Considering buying a house. Have some questsion that ATOT might be able to answer...

[Argo]

Hi guys. Let me start by saying that I really appreciate all the help collective minds of ATOT offer. I've had a lot of my questions answered here, saving me lots of time and money (no, I'm not going to share). Now, I've read through numerous mortgage/real estate thread and learned a lot of useful information from them. However, I have several questions that I believe are unique to my situation. So, I'd appreciate any help you guys could give me. Now to real questions.

I decided that I don't want to continue paying $1050 a month in rent so I decided it's time to buy a condo. Decent condos go for $150,000 - $250,000 around here. Including mortgage, condo fees (around $150-$200 here) and any other monthly expenses I can afford $1300 a month. My credit score is relatively high - 780 last time I checked. It actually might be in 800s by now, although I'm relatively young and had credit history only for 4+ years, so that could potentially play against me.

Everything sounds good so far, except for a problem - I don't have much saved up, and therefore can't afford a decent downpayment. My savings account has a little more than required as a safety net. The max I can squeeze out of it is $5,000. Now, I also have a little less than 10k in my 401k account, and I've heard that you can withdraw from your 401k without any penalties (taxes too??) provided you use that money towards purchase of your first home. If that's true I can get 10k-15k as a downpayment, but not a cent more.

Now the first question is - can I even get a loan with that little down? If I can, what kinda interest rate can I expect?

Second question - assuming that I can get a loan, and lets say interest rate is 5% (highly optimistic rate, I'm guessing). I'm looking $190,000 condo, with 30 year mortgage. The monthly payment on that should be $950, which after condo fees should come out to be within my limit. Looking at amortization schedule I'm using only $2500 towards the principal - the rest is interest. Is this worth it? Am I going way over my head?

These are all the questions. I realize it's a long read, but I'd appreciate any advice you guys can give me. I'm planning on visiting a broker this weekend and I'd like to be prepared. Once again thanks for bearing with me.

 

[StageLeft]

Yeah you can get a loan without any money down, with that credit score, assuming your income is decent. I would try my absolute best though to get a house, or wait until you can. You'll be paying more for this condo than you currently pay for your apartment. And, since a condo feels like an apartment, it's only beneficial from an investment standpoint. But, since you now have to pay for all repairs, have no mobility, etc. it's probably not a great move. You may have PMI, which will up your payments by another $150-200/month too.

 

[Argo]

Thanks for reply skoorb. Unfortunately the houses around here cost more than $300,000 which is so out of my range that I feel bad just thinking about it. Any idea what kinda interest rate would I be looking at?

 

[Dunbar]

How long do you plan to stay there? Also, how much money do you take home a month (less all deductions, 401k etc?)

 

[Vic]

With that credit, and provided you have the income to qualify, you could get a 80/20 combo purchase loan today with a 3/1 ARM (fixed for first 3 year, 1 year adjustable for remaining 27 years) at a rate as good as 4% on the 1st (80% of purchase price) and 30 year fixed rate on the 2nd (remaining 20%) in the 7's%. No down required, but you would have to pay closing costs.
Assuming $190k price on the condo, the combined principal and interest payments would be about $978 per month, plus HOA, taxes, and insurance (if not covered under HOA).
Rates are good right now, but look to be trickling up in the near future.

 

[FrustratedUser]

Originally posted by: Vic
With that credit, and provided you have the income to qualify, you could get a 80/20 combo purchase loan today with a 3/1 ARM (fixed for first 3 year, 1 year adjustable for remaining 27 years) at a rate as good as 4% on the 1st (80% of purchase price) and 30 year fixed rate on the 2nd (remaining 20%) in the 7's%. No down required, but you would have to pay closing costs.
Assuming $190k price on the condo, the combined principal and interest payments would be about $978 per month, plus HOA, taxes, and insurance (if not covered under HOA).
Rates are good right now, but look to be trickling up in the near future.

I'd take a 15/30 year fixed rate now. These are the lowest rates in 40 years and you are sure that your rate is never ever going to go up whatever happens.
I'd say that's a no brainer. What does 0.5 to 1% make in the long run considering that. I can say with 100% accuracy that the interest rates will go up the next 30 years.

 

[dmcowen674]

It's always worth it to be paying on a Mortgage than giving your hard earned money for free to a Landlord, period.

Good luck Argo and enjoy.