Thinking of buying a house

audiocr381ve
audiocr381ve Posts: 2,588
edited May 2014 in The Clubhouse
My wife and I are about ready to buy a home and would love some advice in two areas. But first a short brief on our experience in buying a home.

We have none.

Lol. I'm starting at square one my friends.

First: Finding a Realtor

We have many friends who are realtors that we will probably use. How should we go about reaching out to them? They all pretty much do the same thing right? (I apologize if that sounds incredibly naive)

Second: Our situation is complicated

We have two kids and want another in the next two years. My wife has a rock solid job that she's make a great living doing, but absolutely has no desire to try and make this all work with three kids in the future. She WANTS to be at home and I think that it's a good thing. She's not the lazy type that just doesn't want to work. In fact, she is the hardest working women I've ever met and has put in 12 years at the job she's at now. Her greatest dream is to now raise our girls and I want more than anything to give that to her, but our situation is unique.

I just started a business with another partner and it has been something we've been doing for years together, we just finally made it official on paper. Our first few months have been phenomenal. In fact, our past year has been phenomenal (for our industry). But since last year we were under our own names, I wonder if this will effect our home loan process?

I bring this all up because my plan is this. We want to get approved for our loan while we're both working, with plans of her quitting when baby #3 is on the way. Is this a terrible idea? On my income alone, we wouldn't be approved for much. Our combined incomes give us way more to work with. In other words, if she were to quit now, my income would mean we'd be living very simply, renting, and with no hopes of owning a home. Why not live very simply and own a home?

I don't know, this is all still very fresh and I'd really appreciate some direction. Thanks!
Post edited by audiocr381ve on
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Comments

  • oldrocker
    oldrocker Posts: 2,590
    edited May 2014
    So many directions this can go. First off, if you do get loan approval, that means your the golden goose and I would be very careful how you proceed. Second, most lending institutions in this area are somewhat hesitate about "self employed" individuals, so be prepared to show the last 2 years tax return for loan approval. Third, getting loan approval while your wife's income is still valid can help one's borrowing limits. Assuming all goes well and you get approved, realize then you are in fact the "golden goose" and being the "golden goose" you are now an entity that someone can make money off of.

    The words "due diligence" are easy to say, yet in my experience most first time home buyers lack the knowledge to ask the right questions, so ask family members, friends, even some foks here have just went thru the process and they can be a GREAT source of information. Find that someone, that can be a "dis-interested/un-biased" third party person who you can trust for guidance.
    Best of luck.....
  • heiney9
    heiney9 Posts: 25,217
    edited May 2014
    Just make sure you look for a house you can afford with one income and another child. You shouldn't and don't have to reveal your plans to your banker. Plus, 12-36 months is a ways out and your plans could change. But if that's what your goal is and you think you can reach it, then make damn sure you don't buy more than you will be able to afford in the future.

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  • AsSiMiLaTeD
    AsSiMiLaTeD Posts: 11,728
    edited May 2014
    I'm somewhat of a karma guy, so my personal belief is that entering into a situation under false pretenses (so in your case using income to get a loan when you know that's going away) = bad stuff happens down the road. I'm sure you're assuming you'll do well in your business going forward but be careful that you're not assuming that things will get better and you'll make even more money. People buying more house than they can really afford because they assume they'll be making more money five years down the road is by far the most common mistake people make when buying a house and how they often get in trouble later.

    I'm not saying you're doing that now, just be careful. There are obviously exceptions where the rules don't apply and maybe you are one, but in general there's a reason there are lending guidelines and it's usually best to work within those as they're there for your protection.

    So there's an alternative view, best of luck.
  • tonyb
    tonyb Posts: 33,014
    edited May 2014
    Spot on Brock

    Using both incomes to buy a home while your earnings are high is fine, BUT don't let anyone talk you into buying over your head. Realtors and loan officers are famous for it. Make the mortgage payment so that if one loses their job, you can still afford it.

    I remember them trying to tell me I could afford a 675,000 house. I laughed...and settled on a 300k house. Wouldn't you know soon after the economy takes a dump and we were down to one income. Those who spent up to their limits wound up in foreclosure and lost it all. Those who didn't survived. Looking at houses is dangerous too as your eyes can get bigger than your wallet. Keep everything in perspective, choose a limit and stick to it, and pick a good area with good schools.

    Also if you never owned a home before, welcome to the wonderful world of taxes, which you have to account for in your monthly payment and learn that they never go down, only up. Add your utilities, gas, water electric garbage....homeowners insurance and maintenance needs of the house and property. These are roughly your fixed costs on top of your mortgage that you have to be sure you can afford on one income. Well, if you don't want to lose it all anyway.

    Pick a budget first, then pick the best area that fits that budget and only look at houses within that range. Don't look at houses you can't afford on one income. Life and finances are in constant change, crap happens. Has a way of throwing curve balls at you when you least expect it. Prepare as best you can is all I'm saying.
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  • EndersShadow
    EndersShadow Posts: 17,596
    edited May 2014
    Main suggestion I have, is if and this is a BIG IF, you can put down enough on your mortgage to not need Mortgage insurance... DO IT!

    Also as others suggested, based what you can afford off one income. We choose to do my wife's income which is now 1/2 what I make.

    As such we are living comfortably and we were able to get "enough" house for us to grow into, but not TOO much house.

    And lastly, have your list of things you "Want" and things you "Need". I "wanted" a enclosed 2 channel room/office and a basement. I "needed" a garage, nice backyard for my kid and the dogs.

    I got what I "needed" and not all of what I "wanted".
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  • Moose68Bash
    Moose68Bash Posts: 3,843
    edited May 2014
    Everything I would say is touched upon above, except: Before you commit to a mortgage get your business structured so that your personal assets are not exposed if the business fails or your partner turns out not to be reliable. Is your business legally a partnership? If so, I believe you are personally exposed (as is your partner). Incorporate or form some other kind of firm that protects you.

    I would also suggest you "work" your business for a couple of years to establish a history of revenue and personal income. That gives you not only credibility with lenders, but also a sense of how much and how steady your income will be.

    One more thought: In my experience there are two types of realtors -- those who SELL homes and those who FACILITATE buying a home. You want to buy a home that you and your wife LOVE. You do not want to buy a home that a real estate agent has sold you. When you are looking, if the agent shows you a house you do not love almost immediately, don't waste time -- walk out.

    Good look to you and your family. Purchasing a home is a great step in life; do it wisely and deliberately.

    Just a couple of thoughts from an old f$$$ with a few battle scars. :~)
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  • HASWELL
    HASWELL Posts: 36
    edited May 2014
    Oldrocker is correct, there are so many directions this could go. So here's my 2¢ - once you have the located the house you hope to call home, hire a qualified home inspector -even if the house is new. Sadly, not all building contractors build with integrity and the corners they cut could cost you significantly. I am not an inspector, but out of my own experience I would point you to the ashi.org website to locate an inspector in your area and suggest that an A+ BBB rating is rarely a sign or seal of integrity. Best of luck!
  • tonyb
    tonyb Posts: 33,014
    edited May 2014
    We are confusing the poor lad...LOL. It doesn't need be as complicated as we all are making it sound but you do need to educate yourself because every step of the way offers pittfalls that can be costly.

    1st step- get pre qualified. What you may think you can afford and what a lender thinks could be worlds apart, especially in todays lending climate. Make sure your credit score is great, anything less will result in a higher interest rate, making the amount of house you can buy less....or none at all.

    2nd- once you have an idea of what they will lend, you then have a range of houses to look at. But like I said, don't look at the top of that range if one of you will soon be out of work for raising kids. That's a recipe for disaster in my book. Pick an area that fits your range with the best school district as that will play into your resale value should you ever sell.

    3RD- Take your pre qualification, area's your interested in, and go see your Realtor friend. Don't go look at the top of your range in houses either, that's how realtors get you to spend over your ability. They show you the nice more expensive stuff first, so anything else you look at will pale in comparison. Remember, they work off commission, the higher the price of the house they sell the more they make. Also remember....a realtor works for the seller.

    Also, make sure the house will appraise out. The realtor should be able to provide comps of recently sold houses in an area so there won't be any issues. Any area with a lot of foreclosures is going to be problematic. Always have your contract contingent on a home inspection and attorneys approval. Gives you a way out legally.
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  • jflail2
    jflail2 Posts: 2,868
    edited May 2014
    Tony provides an excellent summary there. And I have to reinforce that, even though you're approved for a certain price point, don't let anyone talk you into going above your comfort zone.

    Pay good money for a quality home inspection as well. They look at stuff you'd never think to check, and can provide a laundry list of items that you should require to be corrected by the seller prior to purchase.

    Good luck with your hunt, and stay well below the top end of your budget.
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  • Jstas
    Jstas Posts: 14,842
    edited May 2014
    When I went looking for a house, my realtor was actually angry with me because I was looking for houses in a price range that was roughly half of what I was "pre-approved" for. I guess she wanted the bigger commission.

    That was at the height of the market too.

    I decided at the time it was a good idea not to get into something because everything was way over-valued and I could only find junk for the price I wanted to pay. That and everything in my "pre-approved" range had issues and nobody was willing to budge on price.

    Thank God I didn't get into a house because 2 years later, my entire life went to poo and I would have been up the creek and upside down in the house while going through a divorce.

    A year and a half after the divorce, I started looking for a house again. Again, less than half of what I was "pre-approved" for. When I talked to the loan officer at Wells Fargo, he told me that if I had gone and gotten a house with the ex when I was looking and had gotten into a financial situation with it, they wouldn't even be talking to me.

    I ended up not needing a loan from a bank because my grandparents house became available and I purchased that. It's a bit more than half of what Wells Fargo was going to give me for a house but that's fine 'cause I can afford the mortgage on the income I have without any outside help.

    It's also allowed me to be about 40% into the principle of the house value in about 3 years because I've been able to throw extra money at it.

    Moral of the story, it would have been nice to have a house sooner but a house would not have solved the issues I was having. Things changed in a big way that while it was always possible, it wasn't exactly something I planned to do. If I had listened to my realtor and the bank and hadn't been cautious and looked at the over-valuation of the housing market, I'd be divorced and taking a bath on the house I bought at the height of the market and now trying to sell at the bottom of the market for 30% less than it's value when I bought it.

    It was a good move that panned out well for me. Not to say that you are going to get divorced or anything. Just like others have said, plan all you want, life doesn't care. Don't get yourself into a position where you can't handle things if something goes south on you. Besides, it's better to get into a house you can easily afford without paying too much and getting the equity or owning it outright. Having the asset is far more preferable to having the debt and puts you in a better position to "trade up" to a larger house
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  • oldmodman
    oldmodman Posts: 740
    edited May 2014
    Are you a member of a credit union?

    Or can you join one?

    Many credit unions have much lower borrowing thresholds for members that banks and mortgage companies.
  • audiocr381ve
    audiocr381ve Posts: 2,588
    edited May 2014
    Awesome awesome awesome advice and direction guys. REALLY appreciate it.

    I am a member of a credit union and we've gone with our credit union for both of our cars and will definitely be knocking on their door for the home loan.

    I spent 5 or 6 hours of lusting after homes that were just outside of our budget and thinking to myself, "It'll be worth it." But after reading this thread, I'm gonna take all of your advice and look for something we can afford on one income. My work has been stable for the past 2 years so I'm confident that we'll be able to make this work.
  • rpf65
    rpf65 Posts: 2,127
    edited May 2014
    I would suggest that before deciding on a home you really check out the neighborhood, especially if there is some type of property owners association. Some people like them, others, myself included hate them. Make sure that you can live within their regulations. I actually saw a group of people walking around one neighborhood measuring the height of the grass in peoples lawn. They actually had a minimum and maximum height of grass in peoples lawn.

    Like I said some people like them, others don't.

    I would also suggest that you really figure out what you can afford. Don't pay attention to the experts here, go old school on this one. Best advise I could give here is look at what your paying in rent. Chances are that that is going to be pretty close to house payment affordability. If you think you can afford a little more, do the math. Figure you have 14 payments a year, instead of 12. For an example, if you think you can afford 1500 a month for rent, you really can't afford that much when buying. So 1500 x 12 = 18000, but when your buying, you no longer have a landlord. You have to pay for broke things.

    So that 1500 a month rent is really 1285 a month buying: 1285 x 14 = 17990. You'll be glad for this advice when the water heater goes out, especially if you know nothing about plumbing. There are countless things that will always need repairing, and the less you know about building trades, the more you have to spend on them.

    I don't know what your knowledge level is on building trades, but if you know very little I really wouldn't recommend the "do it yourself shows or books. I would also advise you to avoid seeking advise from people from the large home improvement chains. I figure people on tv are actors, and people in retail are there for a reason. Ask a person who actually does it for a living for advise. They aren't paid to advertise somebodies product, and will also tell you to hire a pro if the job is a little dangerous or complicated. It is never as simple as "all you have to do".

    Lastly, you're never going to find a perfect home. It will be up to you to make it as close to perfect as you can.
  • madmax
    madmax Posts: 12,434
    edited May 2014
    I've owned two houses. The first one took half of my paycheck for just the mortgage and now my second one is taking about a fifth of my paycheck. I can tell you first hand that if you get anywhere close to half your paycheck it gets very hard and you can never get ahead. Plus, you are in trouble if anything costly happens. The one I have now I'm easily paying if off in 7 yrs with money to burn. Sometimes I even pay ahead several months just for the fun of it.

    Take a friend with you when you look at one you are serious about buying. Pick someone who will tell you its a piece of crap if it is. They will see a lot of things you won't.

    Don't be afraid to look at one several times while you are looking at others. My present house I made the realtor take me to see it 4 times so I could compare to others we had been looking at. Truthfully, the first time I went through it I thought I could do better and that really made me look at all of them a lot closer. Plus, on different days your mindset will be different.

    Best of luck!
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  • markmarc
    markmarc Posts: 2,309
    edited May 2014
    Lots of good advice being given out.
    1. Definitely, do not get in over your head price-wise. If you live in an area where people have basements, that's extra room without cost versus extra rooms upstairs.
    2. Make sure their are children in the neighborhood for your kids to play with.
    3. Do look for homes where neighbors yards are kept up.
    4. Film each house you visit, then watch later. During a second visit open and close all windows, its a good way to check on how a house has settled.
    5. Remember, don't let room color turn you off, painting rooms is cheap, and makes for a big change.
    6. Check the furnace filter before inspection, this can potentially tell you a lot maintenance.
    7. Walk the neighborhood in the early evening, it's a good time to gleem info from potential neighbors.
    8. Whatever house you buy, remember to do at least one update per year (even if it is just painting a room).
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  • audiocr381ve
    audiocr381ve Posts: 2,588
    edited May 2014
    Really great advice guys. My biggest takeaway is to not get into something we can't afford off of one income. That's huge. Homes in central San Diego are just ridiculously expensive so it's definitely a temptation to spend more to get everything we want. Just to put it in perspective, anything under $350,000 is a serious fixer upper and around 1,100 square feet. We're looking to stay around $500,000 and we want 3 beds 2 baths.

    I'll be revisiting this thread over and over as we go through this process.
  • tonyb
    tonyb Posts: 33,014
    edited May 2014
    Really great advice guys. My biggest takeaway is to not get into something we can't afford off of one income. That's huge. Homes in central San Diego are just ridiculously expensive so it's definitely a temptation to spend more to get everything we want. Just to put it in perspective, anything under $350,000 is a serious fixer upper and around 1,100 square feet. We're looking to stay around $500,000 and we want 3 beds 2 baths.

    I'll be revisiting this thread over and over as we go through this process.

    Much depends too on your down payment. 500K house your looking at 70-100k down for a decent loan with a decent interest rate. That leaves roughly 400k plus taxes, insurance, utilities. Also any outstanding liabilities will subtract from your income or how much you can afford. Car payments, credit cards, student loans or any other outstanding loans. Credit scores have to be stellar.

    Sure you can survive with a 400+k nut, taxes, utilities, and car payment on one income ? Plus kids ? I dunno man, I think you may be experiencing some wishful thinking.
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  • tonyb
    tonyb Posts: 33,014
    edited May 2014
    Principle and interest on 400k, is roughly 2600. Add 1.25% of the purchase price for taxes, generally speaking, and that's another 6-7k a year. So your at roughly 3200 a month plus homeowners insurance, plus utilities, any credit card debt, HC costs, car payments.

    Your looking at 4+k a month....net. That's not including food either....clothes, gasoline, car insurance, other incidentals. I'd say your closer to 5.5k a month with everything, net. So figure out what one income take home pay is, if it isn't just under 6k, you may be in for a rough road.
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  • nooshinjohn
    nooshinjohn Posts: 25,464
    edited May 2014
    tonyb wrote: »
    Spot on Brock

    Using both incomes to buy a home while your earnings are high is fine, BUT don't let anyone talk you into buying over your head. Realtors and loan officers are famous for it. Make the mortgage payment so that if one loses their job, you can still afford it.

    I remember them trying to tell me I could afford a 675,000 house. I laughed...and settled on a 300k house. Wouldn't you know soon after the economy takes a dump and we were down to one income. Those who spent up to their limits wound up in foreclosure and lost it all. Those who didn't survived. Looking at houses is dangerous too as your eyes can get bigger than your wallet. Keep everything in perspective, choose a limit and stick to it, and pick a good area with good schools.

    Also if you never owned a home before, welcome to the wonderful world of taxes, which you have to account for in your monthly payment and learn that they never go down, only up. Add your utilities, gas, water electric garbage....homeowners insurance and maintenance needs of the house and property. These are roughly your fixed costs on top of your mortgage that you have to be sure you can afford on one income. Well, if you don't want to lose it all anyway.

    Pick a budget first, then pick the best area that fits that budget and only look at houses within that range. Don't look at houses you can't afford on one income. Life and finances are in constant change, crap happens. Has a way of throwing curve balls at you when you least expect it. Prepare as best you can is all I'm saying.

    Awesome advice. My wife and I got so damn lucky. She qualified by herself on up to 500k! We bought at 390k @ 3.375 fixed for 30/no PMI, 6 blocks from the best high school and middle school in the San Fernando Valley, and since then, the value of our home has gone up over 200k. Now is the time to buy something if you can, but in many cases, the ship has sailed. Where we live today would not even be a remote option if we started looking now.
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  • audiocr381ve
    audiocr381ve Posts: 2,588
    edited May 2014
    tonyb wrote: »
    Principle and interest on 400k, is roughly 2600. Add 1.25% of the purchase price for taxes, generally speaking, and that's another 6-7k a year. So your at roughly 3200 a month plus homeowners insurance, plus utilities, any credit card debt, HC costs, car payments.

    Your looking at 4+k a month....net. That's not including food either....clothes, gasoline, car insurance, other incidentals. I'd say your closer to 5.5k a month with everything, net. So figure out what one income take home pay is, if it isn't just under 6k, you may be in for a rough road.

    We definitely aren't going to have a 70-100K down payment. More like 20K (or 19K after I buy the Oppo 105 *evil chuckle*).

    One big factor that we haven't talked about is health insurance for the entire family. I haven't done a ton of research on it but it looks like it'll be expensive for a family of 4 (soon to be 5). My wife's job is providing the insurance now and it's probably up there with the best coverage available.
  • audiocr381ve
    audiocr381ve Posts: 2,588
    edited May 2014
    Awesome advice. My wife and I got so damn lucky. She qualified by herself on up to 500k! We bought at 390k @ 3.375 fixed for 30/no PMI, 6 blocks from the best high school and middle school in the San Fernando Valley, and since then, the value of our home has gone up over 200k. Now is the time to buy something if you can, but in many cases, the ship has sailed. Where we live today would not even be a remote option if we started looking now.

    Wow, when did you guys buy? That's awesome.
  • nooshinjohn
    nooshinjohn Posts: 25,464
    edited May 2014
    We bought October of 2012... Look for the WORST house in the BEST neigborhood, and learn how to fix things yourself would be the best advice I can offer here.
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  • tonyb
    tonyb Posts: 33,014
    edited May 2014
    We definitely aren't going to have a 70-100K down payment. More like 20K (or 19K after I buy the Oppo 105 *evil chuckle*).

    One big factor that we haven't talked about is health insurance for the entire family. I haven't done a ton of research on it but it looks like it'll be expensive for a family of 4 (soon to be 5). My wife's job is providing the insurance now and it's probably up there with the best coverage available.

    Less than 5% down is going to be hard to secure a loan and if you do the interest rate will be much higher meaning that's less of a house you can buy. Keep in mind too, it is your wife who wishes to stay home to have kids. If she's the big bread winner, what happens when she quits to raise kids ? What happens when she quits and you have to pay for health insurance ? That could be 1k+ more a month right there. Can you afford 5-6k a month net on your income...that's the question. Getting into the house is one thing, keeping it is another.
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  • audiocr381ve
    audiocr381ve Posts: 2,588
    edited May 2014
    tonyb wrote: »
    Less than 5% down is going to be hard to secure a loan and if you do the interest rate will be much higher meaning that's less of a house you can buy. Keep in mind too, it is your wife who wishes to stay home to have kids. If she's the big bread winner, what happens when she quits to raise kids ? What happens when she quits and you have to pay for health insurance ? That could be 1k+ more a month right there. Can you afford 5-6k a month net on your income...that's the question. Getting into the house is one thing, keeping it is another.

    Right. Very good points. This is taboo to talk about but 5-6k/month was a bad month for me last year. BUT with the new business we took on smaller salaries to get things up and running. I have no doubt that we'll get back to what we did last year, but that's maybe a year away.

    My wife is more than happy to take on part-time work too until I'm able to make things happen on my end.

    I do feel a little rushed because my wife is so stressed as is. We've been through 4 babysitters in the past several months because of how crazy our schedules are. Maybe a better plan is to keep renting/saving, have her quit and switch to part-time later this year, and buy a house when we have a more substantial down payment with the hope that we can qualify on my job alone.
  • txcoastal1
    txcoastal1 Posts: 13,330
    edited May 2014
    We bought October of 2012... Look for the WORST house in the BEST neigborhood, and learn how to fix things yourself would be the best advice I can offer here.

    Exactly what I did, not only did I buy a foreclosure but while it was sitting Hurricane Ike had blown through taking out the roof attic vents, house sat another 6 mo.

    Fixed her back up and raised my equity 75k after expenses, plus that was the year Obama offered the 8k tax credit :)
    2-channel: Modwright KWI-200 Integrated, Dynaudio C1-II Signatures
    Desktop rig: LSi7, Polk 110sub, Dayens Ampino amp, W4S DAC/pre, Sonos, JRiver
    Gear on standby: Melody 101 tube pre, Unison Research Simply Italy Integrated
    Gone to new homes: (Matt Polk's)Threshold Stasis SA12e monoblocks, Pass XA30.5 amp, Usher MD2 speakers, Dynaudio C4 platinum speakers, Modwright LS100 (voltz), Simaudio 780D DAC

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  • nooshinjohn
    nooshinjohn Posts: 25,464
    edited May 2014
    txcoastal1 wrote: »
    Exactly what I did, not only did I buy a foreclosure but while it was sitting Hurricane Ike had blown through taking out the roof attic vents, house sat another 6 mo.

    Fixed her back up and raised my equity 75k after expenses, plus that was the year Obama offered the 8k tax credit :)

    The people that owned our house did everything they could to take care of the place for the 50 years they owned it, they just never did a damn thing right.:lol:

    My audio room, which is still in stud, was nothing more than paneling tack-nailed over 2x4's with no insulation and extension cords for a light and power outlets. It had an acoustic panel treatment for the ceiling and carpet scraps duct-taped together for the floor. I gutted the room back to stud and started over. Once the room is done, it will qualify as a 4th bedroom and add another 420sf to the house. At 380/sf, that will be a nice improvement.

    I figure I have another 3 years on the roof before I need to redo it, and I can handle that job too.

    The house next door to mine has roughly the same footage and lot size as ours, and was just listed for 809k...
    The Gear... Carver "Statement" Mono-blocks, Mcintosh C2300 Arcam AVR20, Oppo UDP-203 4K Blu-ray player, Sony XBR70x850B 4k, Polk Audio Legend L800 with height modules, L400 Center Channel Polk audio AB800 "in-wall" surrounds. Marantz MM7025 stereo amp. Simaudio Moon 680d DSD

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  • jflail2
    jflail2 Posts: 2,868
    edited May 2014
    tonyb wrote: »
    Less than 5% down is going to be hard to secure a loan and if you do the interest rate will be much higher meaning that's less of a house you can buy. Keep in mind too, it is your wife who wishes to stay home to have kids. If she's the big bread winner, what happens when she quits to raise kids ? What happens when she quits and you have to pay for health insurance ? That could be 1k+ more a month right there. Can you afford 5-6k a month net on your income...that's the question. Getting into the house is one thing, keeping it is another.

    You can do as little as 3%, depending on the loan type. If your credit is good, you won't have any issues securing a loan with that little down. But you're exactly right, less down= a higher rate and that PMI as well. I didn't have 20% to put down, but rates were so low last year that I still got 4.25% with only 8% down. I honestly don't think I'll ever see rates that low again in my lifetime, so I went ahead and pulled the trigger anyway.

    And if you can squeeze together one extra payment a year, you can knock something like 6-8 years off of the life of your mortgage. Which means you pay less interest.

    For HOAs, get the details on it before you walk away from a house with one. My house lies in a neighborhood HOA, but it's actually a great deal. For $65 a quarter I get free trash pick up and they keep the grass along the main roads cut. No crazy people walking around measuring people's grass, no worries about having a (in control) party or anything like that. So they do vary in regards to rules and regulations.

    Tons of good advice here. I'm sure you'll be successful in finding the house you want in a range you can afford.
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  • Ducati Guy
    Ducati Guy Posts: 160
    edited May 2014
    Everybody wants the best house they can "afford" so most everyone gets a 30 yr loan.

    This is the worse possible advice ever!

    BOTTOM LINE:
    If you can't afford a 15 yr mortgage, you can't afford the house!!!!!

    Life happens/ bad luck eventually catches up to all of us:
    50% of us get a divorce
    somebody in our family/wife/one of the kids/yourself gets a serious illness that's only partially covered by the dam evil Ins. Co.'s
    layoff or the business slows down for a few years
    house repairs are expensive
    car repairs are expensive
    saving for your kid's 4 yrs of college=$160,000
    Let's not forget saving for Our Own Retirement!!!=should be %15 of the income, yes that much!!
    and the $3-4,000 annual family vacations-because you need & deserve it

    15 1/2 yrs ago I too got a 30 yr mortgage.
    After 1 yr, I told myself, " Are You Freaking Insane!!! I can't do this for another 29 years!!"
    So I changed to a 15 year mortgage.
    That was THE BEST Financial decision of my life!!!!!!!

    TRUST ME, do yourself a favor, get the 15 yr mortgage/the less expensive house vs the 30 yr mortgage/the "dream" house.
  • txcoastal1
    txcoastal1 Posts: 13,330
    edited May 2014
    Since this is your first home and are self employed, building a business while wife planning on cutting back on her job, look for a home 10-20% cheaper a fixer upper and put yourself on a 3-5yr plan or maybe longer and work yourself up to your dream home. My first house was very modest put some work into it, every quarter of the 5 years I owned it I would make an extra payment of $500-$3000 and applied that payment direct to principle pending how my own business was doing.

    Adding the extra payments and improvements on the home plus regular payments gave me a nice equity and sold with a nice profit and down payment for the next home.

    I worked my way up in homes like I did with audio gear...baby steps
    2-channel: Modwright KWI-200 Integrated, Dynaudio C1-II Signatures
    Desktop rig: LSi7, Polk 110sub, Dayens Ampino amp, W4S DAC/pre, Sonos, JRiver
    Gear on standby: Melody 101 tube pre, Unison Research Simply Italy Integrated
    Gone to new homes: (Matt Polk's)Threshold Stasis SA12e monoblocks, Pass XA30.5 amp, Usher MD2 speakers, Dynaudio C4 platinum speakers, Modwright LS100 (voltz), Simaudio 780D DAC

    erat interfectorem cesar et **** dictatorem dicere a
  • tonyb
    tonyb Posts: 33,014
    edited May 2014
    Less money down means a better credit score is needed and little additional liability. Plus he may be entering jumbo status on the mortgage, another set of rules. Lenders aren't as free wheeling these days as before don't forget. Your ducks have to be in order.

    Buy under what you qualify for, fix it up and re-sell before moving up the ladder. That will give you a better feel for what your obligations will be on the nicer home and what you can handle.
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