Teach me about buying a house.

[arrfep]

Okay, time has come that I think I should move out of my parents' house. I'd like to buy a condo to start off with, and here's the facts:

Property I'm eyeing is listed at $70k.
I can comfortably put down $5k.
I make around $29k a year.
I have no idea what my credit score is. Probably average. I owe $2k on credit cards with a combined total credit line of around $15k.
I also owe around $6k in student loans.

Should I have any problems getting a loan?

Property is an REO/foreclosure, if that matters. I may buy only as an investment, if that matters. Other units of same size in same building are going for $95-110K.

So...let me have it. Advice will be greatly appreciated, as well as links to clear information. I've googled and read online, but I really just want to get some straight answers in laymen's terms from people who've been there, not legal doublespeak or shady realtor/morgator sales pitches.

Thanks in advance.

 

[SacrosanctFiend]

With as little as you make, and with the debt that you currently have, I doubt you would get a decent loan, if one at all.

 

[TastesLikeChicken]

One of the larger concerns with buying a condo is the association/maintenance fees. Do you know how much they are?

 

[arrfep]

? Is my debt really that bad? It's only a couple grand, and I didn't think student loans were that serious.

Edit: nvm. edited what was a confusing line about my credit cards.

 

[SacrosanctFiend]

Originally posted by: arrfep
? Is my debt really that bad? It's only a couple grand, and I didn't think student loans were that serious.

Edit: nvm. edited what was a confusing line about my credit cards.

Yea, 15k in CC debt vs. 2k in CC debt is a huge difference.

 

[arrfep]

Originally posted by: TastesLikeChicken
One of the larger concerns with buying a condo is the association/maintenance fees. Do you know how much they are?

From what I've been able to ascertain by looking at other listings in the same complex, the hoa fees are somewhere around $200-250, which includes water, heat and gas.

 

[daveshel]

Save more so you have a larger down payment. Then you can avoid the evil PMI.

In addition to the fees associated with the HOA, they make rules that make owning your own place seem more like living in an apartment.

 

[AlienCraft]

Originally posted by: SacrosanctFiend
With as little as you make, and with the debt that you currently have, I doubt you would get a decent loan, if one at all.

Agreed. You're going to have to pay that CC debt down and increase the down payment amount to at least 10%, 20% shows you're not a flake. They've had enough with the low/ no downs.
Don't know your score ?
Dude, go to the free annual report site, pull your reports and quit guessing.

As for The HOA fees , ask to see the books, check their insurance, the repairs / complaints / lawsuits.
Give the CC&Rs the once over. See if there's anything stupid that sticks out.
Check out the Board of Directors, see if there are any "personalities" you're going to have problems with. Some people think being in an HOA allows them to stick their nose in your business, and if you're not careful, it does. :shocked:

 

[BarneyFife]

How long has it been since you graduated?

 

[TastesLikeChicken]

Originally posted by: arrfep

Originally posted by: TastesLikeChicken
One of the larger concerns with buying a condo is the association/maintenance fees. Do you know how much they are?

From what I've been able to ascertain by looking at other listings in the same complex, the hoa fees are somewhere around $200-250, which includes water, heat and gas.

Not too bad.

You mortgage would be @ $450 a month using a 6.5% rate. Adding in condo fees, along with property taxes and insurance you'd probably be @ $800+/month. Can your budget handle that?

 

[arrfep]

Originally posted by: BarneyFife
How long has it been since you graduated?

Uhh....well that's actually on my List of Things To Do Before I Die.

I do, however, have a secure, steady 9 to 5 where I make an acceptable amount of money, and can get lots of overtime.

Originally posted by: TastesLikeChicken

Not too bad.

You mortgage would be @ $450 a month using a 6.5% rate. Adding in condo fees, along with property taxes and insurance you'd probably be @ $800+/month. Can your budget handle that?

My Budget can handle that. I live a pretty simple, unglamourous life. Car paid off, cheap insurance, make most of my own meals.


So far the concensus seems to be that this is not a great idea. I understand that the current state of the housing market is of concern, but I figured the adage about property being the best investment a young person can make was still valid.

BTW, this is the Chicago Suburbs.

 

[BarneyFife]

Take that imaginary mortgage payment and apply it to your debts for the next 10 months and pay those off.

 

[summit]

btw your gonna need insurance for your condo too.

 

[TastesLikeChicken]

Originally posted by: arrfep
My Budget can handle that. I live a pretty simple, unglamourous life. Car paid off, cheap insurance, make most of my own meals.

So far the concensus seems to be that this is not a great idea. I understand that the current state of the housing market is of concern, but I figured the adage about property being the best investment a young person can make was still valid.

BTW, this is the Chicago Suburbs.

If you find a good deal (it sounds as if you have), you can manage to get a fixed loan with a decent rate, and it fits comfortably within your budget (personally I think you're putting a larger percentage of your income towards housing than you should be, at least for the average person) then there's no reason not to go ahead with it.

I also want to add that I laud you for going for this at a young age. It indicates that you may be more responsible than the average person and smarter with your money as well. If anything else, you're young. Even if this does end up going south you will recover at an early age so this would be a lesson learned and experience for the future. It may be risky somewhat but I'd put my money on you being able to handle this.

I'd urge you to do lots of information gathering on mortgages and the process of buying a home so you don't walk into the purchasing process blindly. There's lot's of really good information available and that knowledge could save you some cash and headaches in the process.

 

[ponyo]

I don't think you'll have problem getting a loan and it sounds like a good deal.

 

[Slew Foot]

Technically stocks are the best investment for a young person to make. Real estate, contrary to popular belief, is amongst the worst from an investment perspective.

 

[Alphathree33]

Originally posted by: Slew Foot
Technically stocks are the best investment for a young person to make. Real estate, contrary to popular belief, is amongst the worst from an investment perspective.

back up your statement...?

 

[Tooncesthedrivingcat]

Originally posted by: Summit
btw your gonna need insurance for your condo too.

thats normally included in the HOA dues.

 

[Slew Foot]

Housing increases at 0-1% above inflation, stocks increase 7-10% per year (3-4% above inflation). Averages over the last century, the last few years has made every idiot think that buying a house is an instant ticket to being a millionaire.

 

[SampSon]

The fact that it is an REO/foreclosure makes a HUGE difference.
You're going to be hard up to find a bank to fund the purchase of an REO property as your first mortgage.
In fact I would be willing to put money on it that you won't find any.
Couple that with your low income and debt responsibilities, you're not going to buy this condo.

 

[TastesLikeChicken]

Originally posted by: Slew Foot
Housing increases at 0-1% above inflation, stocks increase 7-10% per year (3-4% above inflation). Averages over the last century, the last few years has made every idiot think that buying a house is an instant ticket to being a millionaire.

A stock certificate makes for an adequate but temporary roof.

 

[arrfep]

Originally posted by: TastesLikeChicken

Originally posted by: arrfep
My Budget can handle that. I live a pretty simple, unglamourous life. Car paid off, cheap insurance, make most of my own meals.

So far the concensus seems to be that this is not a great idea. I understand that the current state of the housing market is of concern, but I figured the adage about property being the best investment a young person can make was still valid.

BTW, this is the Chicago Suburbs.

If you find a good deal (it sounds as if you have), you can manage to get a fixed loan with a decent rate, and it fits comfortably within your budget (personally I think you're putting a larger percentage of your income towards housing than you should be, at least for the average person) then there's no reason not to go ahead with it.

I believe I have. Like I said, it's listed at $70k. In the same building, equivalent units are all priced at $95k-110k. I checked property transfers, and on that street, no unit has sold for under $100k in the last 6 months.

I also want to add that I laud you for going for this at a young age. It indicates that you may be more responsible than the average person and smarter with your money as well. If anything else, you're young. Even if this does end up going south you will recover at an early age so this would be a lesson learned and experience for the future. It may be risky somewhat but I'd put my money on you being able to handle this.

Thank you for the vote of confidence. My immediate circle of peers/family think it's a good idea. Most of the negative feedback I've received has been right here, but that's because ATOTers can look at a subject (don't laugh) objectively, with no attachment to me. And that's exactly what I wanted.[/quote]

 

[Slew Foot]

Originally posted by: TastesLikeChicken

Originally posted by: Slew Foot
Housing increases at 0-1% above inflation, stocks increase 7-10% per year (3-4% above inflation). Averages over the last century, the last few years has made every idiot think that buying a house is an instant ticket to being a millionaire.

A stock certificate makes for an adequate but temporary roof.

When it costs three times as much to buy than to rent (I.e. CA, your locality may vary) only an idiot would buy.

 

[arrfep]

Originally posted by: SampSon
The fact that it is an REO/foreclosure makes a HUGE difference.
You're going to be hard up to find a bank to fund the purchase of an REO property as your first mortgage.
In fact I would be willing to put money on it that you won't find any.
Couple that with your low income and debt responsibilities, you're not going to buy this condo.

This is the kind of information I am looking for, and can't find answers on. Can I qualify for an FHA loan if I'm trying to buy an REO? If not, is it because there is an actual stipulation against doing so, or just because of a bank's reluctance to get into what might be a bad business deal?

I really didn't realize the odds were that stacked against me. Have times changed that much that I really couldn't buy a property that costs only a little over twice what I make yearly? My job is stable, my debt is what I would consider average or even below the average American, and is well under control. If I wanted to, I could pay my card debt off tomorrow, but I would have a less comfortable safety net after forking over a down payment.

A condo going for well below market seemed like a very wise investment to me. Plus it seemed like it was well within my limits to buy it. I spent some time reading FHA guidelines, and I guess I was going by those.

Is it really that hard to get approved for a loan now? Or is ATOT just generally collectively pessimistic?

 

[sdifox]

Might want to wait just a wee bit more, then the banks will beg you to buy it.