to buy and sell.
ETA: Agreed on a roommate to help cover the mortgage. You'll be able to save a lot of money that way even if it sucks. Once you settle down, you can kick that person to the curb and get bae in there.
I'd very highly consider buying. You can probably get a mortgage for the same price or less depending on what your range is. Considering you are paying 1300 a month by yourself, I'd imagine you can handle buying a house. 3/2 is probably the easiest size to buy and sell.
ETA: Agreed on a roommate to help cover the mortgage. You'll be able to save a lot of money that way even if it sucks. Once you settle down, you can kick that person to the curb and get bae in there.
This post was edited on 12/7/17 at 9:54 am
Posted on 12/7/17 at 10:00 am to Brageous
quote:
Do you plan on being in BR or wherever for a good while? Do you have a decent chunk in the bank for down payment and extra to keep on the side?
Yes, will be here unless something goes horribly awry. i wouldnt have much left if I bought today, but I'm thinking more in a year or so anyway.
quote:
Agreed on a roommate to help cover the mortgage. You'll be able to save a lot of money that way even if it sucks. Once you settle down, you can kick that person to the curb and get bae in there.
yeah, i could swing that, especially if I got a 2 story and they just stayed upstairs lol
Posted on 12/7/17 at 10:42 am to scott8811
You should try to put as much in the down payment as possible (within reason).
As for closing costs, there are two ways to keep them low:
1) You can request for the seller to pay your closing costs when you make an offer (either partial or all of the costs). Not all sellers will accept this, but it's worth a shot.
2) Once you have a contract, shop prices with title companies. (Do not let the seller pick the title company. As a buyer, you are allowed to choose who will conduct your title search.)
EDIT: Forgot to add: Shop around for homeowner's insurance also. Don't just go with the ones that insure your car.
As for closing costs, there are two ways to keep them low:
1) You can request for the seller to pay your closing costs when you make an offer (either partial or all of the costs). Not all sellers will accept this, but it's worth a shot.
2) Once you have a contract, shop prices with title companies. (Do not let the seller pick the title company. As a buyer, you are allowed to choose who will conduct your title search.)
EDIT: Forgot to add: Shop around for homeowner's insurance also. Don't just go with the ones that insure your car.
This post was edited on 12/7/17 at 10:48 am
Posted on 12/7/17 at 10:56 am to scott8811
i was in similar situation to you. we put down 3%, which was minimum for FHA loan at the time. however, we ended up pissing away ~150-200/mo in mortgage insurance because we did not have enough equity. that was on a new construction in a newer subdivision. after about 5 years, we bought an older house in the middle of town for much cheaper, put 20% down, and cut note almost in half. was lucky i didn't have to stroke a check to the buyer of my first house. if i could do it over again, i'd buy cheaper house up front.
my recommendation is plug some numbers into the online calculators (google mortgage calculator). with your savings, i'd keep house price to under $200k (lower the better obviously). factor in about 1000 for insurance, about $2000 for property tax. play with the down payment and see what the payment works out to be. my recommendation is keep payment to less than 20% of your take home pay. lots of advice says 30% of gross, but you will appreciate the flexibility of the lower payments. much more than that, and you will be house poor (nice house but no money to do what you want).
in shreveport, it's common for sellers to pay closing. you would just make that part of your offer. when you are close to being ready to buy (1-3 mos out), get a real estate agent. stay within your budget (as discovered from online calculators above). given your age and budget, i'd recommend broadmoor area. relatively safe and wide variety of housing options. as others have said, look for a 3/2 if possible. they sell the easiest.
my recommendation is plug some numbers into the online calculators (google mortgage calculator). with your savings, i'd keep house price to under $200k (lower the better obviously). factor in about 1000 for insurance, about $2000 for property tax. play with the down payment and see what the payment works out to be. my recommendation is keep payment to less than 20% of your take home pay. lots of advice says 30% of gross, but you will appreciate the flexibility of the lower payments. much more than that, and you will be house poor (nice house but no money to do what you want).
in shreveport, it's common for sellers to pay closing. you would just make that part of your offer. when you are close to being ready to buy (1-3 mos out), get a real estate agent. stay within your budget (as discovered from online calculators above). given your age and budget, i'd recommend broadmoor area. relatively safe and wide variety of housing options. as others have said, look for a 3/2 if possible. they sell the easiest.
This post was edited on 12/7/17 at 10:59 am
Posted on 12/7/17 at 11:01 am to lsujro
quote:
lsujro
Thanks! I've gotten tons of great advise..this has been some of the most helpful.
Posted on 12/7/17 at 11:05 am to scott8811
quote:
Thanks! I've gotten tons of great advise..this has been some of the most helpful.
glad to help. i can recommend a good young agent if you need one. feel free to email me.
<--@gmail
Posted on 12/7/17 at 11:17 am to lsujro
quote:Broadmoor is an ok but older area with occasional crime. South Highlands is charming, but with more-than-occasional home break-ins. Southeast Shreveport is the growing area, and the safest.
i'd recommend broadmoor area
*Also OP, we've got the luxury of some of the highest property taxes in the state - effectively 1.5%, so make sure you factor that in as well - if you buy a $200k home, expect to pay $250/month in taxes.
This post was edited on 12/7/17 at 11:19 am
Posted on 12/7/17 at 11:24 am to NaturalBeam
quote:
Broadmoor is an ok but older area with occasional crime. South Highlands is charming, but with more-than-occasional home break-ins. Southeast Shreveport is the growing area, and the safest.
south highlands price/sf is probably out of his budget, but it's certainly a good option. SE shreveport is almost certainly going to cost more than he wants to spend. fwiw i moved away from there, in part due to the crime. there were more break-ins in my small gated neighborhood than anywhere near me in broadmoor over past few years. lots of property crime anywhere you live in the port unfortunately. put a bright motion light in front of house, get an alarm, and you'll probably be fine.
eta: for property tax, don't forget homestead exemption. 200k house is about about 2000/year, which is about 160/mo.
This post was edited on 12/7/17 at 11:27 am
Posted on 12/7/17 at 11:31 am to scott8811
You need to really push hard to stay in a comfortable place financially I'll tell you that, especially with a wife. Women go nuts on a house once they know they can change whatever they want my damn wife included. No matter how perfect a home is, you'll likely want to make some changes at some point and women want to make changes sooner than later. It's absurd how you can live in a rental house and make do perfectly fine then buy a nicer home and all of a sudden half of it needs updated.
Just off the top of my head I know a couple that had rented 2-3 places together for 5 years or so, then built a $320k house custom built for the most part. Within living there 9 months, the living room is too small and they are trying to add a deck out the back for $30k or so.
So just be careful. Your first home you will do a lot of growing, so you want to buy in some room to grow. But you also don't want to be house broke and have some money for minor improvements.
Just off the top of my head I know a couple that had rented 2-3 places together for 5 years or so, then built a $320k house custom built for the most part. Within living there 9 months, the living room is too small and they are trying to add a deck out the back for $30k or so.
So just be careful. Your first home you will do a lot of growing, so you want to buy in some room to grow. But you also don't want to be house broke and have some money for minor improvements.
Posted on 12/7/17 at 3:30 pm to baldona
I’d rather live with my parents than have a roommate. I bought a 2 bedroom condo and pay less a month mortgage than a comparable rental would be.
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