Saving up for a downpayment on a house

[wfn]

closing cost will depend on where you live and obviously on your credit history
80/20 is the way to go if you're short on cash

rent is considered a valid source of income when applying for a loan but you can't use "projected" rent as a source of income (tell the bank you'll rent out a part of the house you're trying to buy)

essentially the way it'll go down is this:

1) your merged credit report will be pulled by a mortgage broker or a bank loan officer

2) looking at your score they will be able to tell you what you qualify for and hopefully give you several choices of loan product (fixed/arm/baloon) so you can pick the one that's right for you. again while looking at your score they will determine your monthly expenses and make calculations for debt/income ratios which will further dictate what loan product and amount you qualify for

3) after all that is done you'll need to bring all necessary paperwork (paystubs, verifications of employment, deposit, rent etc.) and just wait and let them do their job

at closing you will need to pay: attorney, appraisal, flood certificate, title insurance, recording, curier, real estate tax reserves and prorated principal and interest until your next mortgage statement

again all the fees vary by the state and some depend on your lender

 

[vi edit]

I've never paid more than $1500 for a closing fee (and I've bought three houses and done one re-fi). It doesn't start getting really expensive until you start figuring in points down a "point" equals 1% of the home cost. 1 point on $100,000 = $1,000. 1 point on $500,000 = $5,000.

 

[woowoo]

Originally posted by: Slew Foot
Dont buy in CA for at least 2 years, youll save yourself a pile of money.

Good advice here.

 

[wfn]

^ a lot of people forget about the earneast money they gave the seller as good faith and think their closing costs are small when in reality the earnest many eats up some of it.

in IL typical buyer's closing cost is $2500-2700 in fees

 

[vi edit]

Originally posted by: wfn
^ a lot of people forget about the earneast money they gave the seller as good faith and think their closing costs are small when in reality the earnest many eats up some of it.

in IL typical buyer's closing cost is $2500-2700 in fees

True. Plus it depends on the time of the month you close and the time of the year. Close at the beginning of the month and you owe all interest forward. Close at the end and you don't. Close at the beginning of a tax cycle and pay forward the taxes. Close just after they are due and you escrow them.

Can make a difference of several thousand.

 

[dullard]

Originally posted by: vi_edit
Personally, so long as rates stay reasonable(6% for a 30 year fixed is reasonable), I'd stretch my home financing as far as the bank allows. Split it 80/20 and save the down payment. PMI is almost completely avoidable now if you aren't sub prime. All it does is bump up the rate a bit on the second loan. But at least that is deductible while the PMI is not.

Use your down payment to put towards consumer debt(CC's, cars, ect) if you have it or just bank it for a rainy day fund...or start your Roth IRA's and begin saving for retirement.

There comes a point where the rates aren't reasonable to do what you suggest. Right now, we are close to 6.5%. Less than 2 months ago, the average rate for a 30-year fixed mortgage was 6.8%. By the time jmcoreymv closes, we may possibly be back up there to 6.8% (although which direction it goes is hard to know).

Yes, you can probably get a 6.5% return by saving for retirement. But, that isn't guaranteed. And stocks probably aren't going anywhere anytime soon. So, there is nothing wrong with wanting a GUARANTEED 6.5% return on your investment by paying down the house.

Your advice is ok now, was wonderful the last couple of years, but will very shortly become horrible advice.

 

[wfn]

yet another way to look at it is equity accumulated through estate appreciation will in many cases cover the interest you pay out unless you didn't do your homework. coupled with property tax and interest writeoff you should be golden. just run the numbers and see for yourself.

 

[vi edit]

Originally posted by: dullard

Originally posted by: vi_edit
Personally, so long as rates stay reasonable(6% for a 30 year fixed is reasonable), I'd stretch my home financing as far as the bank allows. Split it 80/20 and save the down payment. PMI is almost completely avoidable now if you aren't sub prime. All it does is bump up the rate a bit on the second loan. But at least that is deductible while the PMI is not.

Use your down payment to put towards consumer debt(CC's, cars, ect) if you have it or just bank it for a rainy day fund...or start your Roth IRA's and begin saving for retirement.

There comes a point where the rates aren't reasonable to do what you suggest. Right now, we are close to 6.5%. Less than 2 months ago, the average rate for a 30-year fixed mortgage was 6.8%. By the time jmcoreymv closes, we may possibly be back up there to 6.8% (although which direction it goes is hard to know).

Yes, you can probably get a 6.5% return by saving for retirement. But, that isn't guaranteed. And stocks probably aren't going anywhere anytime soon. So, there is nothing wrong with wanting a GUARANTEED 6.5% return on your investment by paying down the house.

Your advice is ok now, was wonderful the last couple of years, but will very shortly become horrible advice.

Even still, assuming one was disciplined enough not to squander it, I think most first time buyers are better off banking that money for repairs and emergencies and paying a bit higher rate each month. You can always equalize the higher interest by paying extra each month.

 

[tfinch2]

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex
this is something i was wondering also. there's no way in hell i'd be able to scrounge around for like 10-20k for a downpayment on a house and it would take me my entire life to get that much with my current wages and bills.

of course, once my car and student loan payments are done, i would have like an extra $473 a month, which would help a bit. i have about 2-3 years on the car and probably a good while left on the student loans.

Without your rent and current utilities, what is your monthly cash flow like after all of your other expenses if you don't mind my asking?

how much do i make a month after taxes but before bills?
i make about $1795 a month before i pay any bills.

after bills are paid (i still live at home so i don't pay rent) i bring home about $900 a month, maybe a little less. i could afford maybe an apartment but not much else after that.

WTF you need to re-evaluate your spending habits. You could easily be saving 12-15k a year living at home with that kind of income.

 

[pontifex]

Originally posted by: acemcmac

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex
this is something i was wondering also. there's no way in hell i'd be able to scrounge around for like 10-20k for a downpayment on a house and it would take me my entire life to get that much with my current wages and bills.

of course, once my car and student loan payments are done, i would have like an extra $473 a month, which would help a bit. i have about 2-3 years on the car and probably a good while left on the student loans.

Without your rent and current utilities, what is your monthly cash flow like after all of your other expenses if you don't mind my asking?

how much do i make a month after taxes but before bills?
i make about $1795 a month before i pay any bills.

after bills are paid (i still live at home so i don't pay rent) i bring home about $900 a month, maybe a little less. i could afford maybe an apartment but not much else after that.

Wtf kind of bills are you paying

You could get a house on that between 100-150k if you stop spending so much money

car payment - $285
car ins. - $130
student loan - $187
phone/dsl - $90
cell phone - $55
life ins. - $40

i pay about $100 towards my credit card, sometimes more if i have extra cash.
for some reason i think i am missing a payment but thats most of it.

but thats why i said if i didn't have the student loan and car payment i would be a lot better off.

don't forget other charges that go with owning a house, espcially for utilities. i also have no furniture, dishes, etc. i also have no lawn care equipment. that stuff isn't cheap either. don't you have to pay extra taxes for owning a house and land also?

 

[dullard]

Originally posted by: vi_edit
Even still, assuming one was disciplined enough not to squander it, I think most first time buyers are better off banking that money for repairs and emergencies and paying a bit higher rate each month. You can always equalize the higher interest by paying extra each month.

Yes, you should have some money for repairs and emergencies. Oh, and furniture. It is silly to have a nice new house and no furniture to enjoy the house. You should never buy so much house that you cannot afford repairs, emergencies, furniture, enjoyment, retirement, etc. That should be the golden rule for house buying.

But I thought your advice was to invest it. If you invest it, you really don't have it for repairs or emergencies either. Investing is good. Part of your mixed bag of investments can certainly be going towards your house equity. And if we are talking about a 20% downpayment loan, the interest rate will be much higher than the 6.5% mortgage rate. I don't know what the going rate is now, is it close to 8%? A guaranteed 8% return is quite a nice return for an investment.

 

[tfinch2]

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex
this is something i was wondering also. there's no way in hell i'd be able to scrounge around for like 10-20k for a downpayment on a house and it would take me my entire life to get that much with my current wages and bills.

of course, once my car and student loan payments are done, i would have like an extra $473 a month, which would help a bit. i have about 2-3 years on the car and probably a good while left on the student loans.

Without your rent and current utilities, what is your monthly cash flow like after all of your other expenses if you don't mind my asking?

how much do i make a month after taxes but before bills?
i make about $1795 a month before i pay any bills.

after bills are paid (i still live at home so i don't pay rent) i bring home about $900 a month, maybe a little less. i could afford maybe an apartment but not much else after that.

Wtf kind of bills are you paying

You could get a house on that between 100-150k if you stop spending so much money

car payment - $285
car ins. - $130
student loan - $187
phone/dsl - $90
cell phone - $55
life ins. - $40

i pay about $100 towards my credit card, sometimes more if i have extra cash.
for some reason i think i am missing a payment but thats most of it.

but thats why i said if i didn't have the student loan and car payment i would be a lot better off.

don't forget other charges that go with owning a house, espcially for utilities. i also have no furniture, dishes, etc. i also have no lawn care equipment. that stuff isn't cheap either. don't you have to pay extra taxes for owning a house and land also?

Extra Cash? You bring home 1700+ a month, and have 800 dollars in bills. Where is the other 900+ going besides gas? You should be paying off your bills as fast as possible with no rent to get back on your feet. What is the interest rate on your student loan? I assume since you mention CC debt, you are paying high interest rates there.

 

[trmiv]

Man, all of this home buying stuff is confusing and intimidating. My wife and I will (hopefully) be moving to North Carolina in June of next year and purchasing our first home. I'm looking forward to owning my own home after years of sky high rent in California, but reading all of this does not make me look forward to the process.

 

[pontifex]

Originally posted by: tfinch2

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex
this is something i was wondering also. there's no way in hell i'd be able to scrounge around for like 10-20k for a downpayment on a house and it would take me my entire life to get that much with my current wages and bills.

of course, once my car and student loan payments are done, i would have like an extra $473 a month, which would help a bit. i have about 2-3 years on the car and probably a good while left on the student loans.

Without your rent and current utilities, what is your monthly cash flow like after all of your other expenses if you don't mind my asking?

how much do i make a month after taxes but before bills?
i make about $1795 a month before i pay any bills.

after bills are paid (i still live at home so i don't pay rent) i bring home about $900 a month, maybe a little less. i could afford maybe an apartment but not much else after that.

Wtf kind of bills are you paying

You could get a house on that between 100-150k if you stop spending so much money

car payment - $285
car ins. - $130
student loan - $187
phone/dsl - $90
cell phone - $55
life ins. - $40

i pay about $100 towards my credit card, sometimes more if i have extra cash.
for some reason i think i am missing a payment but thats most of it.

but thats why i said if i didn't have the student loan and car payment i would be a lot better off.

don't forget other charges that go with owning a house, espcially for utilities. i also have no furniture, dishes, etc. i also have no lawn care equipment. that stuff isn't cheap either. don't you have to pay extra taxes for owning a house and land also?

Extra Cash? You bring home 1700+ a month, and have 800 dollars in bills. Where is the other 900+ going besides gas? You should be paying off your bills as fast as possible with no rent to get back on your feet. What is the interest rate on your student loan? I assume since you mention CC debt, you are paying high interest rates there.

fvck if i know, it seems like i'm never getting ahead. i have less money in the bank than i did previously.

 

[Slew Foot]

Originally posted by: wfn
yet another way to look at it is equity accumulated through estate appreciation will in many cases cover the interest you pay out unless you didn't do your homework. coupled with property tax and interest writeoff you should be golden. just run the numbers and see for yourself.

Of course, prices in CA are falling fast so paying 0 down, i/o means you're on the hook for 50-200K depending on how far prices fall, if you have to sell. Like these guys: http://flippersintrouble.blogspot.com/

 

[dullard]

Originally posted by: pontifex
car payment - $285
car ins. - $130
student loan - $187
phone/dsl - $90
cell phone - $55
life ins. - $40

i pay about $100 towards my credit card, sometimes more if i have extra cash.
for some reason i think i am missing a payment but thats most of it.

but thats why i said if i didn't have the student loan and car payment i would be a lot better off.

don't forget other charges that go with owning a house, espcially for utilities. i also have no furniture, dishes, etc. i also have no lawn care equipment. that stuff isn't cheap either. don't you have to pay extra taxes for owning a house and land also?

It is possible for you to save, but it'll be quite difficult in your current situation. You put yourself into a position where you made it virtually impossible to save for a downpayment. Then you ask how you'd be able to scrounge around for 10-20k. The answer is you can't because you overspent in the past.

1) A $415/month total car payment is massive (car + insurance). Had you bought a car which is just a couple years older you'd be near $100 a month (or possibly just $50/month). Yes, people can buy cars if they want. Yes, cars give a lot of pleasure. But it comes at a cost where you are finding it difficult to save for a house. Many times it comes down to house vs. car.

2) $145/month for communication isn't usually needed. If you were serious about saving for a house, you could cut this drastically. If you have high speed internet and a cell phone, do you really need phone service?

3) Life insurance for someone who has nothing is usually a big waste of money. I don't know your personal situation (do you have kids or a spouse?), but you very well may not need it. Heck, if those student loans are through the government, you already have tens of thousands of dollars of life insurance for free.

4) It appears as if you aren't paying off your CC in full. If you aren't. Bingo, we found where all your money is going to waste. Pay it off in full now no matter what it takes. As soon as you do that, you'll find it is much easier to save for a house.

 

[BurnItDwn]

Originally posted by: tfinch2

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex
this is something i was wondering also. there's no way in hell i'd be able to scrounge around for like 10-20k for a downpayment on a house and it would take me my entire life to get that much with my current wages and bills.

of course, once my car and student loan payments are done, i would have like an extra $473 a month, which would help a bit. i have about 2-3 years on the car and probably a good while left on the student loans.

Without your rent and current utilities, what is your monthly cash flow like after all of your other expenses if you don't mind my asking?

how much do i make a month after taxes but before bills?
i make about $1795 a month before i pay any bills.

after bills are paid (i still live at home so i don't pay rent) i bring home about $900 a month, maybe a little less. i could afford maybe an apartment but not much else after that.

Wtf kind of bills are you paying

You could get a house on that between 100-150k if you stop spending so much money

car payment - $285
car ins. - $130
student loan - $187
phone/dsl - $90
cell phone - $55
life ins. - $40

i pay about $100 towards my credit card, sometimes more if i have extra cash.
for some reason i think i am missing a payment but thats most of it.

but thats why i said if i didn't have the student loan and car payment i would be a lot better off.

don't forget other charges that go with owning a house, espcially for utilities. i also have no furniture, dishes, etc. i also have no lawn care equipment. that stuff isn't cheap either. don't you have to pay extra taxes for owning a house and land also?

Extra Cash? You bring home 1700+ a month, and have 800 dollars in bills. Where is the other 900+ going besides gas? You should be paying off your bills as fast as possible with no rent to get back on your feet. What is the interest rate on your student loan? I assume since you mention CC debt, you are paying high interest rates there.

To Pontifex: Perhaps a small condo or townhouse is worth considering

I bought my townhouse a few years ago for $115K with 0 down. I went with a 100% LTV arm. My interest rate has gone up a little bit, but I'm still very happy with the rate. PMI sucks, but it's not too horrible.

At the time of the purchase, I was making not too much more than you are now.

Are there ANY townhomes/condos anywhere close to where you want to live for like $80,000 to $100,000? With your income and bills, you should be able to afford a mortgage of 80K to 100K. If you're in CA or NJ somewhere where real estate prices are through the roof, then you should probably ignore my post.

 

[JeffreyLebowski]

Bah, learn how to negotiate on closing costs. I walked out of closing with a check for more than what my earnest money was.

 

[pontifex]

Originally posted by: dullard

Originally posted by: pontifex
car payment - $285
car ins. - $130
student loan - $187
phone/dsl - $90
cell phone - $55
life ins. - $40

i pay about $100 towards my credit card, sometimes more if i have extra cash.
for some reason i think i am missing a payment but thats most of it.

but thats why i said if i didn't have the student loan and car payment i would be a lot better off.

don't forget other charges that go with owning a house, espcially for utilities. i also have no furniture, dishes, etc. i also have no lawn care equipment. that stuff isn't cheap either. don't you have to pay extra taxes for owning a house and land also?

It is possible for you to save, but it'll be quite difficult in your current situation. You put yourself into a position where you made it virtually impossible to save for a downpayment. Then you ask how you'd be able to scrounge around for 10-20k. The answer is you can't because you overspent in the past.

1) A $415/month total car payment is massive (car + insurance). Had you bought a car which is just a couple years older you'd be near $100 a month (or possibly just $50/month). Yes, people can buy cars if they want. Yes, cars give a lot of pleasure. But it comes at a cost where you are finding it difficult to save for a house. Many times it comes down to house vs. car.

2) $145/month for communication isn't usually needed. If you were serious about saving for a house, you could cut this drastically. If you have high speed internet and a cell phone, do you really need phone service?

3) Life insurance for someone who has nothing is usually a big waste of money. I don't know your personal situation (do you have kids or a spouse?), but you very well may not need it. Heck, if those student loans are through the government, you already have tens of thousands of dollars of life insurance for free.

4) It appears as if you aren't paying off your CC in full. If you aren't. Bingo, we found where all your money is going to waste. Pay it off in full now no matter what it takes. As soon as you do that, you'll find it is much easier to save for a house.

1) yeah, i'm really wishing i bought a used car instead of new.

2) well, i need the phone line for the dsl. i can't get anything else.
i can't use the cell phone where i live now (not strong enough signal). i might be able to get a lower plan for the cell. the phone line is just basic local, there's no long distance on it and i don't use it other than for the dsl.

3) life insurance - when i turned 18 my parents made me take over the costs if i wanted to keep it up. If I stop paying, do I lose it or do I just have whatever is paid into it? i don't even know anything about it. whats weird is that they took out the policies for me and my sister at the same time. my sister stopped receiving bills for it a few years ago, but yet i'm still paying. i don't understand that. i'm single, no kids.

4) i have about $1000 in CC debt.

i have about 4k or maybe a little less in checking account and about 1.4-1.5k in savings account.

 

[dullard]

Originally posted by: JeffreyLebowski
Bah, learn how to negotiate on closing costs. I walked out of closing with a check for more than what my earnest money was.

You still pay closing costs. But now you are paying closing costs AND interest on closing costs AND interest on that check you just cashed. If you are ok with forking over that much interest, then so be it. The rest of us see it as very silly to pay interest on stuff like that.

 

[pontifex]

Originally posted by: BurnItDwn

Originally posted by: tfinch2

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex

Originally posted by: acemcmac

Originally posted by: pontifex
this is something i was wondering also. there's no way in hell i'd be able to scrounge around for like 10-20k for a downpayment on a house and it would take me my entire life to get that much with my current wages and bills.

of course, once my car and student loan payments are done, i would have like an extra $473 a month, which would help a bit. i have about 2-3 years on the car and probably a good while left on the student loans.

Without your rent and current utilities, what is your monthly cash flow like after all of your other expenses if you don't mind my asking?

how much do i make a month after taxes but before bills?
i make about $1795 a month before i pay any bills.

after bills are paid (i still live at home so i don't pay rent) i bring home about $900 a month, maybe a little less. i could afford maybe an apartment but not much else after that.

Wtf kind of bills are you paying

You could get a house on that between 100-150k if you stop spending so much money

car payment - $285
car ins. - $130
student loan - $187
phone/dsl - $90
cell phone - $55
life ins. - $40

i pay about $100 towards my credit card, sometimes more if i have extra cash.
for some reason i think i am missing a payment but thats most of it.

but thats why i said if i didn't have the student loan and car payment i would be a lot better off.

don't forget other charges that go with owning a house, espcially for utilities. i also have no furniture, dishes, etc. i also have no lawn care equipment. that stuff isn't cheap either. don't you have to pay extra taxes for owning a house and land also?

Extra Cash? You bring home 1700+ a month, and have 800 dollars in bills. Where is the other 900+ going besides gas? You should be paying off your bills as fast as possible with no rent to get back on your feet. What is the interest rate on your student loan? I assume since you mention CC debt, you are paying high interest rates there.

To Pontifex: Perhaps a small condo or townhouse is worth considering

I bought my townhouse a few years ago for $115K with 0 down. I went with a 100% LTV arm. My interest rate has gone up a little bit, but I'm still very happy with the rate. PMI sucks, but it's not too horrible.

At the time of the purchase, I was making not too much more than you are now.

Are there ANY townhomes/condos anywhere close to where you want to live for like $80,000 to $100,000? With your income and bills, you should be able to afford a mortgage of 80K to 100K. If you're in CA or NJ somewhere where real estate prices are through the roof, then you should probably ignore my post.

i haven't looked at condos or townhomes. I know i don't want to rent because that is just a waste of money imo. i'd rather have my own home somewhere out in a rural area. i used to think i wanted to live closer to or in a city. While being closer to stores and stuff would be nice, i've come to appreciate the rural setting and several of my hobbies and conducive (sp?) to that setting. i live in central PA, btw.

 

[dullard]

Originally posted by: pontifex
2) well, i need the phone line for the dsl. i can't get anything else. i can't use the cell phone where i live now (not strong enough signal). i might be able to get a lower plan for the cell. the phone line is just basic local, there's no long distance on it and i don't use it other than for the dsl.

Clearly this is a lifestyle choice. If you want to save money, you can ditch the DSL. I realize that is blasphemy for most people on ATOT though. If you want the DSL, it'll be tough to save the money. I myself ditched the home internet. It was difficult at first. But there are plenty of other free places to use it for me, so I don't need it at home. Think about the savings $1080/year for that DSL (assuming they don't raise rates). Put that $90/month into a high yield online savings and you'll have your $10,000 house downpayment in 7 years WITHOUT cutting any corners anywhere else or without working harder.

I'm confused, do you use your cell phone much if you don't get reception? If not, do you need it? Can you pay the fee to cancel it and still be ahead of paying $660/year for it?

3) life insurance - when i turned 18 my parents made me take over the costs if i wanted to keep it up. If I stop paying, do I lose it or do I just have whatever is paid into it? i don't even know anything about it. whats weird is that they took out the policies for me and my sister at the same time. my sister stopped receiving bills for it a few years ago, but yet i'm still paying. i don't understand that.

I can't help you there. Life insurance varies dramatically from plan to plan. You'd have to contact the insurance company or read your paperwork to answer those questions. You have to ask yourself what is more valuable to you: (a) $500/year that you can spend/save right now or (b) a lump sum of money that you'll get when you die. When people have kids/a spouse, there is a strong value in option (b) because you want them to be able to still eat and have shelter after you are gone. But if you have no kids and no spouse, then what value do you personally get from this policy? I suspect the answer is none. And you may be paying $500/year for something that gives you no value (until you die of course).

4) i have about $1000 in CC debt.

i have about 4k or maybe a little less in checking account and about 1.4-1.5k in savings account.

I see no reason for you to have so much saved and to pay so much on CC interest. Just pay off the CC and save. Think of it as $200/year of free money. Then learn to pay it off each and every month.

Rich people aren't rich due to luck or skill. Rich people GOT rich because of luck or skill, but they STAY rich because they know where every penny of their money goes. Rich people never have a "fvck if i know" policy. To stay rich, you'll have to change that attitude (assuming of course if you ever do get rich).

 

[wfn]

negotiate closing costs? granted you can try negotiate with your broker how much they'll charge you to originate the loan, your appraiser's fee and your attorney's fee but try to negotiate these:

title company's title insurance
your lender's requirement for tax reserves

or by "negotiating" you mean asking the seller for closing cost credit, repair credit and having the broker roll the closing cost into your loan?

 

[pontifex]

i usually go through 100-140 a week on food and gas. i eat out for lunch every day which i know is not saving me money, about once or twice a week i eat at Mcdonald's for breakfast. this is one of the rare times that i actually eat breakfast.

thats probably where all the "f*ck if know" money is going.

 

[ArchCenturion]

Originally posted by: pontifex
i usually go through 100-140 a week on food and gas. i eat out for lunch every day which i know is not saving me money, about once or twice a week i eat at Mcdonald's for breakfast. this is one of the rare times that i actually eat breakfast.

thats probably where all the "f*ck if know" money is going.

Make PB&J sandwitches your friend. It saves lots of money.