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Questions to homeowners / realtors / bankers / anyone...

Questions to homeowners / realtors / bankers / anyone...

My current situation:

single
have been renting a one-bedroom apt. for a few years now
living in mercer / bucks county area
have never owned a home / property
I just unofficially locked myself into my job / company / area for at least a few more years
my only debt is a car loan (which will disappear within the year)

What I'm thinking about:

I don't have a great desire to be a homeowner, but it would be nice to get out of the renting game
I am thinking it would be good to buy now, while it's still a buyer's market
I'd rather not have to get a random roommate / renter
I would like to have the ability to sell / move in a few years (if I end up wanting to)

What I think I can afford:
(this is without doing any real research or figuring)

I can probably put down 10-15% of my purchase-price range without having to do too much fund-shuffling
I could probably afford to pay about 125% of my current rent

Any input would be appreciated...

Do you think it's advisable to go home-buying?
Any suggestions for getting financing?
Any pitfalls to look out for?
Any recommendations on what to look for or keep away from in a home?

Thanks.

- Andrew -

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Permalink Reply by Anne Marie on March 21, 2011 at 3:00pm

Hi Andrew,

I bought a 2 bedroom condo almost 2 years ago and was in a similar situation. Here are some things to think about... If you don't plan on putting 20% down, you'll have to pay a PMI every month until you have paid the bank the 20% (this will take a while). Also, make sure you have around $8-10,000 for closing costs. It may be more or less depending on the size of the home you buy and if you purchase any points. The cost of a point will vary but it will reduce your monthly payments. I bought a point and for me the cost of paying it up front (with the closing costs) was equal to me paying it off in 2 2/3 years. So anything afterward will be saving me money. Also, Passaic County collects taxes 4x a year (not sure if all counties do this) so my mortgage company actually wants a little more each month for taxes so they have enough when it's time to pay them (I wasn't expecting this).

As for picking a home, if you can afford 2 bedrooms or more, this is the way to go because it will be easier to sell in a few years.

You should get a nice tax refund every year because you'll be paying so much in interest the first couple years of your mortgage. For me, it's almost equal to what I pay in taxes.

When you look at homes, take pictures of each place you see because you will not remember everything. It helps to take notes too... what you like about the place and you don't like, how much for maintenance, taxes, etc., parking space(s) vs. garage, laundry in unit? You probably won't know what you are looking for until you see a couple places and you'll know what you don't want. Remember, if there is something minor you really don't like, you can always change it.

Good luck! And message me if you have any more questions.

Anne Marie

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Permalink Reply by Laura Labriola on March 21, 2011 at 3:34pm

an alternative to PMI is an 80/10/10 loan which is what I did when I bought my first house. You put 10% down, take out 80% at a low interest rate and take out another loan for the remaining10% (at a higher interest rate). Do some research but generally this will save you money in the long term and has tax advantages over paying PMI.

Condos are great for being able to own a home but without a lot of the hassles of home ownership.

Always buy less than you can afford!!!