First Time Homebuyer - Page 2

[georgia]

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[sanguine_speed]

Originally Posted by velochic
1. If you have money, then you need to be debt-free before buying a home.

2. If after paying off EVERYTHING, you don't have 20% down to buy a home, then you can't afford it.

Period. Sorry to be so blunt.

I do not agree that one must be 100% debt-free before buying a home.

In my opinion, the ability to choose a permanent residence, so, for instance, your children can go to the same school without transfering when you do pay off every last cent of debt, can mean buying a house before paying off all debt is a good decision. Also, the amount of the mortgage matters too.

By your criteria, you're saying buying a house you can afford but takes say 20% of your income to pay for with 20% down is better than buying a house with 20% down that takes 10% of your income for while you also carry a debt that takes up another 2% of your income. In scenario two, you have say a student loan and a mortgage, but both equal less than a mortgage that could have on its own been reasonable and affordable. And where we live, there are student loans and lines of credit with lower interest rates than mortgage rates. It is not as black and white as you type it to be.

[velochic]

Originally Posted by sanguine_speed

By your criteria, you're saying buying a house you can afford but takes say 20% of your income to pay for with 20% down is better than buying a house with 20% down that takes 10% of your income for while you also carry a debt that takes up another 2% of your income. In scenario two, you have say a student loan and a mortgage, but both equal less than a mortgage that could have on its own been reasonable and affordable. And where we live, there are student loans and lines of credit with lower interest rates than mortgage rates. It is not as black and white as you type it to be.

I didn't say any of that. Those are your scenarios. Not mine. I said that if you can't save 20% for a down payment, you're buying too much house. If you have money to pay off debts and you're not, then you need to reevaluate your finances.

[rhiOrion]

This isn't really related to the OP's question, but back to some of the PP's answers.

I just don't get what's so horrible about buying a house with less than 20% down.

We have the 3.5% down for the FHA loan. We have some savings outside of that, but we don't want to completely deplete our savings to buy the house, because we know things could need fixing and emergencies could arise. Outside of some student loan debt we have NO debt. No credit card debt, no car payments, etc. The student loans are a fixed amount every month, and we factored them in to what we could afford, house-wise. Our loan is a fixed rate and well within our monthly means. It's only slightly higher than what we are paying to rent our little town house. We qualify for a loan WAY larger than what we're looking at, but we are specifically keeping the loan smaller so that our monthly payments are affordable.

So... why should I raise my kid in a house with no yard where we can't paint the walls or remodel anything, when for almost the same price I can be raising my kid in a house with a fenced-in yard, room for the dog to run, rooms painted nicely, in a great neighborhood, and building equity?

It just doesn't make sense to me. Would 20% down have been nice? Of course! Obviously I see that in the long run we're paying more money by putting less down. But with that concept you could say you shouldn't buy a house until you can pay for it with cash.

I personally feel pretty damn proud of ourselves that we've been able to save money since finishing school, come up with the 3.5 percent down, and live debt-free with the exception of the student loans. And the student loans are a non-issue to me (as long as we factor them in to our budget) because without them, DH wouldn't have the job he has, and we wouldn't be debt-free otherwise.

[AlwaysByMySide]

Originally Posted by Hannah32

Finally, because I can't resist, "creative" mortgage brokers helped in creating the worst economic crisis since the Great Depression. Boo hiss to them.

When I said creative, I meant more that my mortgage broker was able to work around some of my issues (the fact that I'm self-employed was a big hurdle) and make something happen. He worked very hard to make this happen. I don't have an adjustable rate mortgage. In fact, I have a lower rate than my father, who co-signed my loan, has on his house. I also bought a lot less of a house than I qualified for, and I think that's key. Mortgage brokers helped create this mess, but so did people who bought a lot more house than they needed/could afford.

In my area (and I realize that it isn't like this everywhere), it is SAVING me at least $200/month to be a homeowner than it is to rent, and I have a much bigger place than I would have had as a rental. It simply made economic sense to buy.

[Delicateflower]

Originally Posted by rhiOrion

I just don't get what's so horrible about buying a house with less than 20% down.

It's horrible for the bank, not the buyer. 20% equity is the point where, statistically, people have enough invested to not default as often. If you have a financial crisis with 5% equity, you're more likely to walk away from the loan than if you have 50% equity.

For the buyer, it's irrelevant, so long as the interest rate and PMI are factored in. Well, except if you're like us and you're giving the rest of the downpayment to Lowes and Home Depot