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post #1 of 13 (permalink) Old 06-07-2008, 09:18 PM Thread Starter
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starting the home buying process!

I've been talking about it for years and finally I'm doing something to move forward in buying my first house!

I haven't done anything "official" such as preapproval, but decided before I fell in love with houses I can't afford I'd at least talk to someone at a bank. Told her what I had to put down, what I make, and what I owe as a car payment (my only debt). Pulled my *fabulous* credit report and crunched some numbers. She asked how much the houses I was looking at were selling for.

Told me it wasn't impossible!

I still have many more people to talk to. The biggest issue at the moment is almost all of my money is tied up into a CD that matures in September. So I'm working on saving up as much as I can to build up more of a "cushion" in addition to a down payment. I'd like to find someone who knows a lot about the first time home buyers programs in my area to see what my best options are going to be.

I'm also trying to find out more about foreclosures. With the market being so bad there are TONS of houses in my area in very nice neighborhoods literally walked away from on a daily basis. I just don't know how to find them, or find out more about them.

What else should I look into?

Jessie

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post #2 of 13 (permalink) Old 06-07-2008, 09:32 PM
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Good for you! Buying your first house is scary, but a great step.

I looked on CNN money and found an article which might help you.
http://money.cnn.com/magazines/money...ey101/lesson8/

One thing that is vital is a home inspection, especially if you are looking at a foreclosed home. Here is a link from a local home inspector but he has some great resource links for you. http://wvhomeinspections.net/links.htm

Before we even started looking for a house we sat down with the loan officer at our credit union and asked lots of questions. She was invaluable.


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post #3 of 13 (permalink) Old 06-07-2008, 10:01 PM Thread Starter
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I've read all the articles I can find and played with numbers on every "how much home can I afford" calculators. I've made my head spin. I think the best thing for me is to talk to a real person about it.

My biggest issue is that I don't technically make that much money on paper. But, according to the woman at my credit union... mortgage brokers should jump at me. I'm young, but for someone my age I have a large sum of money to put down (not quite 20% of what I'm looking at but close to it) have a great credit score and report and other than a very low car payment, have no debt.

I also talked to her about my pet sitting. I know I have no actual proof or record of what I make and there's no way to know how much I'll make in the future, I've averaged $450 per month so far this year. So even if they don't count it, its enough to make me really comfortable with a payment on the higher end of what they think I can afford.

And talking about a "cushion" the woman at the bank asked if my downpayment would wipe me out. At the moment, it would leave me with about $1000... but I'm hoping by September to have about $5000 in addition to my downpayment. I also have close to $4500 in my IRA (which I know I can't technically touch, but if *knock wood* something happened its something I could use if I had to) and I also have made extra car payments so that I'm paid up for the next six months. Again... just things I can use in my favor.

Jessie

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post #4 of 13 (permalink) Old 06-07-2008, 10:59 PM
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This is a great time to be buying a house. You're in the driver's seat as far as negotiations go. I'm going to give some advice that goes against conventional wisdom: don't put down that much. You'll need the money both for your emergency fund and also for unplanned maintenance expenditures and for planned improvements, both on the house and furniture, property taxes, and so forth. The last thing you want to do is put yourself in a cash-poor position immediately after closing on a house. I'd suggest putting down 10% or less if you can get away with it, and the resultant monthly payments are within your budget. Your equity in the house actually isn't doing you any good at this point, since home values are stagnant. So your money that you want to put into equity will just get locked up and you lose the use of it. The less you put down, the higher your leverage, and when understood and used responsibly, leverage is a good thing. The only benefits to putting down 20% or more are no PMI and lower mortgage payments.
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post #5 of 13 (permalink) Old 06-07-2008, 11:40 PM
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I just want to say Good For You, Jessie!
Foreclosures might be worth looking into right now. I think mortgage defaults create public records, so you could try looking around in the records at the county seat? Property tax records also would be worth a look.

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post #6 of 13 (permalink) Old 06-08-2008, 02:14 AM
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Someone correct me if I'm wrong, but I believe if you put down less than 20% you will have to get PMI (private mortgage insurance). It's an extra insurance that is required in case you default on your loan.
Now I don't think it is usually that much, but it's something to think about and plan for.
We ended up doing a 20% down payment, but if we had not, our lender was actually going to get us a mortgage for 80% and then a 2nd personal loan for the other 10% or so. That way we would not have had to pay the PMI. The interest rate on the 2nd loan would have been a little more, but still less than the PMI would cost.

I was going to tell you to be careful not to overextend yourself. We got approved for waaay more money than we would have actualy wanted to spend. But in your case it sounds like you have that extra income that they aren't "counting" so it may be okay for you. I'd sit down and make a budget, crunch all the numbers and then decide how much you feel comfortable spending.

Good luck and keep us posted! It took a lot of time and effort, but I love being in a house so much more than apartment living.

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post #7 of 13 (permalink) Old 06-08-2008, 02:39 AM
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Very exciting Jessie!

If you want to use your pet sitting income towards qualifying for a mortgage, you have to be able to document that you received it. The most obvious way to do that is to show your income tax return, but it doesn't sound like you claimed it, so you're kind of up a creek on that. You can get a loan where you don't have to provide proof of income, but interest rates are significantly higher.

I'm with Tim...if you can't do 20% comfortably, then put down as little as possible. The only benefit is that you don't have to pay PMI. The incremental difference between paying PMI on a mortgage that you put 10% down on and one that you put down 17% is a few dollars a month. Just make sure that your mortgage is written that you can apply to have PMI eliminated once you gain 20% equity, whether that's thru the market going up or you paying enough on your principle. Most mortgages will make you pay PMI for a minimum of 3 years, then you can apply to have it removed if you have the equity.

One of the reasons that I recommend not putting all the money down is because foreclosed houses often need a fair amount of work because the owners don't have any money to maintain it properly if they can't make mortgage payments. They also don't have a vested interest in caring for it those last few months. And they're mad at the mortgage company for foreclosing on them, so they take it out on the house. So it's likely that there will be a lot of painting, carpet, other flooring, and other cosmetic work that will need to be done.


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post #8 of 13 (permalink) Old 06-08-2008, 03:01 AM
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And just be careful about going for the maximum you can qualify for - that's the reason there are so many foreclosures out there.

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post #9 of 13 (permalink) Old 06-08-2008, 03:10 AM
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It's a good idea to have enough money in your savings account to pay six months of mortgage payments. I know you just started a new, good job that you really like and it seems secure, but anything can happen. Believe me, I know.

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post #10 of 13 (permalink) Old 06-08-2008, 10:25 AM Thread Starter
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actually, in all the reading I've done I've never seen that the option to stop the PMI once you've reached the 20% equity. And Tim, what you're saying does make a lot of sense.

And with the foreclosures, the few I've seen all do look to need a fair deal of work. I dont' want to say it won't be an option, but I KNOW myself well enough to know getting any sort of fixer upper is not an option for me because I just can't do the fixing Plus, if it came down to a foreclosed home or a nicely kept home for the same price... I'm not going the foreclosure route.

And no, I don't claim any of my extra income on my taxes. I guess I'd rather them not count the money I make so it really is *extra* income... especially if it stops coming in.

What's really great is I was talking to my boss this week about how I don't make as much on paper as I'd like and that I was actually thinking about finding somewhere to work on Saturdays (actually, I mentioned the clinic I used to work at because I had just been for a visit and kind of missed a lot of the people). I wasn't all that serious, just mentioning that it was a passing thought. So she offered me extra office work that I can come in and do on Saturdays (since nobody can get anything done there during the week!) like her Quick Books stuff and things like that. It may only be about 4 hours a week but might be more so I could really use that extra couple of hundred bucks a month on paper!

Oh, does anyone know how long a prequalification letter is good for? I keep saying I don't want to go find out how much I can qualify until I'm ready to actually put down the money... but I'm still going on assumptions of what I can afford. If I'm not planning on buying until September is it way too early to get prequalified?

Jessie

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