Buying a Home...Good time or no?

[ozzfloyd]

I'm looking to buy a home. Here are my circumstances:

-I'm single
-Paying $550 a month in rent
-Only gross $36,000 /yr
-My job seems pretty secure right now (75% of my salary is currently subsidised by grants)
-Can afford $700 /month mortgage
-My parents are willing to pay a $10-20k down payment
-I've seen some nice small (1200 sq ft.) homes nearby at around $90,000


So...good idea? bad idea? Thoughts?

 

[Gizmo Williams]

I'm looking to buy a home. Here are my circumstances:

-I'm single
-Paying $550 a month in rent
-Only gross $36,000 /yr
-My job seems pretty secure right now (75% of my salary is currently subsidised by grants)
-Can afford $700 /month mortgage
-My parents are willing to pay a $10-20k down payment
-I've seen some nice small (1200 sq ft.) homes nearby at around $90,000


So...good idea? bad idea? Thoughts?

It is probably a good time to buy given the info above as long as the home is not in a nearly abandoned subdivision that has tons of foreclosures, squatters and the desert is reclaiming. Also, if you plan on being in the house for more than a couple of years...then it is probably a slam dunk. Prices may drop a bit...but the downside is pretty limited. Most of the damage has been done and $90K is well within the means of the median income in the Valley. With your parents down payment, you should not be at risk of being upside down on the mortgage.

You can take advantage of the buyers credit and interest rates are still very low....huge factors to consider and buy now vs. waiting a couple years. Your mortgage payment may be less than your rent now....70K at 5.5% is about $400 a month plus Insurance and Taxes.

Since you will have a fairly small mortgage, the interest will probably not help you that much as far as taxes go...unless you have a ton of other expenses to itemize.

 

[DeAnna]

It's never a bad idea to own instead of rent.

Your best bet is to get pre-approved by a lender first. Most sellers today will not even look at an offer unless they see your pre-approval letter. And obviously factor in the costs of home ownership: utilities, insurance, property taxes, etc.

IMO, the bottom hit this past spring. Prices are edging upward now.

 

[Gaddabout]

In that price range, I'd suggest looking at homes that are 10 years old or newer. You definitely want something with some upside. Either that, or gamble on a place you think will undergo a renewal (aka downtown Phoenix in the historic district, before the designation, you could have paid $75,000 for a home now going for $350K).

 

[bankybruce]

Here is some advice. If you are going to do FHA, have your parents give that money to you now and put it in your savings. If not, you have to throw extra paperwork in there to get FHA approved. My father-in-law gave us the down payment and we have to jump through a few hoops to prove it was a gift and not a loan.

Also, keep in mind HOA and trash/water. We pay almost $200 extra a month in just that.

 

[jw7]

I don't know your complete financial situation, but my advice is if you are going to do it, start moving fast.

The $8K first time home-buyer tax credit is scheduled to expire in 4/2010.

Spend $15, read "Home buying for dummies" and when you are done read it again. Then read more and do online research.

Start budgeting for things that you take for granted in rent - property tax, insurance, pest control, appliances, repairs, PMI (unless your folks put down 20%) and so forth.

 

[thirty-two]

Where you looking to buy?

 

[dreamcastrocks]

What's your credit score?

 

[Linderbee]

If you can do it, DO IT. God only knows where our economy is going to go, and it's better to at the very least, have a home.

 

[Russ Smith]

What's your credit score?

Yep great question, these days loans are highly dependent on credit score.

I think the answer is probably yes if you really think your job is stable.

It's a great time to buy a home if you have the job part of the equation solved.

 

[Derm]

First Time Homebuyer Credit
A first time homebuyer who has not owned a home in 3 years buys and moves into a home from January 1, 2009 to April 30, 2010 (escrow closed by June 30, 2010) as a primary residence will receive a refundable tax credit of 10% of the purchase price (max $8,000 – use form 5405).

Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.

No repayment if primary residence for 3 years. Phase-out for the credit is: MAGI Single $125,000; MFJ $225,000.

Old program (April 8, 2008 to December 31, 2008) was a $7,500 loan with repayment over 15 years starting in 2010.

"Move-up" Homebuyer Credit
Similar to the first-time homebuyer's credit, a reduced credit for up to $6,500 for existing homeowners is available to those who have been in their current residence for a consecutive five-year period. The timeframe for the purchase of a new (to you) primary residence starts November 6, 2009 (when the credit became law) same end dates as "First Time" credit.

 

[DeAnna]

Yep great question, these days loans are highly dependent on credit score.

I think the answer is probably yes if you really think your job is stable.

It's a great time to buy a home if you have the job part of the equation solved.

Not just for mortgages, but homeowners insurance rates are also dependent on FICO scores.

For FHA loans, you need minimum 680 Fico score.

For $15.95, you can check it here:
http://www.myfico.com/Default.aspx?LPID=FICORP53

If it's not up to snuff, start cleaning up your credit before you start your home search.

 

[ozzfloyd]

Thanks for the replies folks.

Not quite sure where I'm looking to buy just yet.

Credit score is 751

 

[kps0001]

For FHA loans, you need minimum 680 Fico score.

pretty sure it is 620 unless it was increased within the last month or two.

 

[BACH]

Not only a good time to buy, but a great buy to buy, if three conditions are met:

1) You don't buy a house more expensive than you can afford
2) You pretty good job security
3) You plan to keep the house for more than 3 years.

It's basicly common sense. If you buy a house right it will be a good investment over time. The problem is that nobody knows how long time it takes for it to become a good investment, so as long as you don't end up in a financial situation, where you absolutely have to sell Or you plan to sell before the market realisticly has rebounded, then it's a good idea to buy.

 

[Gizmo Williams]

Not only a good time to buy, but a great buy to buy, if three conditions are met:

1) You don't buy a house more expensive than you can afford
2) You pretty good job security
3) You plan to keep the house for more than 3 years.

I would add a fourth....make sure Domino's will deliver to you. If there is no infrastructure existing around the development today....chances are there won't be for a long, long time if ever. Some developments will probably end up being modern day ghost towns.

 

[DeAnna]

Buying a house should be a long-term investment, not a quick-buck scheme.

That's what got us (among other things) into this mess now.

 

[ozzfloyd]

Looking at some decent places right now. Got pre-approved for twice the amount that I'm looking for. Good to know, but no way do I bite off more than I was planning on. Now I just need to get the ball rolling and also figure out how I'll get out of my apt lease that runs through July... The snails pace this process will take will at least give me several months to fugure that out.

Thanks for the help folks.

 

[ozzfloyd]

Update: I may be making an offer on a place this week. 1200 sq. ft, newly remodeled 1958 brick home. All brand new stainless steel appliances, wood floors etc. Listed at $115,00, going to start with an offer of 90k or so...we'll see...

Thanks for the thoughts folks.

 

[LVG]

$75/SF - damn,

 

[Linderbee]

$75/SF - damn,

lol...I forgot what forum I was in, and couldn't figure out what $75/San Francisco (49ers) meant.

(and I spent 5 years as a Realtor)

 

[MaoTosiFanClub]

My sister and I went looking into places near Flag for a second home/family retreat place yesterday. Some good deals out there but I'm still not sure we've completely bottomed out yet. We'll jump on the right deal and in the meantime perhaps throw out some lowball offers to see if we can get somebody to bite but we're definitely not in a hurry.

 

[conraddobler]

Well a lot depends on your long term rate outlook.

Typically the best time to buy a house is when rates peak at their HIGHEST point and start comming down.

The value of the house is really inverse to the rate enviroment.

Since rates are at generational lows then you can kinda see where I'm going with this.

Now if you believe rates are going to stay low or get lower for an acceptable period of time then sure but if rates went to say 10% that wouldn't hurt you as the buyer or would it?

If rates are 5% now and go to 10% all else being equal it will about halve the value of your home just by math as most of the payment people make is interest and if that doubles then they can afford roughly half the house.

So if you don't need to sell and your job is steady it might look painfull in terms of value but if you can afford it then you'll still have a place to live but if you have to sell it..... that's not so good as the buying pool is much smaller and they will demand a lower price to qualify to buy it.

So if rates are like 15% when you buy and fall to 5% you can refinance and you should have pretty sizeable capital appreciation but if rates are at their low then there's only about one way for this equation to go.

Also buying now you're in the pool of people bidding on houses vying for the stimulus money, if that ever goes away you can imagine the car market as a model of pulled forward demand using zero percent financing teasers.

2 of the 3 automakers went belly up in that enviroment.

We're getting to a point where we can never have higher rates without destroying our economy, so you could bet they'll stay that way I guess.

 

[jw7]

Well a lot depends on your long term rate outlook.

Typically the best time to buy a house is when rates peak at their HIGHEST point and start comming down.

The value of the house is really inverse to the rate enviroment.


We're getting to a point where we can never have higher rates without destroying our economy, so you could bet they'll stay that way I guess.

I'm trying to figure out if I agree or disagree with this.

For the last few years other things have come into play other than the inverse relationship between home value, time on market and interest rates.

Again, the artificial boom from subprime loans caused a bubble, the fallout caused a huge drop in home values, yet the interest rates really haven't moved much.

IMO, the biggest factor is are you ready to buy now? Can you take advantage of the free (e.g. our) money subsidy? and will you live there at least 3-5 years?

If so, you buy now. But if you think you may need to sell Conrad has a point that the market could easily get even worse than it is for resale.

Also and the price OZ is looking at, he is very borderline at the Std deduction, even with a full year of payments.

Oz, if you want to buy a house, close sometime after Jan 1, 2010 and before the 4/2010 expiration of the tax credit. Earlier in the year is better is that there will be a better chance you can itemize and deduct your closing costs, property tax, and mortgage interest for a full year. Otherwise, you will not have enough to deduct to clear the standard.

 

[Duckjake]

$75/SF - damn,

Houses in the Austin suburbs have been selling in that range for at least 5 years now.