Just wanted to take you guys opinions...

I am planning on buying a house within the next 30 days. I have been shopping around for the last 6 months or so. I just wanted to make sure I wasn't getting in over my head.

I work a full commission job. I plan on bringing in 40k this year. I also am recieveing a 50k inheritance, 1k a month. I have ownership in the company. Due to that I end up oweing subatantial amounts of money every year on taxes, paid by the company.

Also, I drive a 2011 focus that is paid off.

I have been approved for just about any loan I want due to the income from the company (that money is automatically put back into the business).

I am 20 years old. I have 11k saved. I will have a $2500 paycheck on the 15th.

I am wanting to spend around 130k on a house. This will put me at around a $800 mortgage. I average 3-3500 a month plus the inheritance. Just wanted your opinion as to whether or not I am getting in over my head.

Thank you,
Sam.

 

Your car is paid off, which is good, but do you have any other debt? What are your monthly expenditures? That 50k will only last you for 4 years, and any mortgage is going to be at least for 15 years.

If I were in your shoes, I would bank that 50k over the next four years. Then, turn around and buy a house at that time (assuming everything is going well) and put that 50k towards the down payment. You will save an enormous amount of money in the form of interest by doing so.

Also, in the next four years, you could probably save up another large chunk of change to add to the 50k. You could probably almost buy the house outright without having to worry about a mortgage, or at worst a very small mortgage.

 

Based on the limited info you gave, I think you will be fine and are not stretching too far, and are in way better shape than most your age. Congratulations.

You are wise to be cautious and not take out the largest mortgage the bank will give you. Seems like you have a good handle on your overall income and expenses and are making a reasonable first home purchase.

Interest rates are low, and if property values are going up in your neighborhood, it might be a good time to buy.

When making your decision, don't forget other expenses like property taxes and maintenance on the home. And try to have a big enough down payment where you don't need any PMI (private mortgage insurance). That can be expensive and hard to get rid of.

You are probably paying rent now, or would have to pay rent soon if you don't buy a house, so that may hinder your ability to save up a bigger down payment if you wait.

Since you are young and may meet a fine lady at some point or start a family, keep in mind that you may well need to sell the home in the next 5 - 10 years (or maybe you can keep it aas a rental property). So I would factor in ease of resale and rentability when you are making your decision on which house to buy.

 

Thanks for the replies.

To give a little more information...

I still live at home and do not have to pay rent. My mom knows I am saving for a house and encourages me to stay as long as I want (meaning a few more months at the most).

As far a my expenses... I have a $50 phone bill that is diducted from my pay check (company phone), $140 car insurance (no wrecks, no accidents, full coverage), and a Walmart credit card that I use for gas & small purchases (paid in full every month). No debts now that the car is paid off.

I have a 720 credit score. I started working on my credit around 16.

I have worked my *** off to get to this moment. House prices have risen 5% In the last two months.

The house I am looking at is a 4/2, 1800 sqft, nice neighborhood. I a more attracte to 3/2's with a den... Usually larger bedrooms. I have to have an office for my work.

Once again, I appreciate everyone's help.

Edit:
Also, I do not want to rely on the 50k inheritance. I would rather use to to save a safety cushion. I want to base my home buying off of nothing other than my pay check.

Thanks,
Sam.

 

took a quick look at a loan scenario.

130,000 house appraisal value
20% down ( 26,000 )
rate 3.5%
property taxes = 3,000 / yr
Ins = 1,500 / yr

This is 842.01 / month.

If I read the 1st post correctly, your net ( take home ) pay is ( planned ) 3,333 / month.
- This is what you plan on, what are your historical numbers and are they realistic ? ( not too sure what you are selling, to know if there could be a down turn in it ).

1. You do not have a conforming loan ( don't have 26K down pmt ).
- this means PMI being added which is going to be 0.5% +
- This changes the loan to 8% down pmt + PMI = 963.88 / month.

2. Don't know if you will be approved for a non conforming loan with your age, credit score ( 720 = top end of average ) and without a run rate of earning those wages in a straight commission job.

3. Do you plan on a walk away if the seller does not pay the closing costs ?
- Don't know if this was included in the price you gave, I took that to be house costs.

4. The houses you are looking at, do you have an idea of what the utilities are per month ?
- If it is older might not have the best insulation and heating costs could be out of sight. Also matters on geography and cost per therm where you are at. Example my house ( 3K sq ft 2 furnaces ) built in 1999 ( major remodel in 2003 ) in Chicago ( mild winter this year ) and last month Nicor bill was 145.00 Your therm cost, insulation and temperature range will change this.

The part that has nothing to do with owning a home, Cash reserves.

You should always have 3 months wages in a reserve account just in case.
If I got the amounts up the thread correct, you should have 10K in cash reserves that you do not touch for anything other than job issues ( i.e. loss of job ).
- This is not for making up a short fall if the commission check is light one month, that is another account.

What I see, you just got your cash reserves finished, and now need to create an account for commission short falls
In 100% comm plans, this is another 3 months commissions or in your case another 10K, only used if your comp for a month is short and you need the money to pay bills ( i.e. not go out to eat ).

Next would be getting the 20% down payment for the house saved.

That is just what I see in straight money items, up the thread it was noted about maintenance funds.
Is the roof going to need to be replaced in 5 years ?
- Some Ins companies are getting picky about an item like this, and if not replaced, they will not cover it in event of damage.

Just my opinion on the topic.

 

Scully, I think your numbers are a bit high... I just bought my first house, similar situation to him (no debt other than student loans), and got 3.25%. \

Depending on your area, see if the house qualifies for a USDA loan. Similar to a FHA, but no PMI.

I also didn't put 20% down on the house. I wanted to, but the market was showing signs of turning towards the better and found a great deal on a house with land.

 

I am going FHA, I will get a 3.25% rate. Looking to put down 5-10%. Splitting closing cost.

Thanks all.

Edit:
I was planning on saving up 20%. However, homes have increased in price dramatically. There isnt the volume there was 5 months ago.

I'm going 3/2 (possibly 4/2), split open floor plan, quarter to half acre lot, 1700-2000 sq ft living, block.

All of the house were built from 99-03. All of the roofs are new due to hurricane Charlie.

 

I tend to lean fairly conservative when it comes to financial matters, but in looking at the numbers you have presented, I suspect you will be just fine with the home you discussed. Let's face it, if you're still in your early 20's, your wages will almost certainly go up over the next decade as long as you have a single ambitious bone in your body. If the numbers work with your current income, they will look even better five years down the road as long as you don't incur a bunch of extraneous debt.

The way I see it, the unbelievable interest rates we've had over the past few years have been one of the few "can't miss" financial opportunities associated with this whole financial debacle. I have encouraged many people I know to take advantage of these rates by either pulling the trigger and buying a new home, or refinancing their current property! Go for it and enjoy the many trials and tribulations of home ownership......

 

There are a couple of wild cards that make it difficult to decide on when to buy and how much to spend.

One wildcard is appreciation of the home. If the purpose of waiting is to get a bigger downpayment but home prices go up faster than you can save, you hurt yourself by waiting, as you miss out on the appreciation. FWIW, in my area, prices have come up about 20% in the last year (of course they dropped 60% between 2006 - 2010).

Terms of your mortgage are another factor. but it sounds like you are getting that square away.

FWIW, there are few homes on the market here, also. Multiple offers and prices above list price are common. Limited inventory, low interest rates and pent up demand from years of own/users holding off is resulting in the rising prices. There are alot fewer distressed/bank owned listings now then there were 2 years ago.

 

130,000 house appraisal value
20% down ( 26,000 )
rate 3.25%
property taxes = 3,000 / yr
Ins = 1,500 / yr

That is 827.61/mo instead of 842.01/mo ( with a conforming loan )

Prop taxes and ins will change depending on the area, and the rate can change depending on longevity in current job position or profession ( with 100% commission jobs ), and now this bit of info on hurricane area.

Now that the bit of info on hurricane area was added, I would say my SWAG on insurance could be low.
- Also might need to look at Federal Flood Ins, your home owners ins is not going to cover that, and the bank could require it ( they don't want you walking from a flood damaged house ).

On the topic of rates, Bernanke just last week came out with his "rerun" and rates are going to remain unchanged until at least 2015.

- Don't believe those commercials about rates are going to change or can't stay this low. That is marketing material to drive business, not financial advice.

 

I am extremely conservative and originally was going to buy a 2/2 1200 sqft home for around 70k. However, the more I thought about it I realized it would be a terrible investment for the long run.

As far a income... Realistically thinking, I should clear 100k next year without any problems. I am a transportation broker.

Edit:
I'm not interested in owning multiple homes. I have dealt with renters my whole life... In Florida, it's difficult to get a renter who will not leave the home worse than before.

My next property will be 5-20 acres. I will build on that property. I have a floor plan that I drew and had a contractor look over. I guess it's my conservative "dream home."

 

Sscully,

The area in looking at is definitely not a flood zone. It's about a quarter mile from a lake. It's all downhill to the lake. The properties are not on a "slope".

 

The township / county / city will be the one to indicate that, not an eye ball look at it.
You would need to check the building / zoning department that covers the area, and check the plat of survey for the area.
- They use the Army Corp of Eng plans. A flood zone can be on the way to the water egress, not solely due to something running over.

Insurance companies can also change flood area designations depending on previous claims.
Where the property is, could be in a zone B, the insurance company might call it a flood zone A from previous claims in that area. They are not required to follow Army Corp of Eng plans. Some Insurance companies do not cover higher flood zones.

Worth confirming with an insurance company before putting in an offer on property. Given the hurricane damage, you could be looking at a sizable ins bill.

Check with your local community college, some will run free classes on 1st time home purchasing that will cover items like this and others, that can turn into a big surprise down the road.
Another good resource would be the lawyer you are using for closing, he is there to watch out for you.

 

Well here's how it is...

I found a hous today, looked at it, perfect.

It's going to cost 140k. My lender said the mortgage (hoa included) will be 915.

What's you guys opinion. I'm about to pull the trigger.

 

You sound like you've been very responsible, and congrats on buying a house! I would echo what SSCULLY said about not worrying about interest rates in the short term. I don't see them going up in the next year-18 months. My only advice is with rates so low, put down the least amount of money that you can and get the shortest term loan that you can. If you do go with a 30 year loan, try to pay another 100 dollars or so every month. That will knock about 8 years off the loan right there.

Again, congrats!