Real Estate Question(s)

Discussion in 'Horn Depot' started by BigLeonard, Jul 7, 2009.

  1. BigLeonard

    BigLeonard 100+ Posts

    I am 28 years old, single, and live in Austin. I earn between 60-70k per year and have a credit of 720. I have roughly 10k in debt in the way of student loans (all with interest rates at about 3%), and 5k remaining on my car. I have approximately $3,000 in savings, and because my rent is currently very low I'm able to save a lot (the salary above was increased by 20k recently). I've always rented, but I'm interested in buying my first house. With that said, I could use some advice.

    1) Does it make sense to buy a house when a) I have that much debt albeit low interest and/or b) when I have very little in savings? Should I be doing everything possible to pay off these low interest debts ASAP, or continue saving towards a DP?

    2) Interest rates are at an all-time low so I'd like to strike while the iron is hot. Additionally, since I would be a first time home buyer I'd get the 8k tax credit. Are these legitimate reasons to buy now, or will it potentially be this way in 2010? Would I be able to apply the 8k tax credit as a portion of my down payment? If not, how exactly does it work?

    3) I'd prefer to live in a desirable area of town, so would I be nuts to pay 275-300k for a house? If so, what's reasonable given the details above?

    4) How much are sellers coming off of list prices in this market? I'd presume it's different based on zip codes, but is this data available on a city-wide basis? If I'm looking at a house listed at 300k in 78751, would it be unreasonable to offer at 275k?

    5) I know it's ideal to do a 10-20% down payment, but is 3-5% far too low?

    6) If it matters, I'd have two roommates contributing towards the mortgage.

    Thoughts/concerns/advice of all kinds are welcomed.

    Thanks in advance.
     
  2. ninerhorn

    ninerhorn 100+ Posts

    It is certainly a great time to buy.

    I think alot of this depends on you personally. What your comfort level is with debt.

    It honestly does not sound like you have a ton of debt.

    I am a mortgage broker and am happy to answer any questions you have. I have worked with a bunch of people from Hornfans.

    robert@buffingtonmortgage.com

    good luck


    [​IMG]
     
  3. JohnnyM

    JohnnyM 2,500+ Posts


     
  4. Larry T. Spider

    Larry T. Spider 1,000+ Posts

    I agree that 275-300k is too much. My wife and I are closing on a house end the end of the month, it is a great time to buy. We combine for a little more than 85k and bought a house for 222k. We have no debt (not even car payments) and credit scores around 800 but found that this is all we would reasonably be able to afford. We still want to go out and have a life.

    I understand the temptation to go higher though. We would have qualified for well over 310k, which blows my mind considering what just happened with the economy.

    Edit: 10% down on that also. 5.5% interest and probably around 1800 a month total.
     
  5. BigLeonard

    BigLeonard 100+ Posts

    If the consensus is that I cannot afford a house in that range (which I presumed), at what point is it affordable for me? In other words, I'm not interested in living in suburbia so my plan is to save a couple years so I can put as much down as possible on a house in this range. Who can afford a house in this range, and what does he bring in? Also, for the record the houses I'm looking into are near I-35 and are not by any means exclusive. **** in Austin is just expensive....still.

    Another question:

    1) Is it best for me to save as much as possible and pay off debts gradually, or should I push to pay them off ASAP? The interest rate is 3% as I previously mentioned, but debt is debt and I'd be able to save a lot faster without these monthly payments towards debt. I'm bonuses quarterly, so should I put these towards the debt, or into savings?
     
  6. JohnnyM

    JohnnyM 2,500+ Posts


     
  7. BigLeonard

    BigLeonard 100+ Posts

    Quite frankly, I'd rather not live anywhere near I-35 but some of the better "deals" in Central Austin are nearby. I work in West Austin, and the furthest I'd want to move outside of the city would be 2222 and Koenig perhaps. I've looked at houses in 78751, 78703, 78731, 78705 and have found very little that's affordable (and more than 1100 sq ft.). The further you get towards 620 the prices drop fairly dramatically, but the % of young families increases as well. Steiner Ranch has some definite affordability, but a 25 minute commute to downtown is less than appealing to say the least. Arboretum-ish area is ok, but still far and it's all new contstruction. Same goes for South Austin. I'm more of a fan of older houses with some personality, that I can gradually "flip" if you will.
     
  8. ninerhorn

    ninerhorn 100+ Posts

    BL,

    Without getting into things a little more, you just are not going to get the info I think you are looking for. You need to sit down with a broker or someone who can get you the information you are looking for so you know a price range that 1) you are comfortable with and 2) you will qualify for mortgage-wise.

    You seem detail oriented so my advice is to sit with someone who can give you the answers you want so you can make the decision you are comfortable with.



    Good luck


    [​IMG]
     
  9. JohnnyM

    JohnnyM 2,500+ Posts

    The Arboretum vs South Austin is not comparable when it comes to commuting. From North you are really stuck with 35, Lamar, or Mopac. From the South there are more options Where in West Austin do you work?

    I'm telling you again, just look down in that Westcreek area. It has homes that have been around for 20-25 years, and you'll get a bigger yard than anyplace close to town. Some need some work, but they are not old "fixer-uppers" that you'll find in the closer areas. That's a very good thing for a 1st time homebuyer who wants to do some remodeling but nothing major. A lot of these homes just need some of the minor "flip" fixes - paint, floors, counters. You get into the older homes and you're looking at projects that are out of your pricerange and likely above your current experience. Wait until you have more disposable income to move into one of those.

    If you want a $200k, 3br, 2000sf house with a yard that is downtown, stop looking. If you want to drive literally 5-10 minutes further it's available (and, when you actually time the commute, you'll be surprised how "far" some of those "close" places are).

    And it sounds like young families is a bad thing to you? Why? You may not like the idea now but do you plan to sell the house? Family-friendly 'hoods move much faster than others.
     
  10. BigLeonard

    BigLeonard 100+ Posts

    The good news regarding a commute is that I work at 360 and 2222, and there's simply not a lot of traffic going that direction. I've been looking at some houses in 78757 that are 1200-1300 sq ft and listed at about 225k. 78757 is generally right around Burnet/Anderson. I would imagine you could get the seller to go lower, but is this enough space and is it a good area? I don't need 2000 square feet, but 1250 seems awfully low. Then again, I'm not buying for a family. I've always lived in Austin, but I'm overly familiar with the surrounding areas. I believe they refer to this area as "Crestview."

    As for the family thing, it's just that I don't have one. I'm single and like the idea of potentially bumping into people other than 35 year old parents with strollers. You make a solid point about those houses being easier to sell though. Also, you're exactly right in that I'd like to find a place that has minor remodeling necessary so I can save up front on the cost (floors, countertops, minor bathroom stuff).
     
  11. JohnnyM

    JohnnyM 2,500+ Posts

    If you're at 360/2222 then you're looking in the right areas, but the dollar just doesn't go far there. 1200sf sucks, especially if you're going to have roomates. 2000sf is really not that big if you plan on having people over and entertaining.

    As for who you're running into....you'd much prefer to run into 35yo homeowner parents than 25yo renting kids. Renters will kill a neighborhood faster than old homeowners usually because the owners of rentals don't keep them up like a homeowner does. So I would get over the young-families thing because you're nearly that age and you'll realize that they really aren't any different than you. I'm sure the idea of neighborhood full of 20-something successful homeowners is appealing, but it simply doesn't exist.

    I can't imagine prices will be going down much, so you're probably in the very best climate for buying. I also doubt they'll be going up much for at least another 8-12 months, probably 12-18. So you have some time, and it's good to start narrowing the search.

    Have you thought about condos? That may be a good first step into homeownership.
     
  12. zzzz

    zzzz 2,500+ Posts

    I would hope "1200-1300 sq ft and listed at about 225k" is in a good area. That's over $170 a square foot. Some city info on the area:The Link Looks like there are some apartments in the area. Don't buy too close to them.

    edit: Agree with Johnny that 1200-1300 sq ft isn't a good size for roommates. It's more suited to singles, couples or couples with one small child. Also, while you don't have kids, they are a big driver of home value -- the quality of the schools that kids in the neighborhood will attend is important.
     
  13. fratboy_legend

    fratboy_legend 500+ Posts

    i havent read all the responses, but here is my $0.02

    dont buy a house now, dont pay off student debt @ 3%.

    house prices and interest rates are inversely correlated. as such, you are better served saving money now so that you may buy a house later when interest rates are higher (and house prices lower)

    at some point after you purchase, interest rates will fall and you will be able to refi your fixed rate mortgage lower, or alternatively swap your variable rate mortgage into a fixed rate.

    $3k is not enough savings cushion to own a $300k house. if you have 3k of savings you really have no savings. you can, and will, spend that much money in the blink of an eye as a homeowner.

    the number probably needs to be somewhere around $30k in the bank after you have paid your downpayment (of whatever level)

    if you do buy now, put in as little equity as is possible. rates are very favorable. you can always put it in later.

    remember, you are buying a house for its utility first, not as an investment. real estate combines the worst of two worlds - high volatility in asset prices and low overall returns. you need to make sure you are getting a LOT of utility from your house to overcome these facts.

    home ownership can be very satisfying if you go into it with your eyes open.
     
  14. BigLeonard

    BigLeonard 100+ Posts

    I think I'll hold off. I feel like the odds are good for a renewal of the tax credit in 2010. My living situation may be sub-par for the moment, but the rent I pay for it is not. My plan is to become debt free and then buy. Since there's no rush, I shouldn't be buying without a significant down payment, which I clearly do not have at this point.

    Thanks to everyone for the feedback. It will be helpful in a year or so.
     
  15. Larry T. Spider

    Larry T. Spider 1,000+ Posts

    Sounds like a good plan. Just keep an eye on real estate prices and the areas that you like. You never know when a deal will come on the market.
     
  16. unpaintedhuffhines

    unpaintedhuffhines 1,000+ Posts

    sounds like you've decided to hold off, but wanted to say this anyway...

    based on the info you shared you would most likely end up purchasing an older home that needed work. I'm not only talking cosmetic work. If you have $3K in savings, what will you do if the air conditioner goes out? Your $3K is gone. That's just one thing of a thousand that can go wrong with an older house.

    point being, you shouldn't buy a house right now
     
  17. alden

    alden 1,000+ Posts

    I own a ~1200 sq ft house, and it would definitely be small for roommates. Perfect for a couple though. Also note that if you're 28, you're probably about to outgrow roommates. You'll be counting the days until you can afford to live in your home w/o the mates.

    My vote is to pay off the car note quickly, but hold off on the 3% student loan. At 3%, that's pretty close to free money.

    So right now you can easily afford a mortgage of ~200k. If you want a 300k house, you need to either have 100k down, or earn about 50% more. I guess you could do the roommates thing, but you should get some serious savings before getting into that mess. A lot of the people that have 300k+ houses have equity from their previous home. Or they are buying as a couple with two incomes.

    Kudos to you for doing some research though. You're already more informed than half of the home buyers in Austin.
     
  18. BigLeonard

    BigLeonard 100+ Posts

    In an effort to become more knowledgeable on the subject, I went ahead and got pre-approved. They told me I could probably get a loan for as much as 280k, but I told them I'm not interested in anything more than 225k. They said they could write loans to me for that all day long. This would be an FHA loan, with 3.5% down at 5%. I went ahead and called another potential lender and his rates were better (4.65%). Why such a discrepancy? Is there anything I should be cautious about with this type of loan?

    Thanks again for all the replies.
     
  19. ninerhorn

    ninerhorn 100+ Posts

    I don't buy 4.65% at all. Did you get the fees associated with that rate?

    4.75% is generally costing more than 50 bps.
     
  20. BigLeonard

    BigLeonard 100+ Posts

    As you can imagine, there are many fees listed on the "Good Faith Estimate" but the total closing costs are roughly the same ($4,667.75: 5.0% vs. $4,563.25: 4.625%).

    Should I be looking somewhere else?
     
  21. ninerhorn

    ninerhorn 100+ Posts

    what is listed for origination, discount or broker fee?


    Tough to know without seeing it.
     
  22. BigLeonard

    BigLeonard 100+ Posts

    Loan Origination Fee is listed at $2,171.25 on both.
     
  23. ninerhorn

    ninerhorn 100+ Posts

    if there are no other fees as described above such as broker fees, discount, administration etc and the other fees look ok and they can lock in 4.65%, that is great.

    I still do not think that rate is out there but if they get it locked and do not charge it for you, good for you.
     
  24. zork

    zork 2,500+ Posts

    BigL,

    You might consider getting into something that could be deemed a starter house now, but could be a rental later when you are more established in your career.

    You still are a home owner. You get to get your feet wet with all the things, good and bad, that come with that. But you aren't sadddled with a huge mortgage every month which means you have a much bigger buffer to pay down other things as well as the mortgage, and have some fun in some months too.

    Find the most reasonably priced house that you can live in with the thought that in 4-5 years you will ahve paid it down 20-40%.

    Check the foundation, the roof, the AC, the carpets, and the fence. Check for termites. Check the school district. (helps rental)

    Be safe in your decisionmaking. BTW, that extra 8K on a 150k house makes a big relative difference.

    If you are going to have a purchase plan in place to get you closed this year, I would pay the minimums or 5$ over the minimums on all of your outstanding debts to build as much cash as possible to get you through the first 6 months of home ownership. Cash buffer is a good thing.
     
  25. Smurfette

    Smurfette 500+ Posts

    There are some really nice new construction site condos available on the east side, (east MLK area, ) that are in the low 200's-- come down nearly 100k. Damn nice places, close to downtown-- super modern. If this is what you want I'll look it up and send you the link. We looked at these places and thought they were really cool, but wanted a bigger living room and 3 bedrooms. We would have bought one if the price had been 239 last fall. I thought they were super cool, but at the time, priced at 299, it was pushing our max budget, and wasn't giving us all we wanted.

    II don't think you need to stress about the car and loans being paid off, especially if you keep a roomie-- keep them until it's paid off.

    Go with FHA financing. 3.5% down, low rates. If you feel your job us secure-- which I'm sure you do-- you will get that 8K next January to pad your emergency fund-- just make sure you have enough left in savings after you close to have a couple mortgage payments under your belt.

    Now's the time to buy, and there's some great deals in austin under 250 right now.
     
  26. BigLeonard

    BigLeonard 100+ Posts

    In this market, how much can you offer under asking price? 10%? 15%? I'm sure it depends on what houses in the area are selling for, so lets use 78731 as an example.
     
  27. Summerof79

    Summerof79 2,500+ Posts

    Yes you should buy, but you need more in savings.

    Will Austin have a marked decline in eal estate prices like other areas of the country? If we do then the whole economy is going down the shitter and we will be atop the last of the flush.

    I would suggest you save a little more money and perhaps look at your first place as an potential investment property. They may be too high but I might be looking at a duplex. If you had a duplex with a tenant you could qualify for a lot more. there are some off Spicewood, and some off Far West that might fit the bill.

    Fratboy legend is partially right in that there is certainly a relationship between low interest rates in higher home costs, because most folks as has been mentioned here in differing ways look at the monthly cost. However if that were the rule for Austin then home prices would have risen pretty dramatically. However there are simply not enough buyers in the market presently to support this "usual" assumption. I don not think you will see a major pull back in ANY of the areas you find desireable. An occasional desperation sale, but overall slight price reductions and longer times on the market.

    If you had a duplex and had a roommate in your side AND the other larger side rented, you could live well AND accumulating equity for very little monthly outlay. How money could you save in a year if you had this situation and were really focused on saving?

    Banking on inflation, higher interst and home depreciation in the Austin market is not a wise bet IMHO. You see declines in suburbia that are pretty steep, not so much in the more desirable areas.

    I will also say that while you are single and schools have no current interest to you, a home located on a better school path next door to a home with a lesser school path will hold it's value better and sell more quickly in nearly every instance.

    You might look up on Jollyville for a Condo if you wanted a smaller investment an no yard upkeep.

    Each year from here on out you will have wish you would have bought something if the long term trends of population in Austin maintain. Find a couple of areas you find acceptable and start watching them very closely on austinhomesearch.com. Print out homes and put them in a file for review. Do the research and watch the market then be ready to make your move. The best deals don't last more than a day or perhaps two. Saw a house on the golf course on the Balcones Coutnry Club golf course that was 2200 square feet that went for just over 225K and had multiple offers. It was a gut and redo, but for a young fella with elbow grease it woudl ahve been a fantastic investment. I expect to see it remodeled and flipped.

    If it were me i woudl probably opt for a condo or townhome that is smaller and cheaper and sinmply try to pay $150+ extra every month. Wouldn't mke me "home poor" but would allow me to accumulate equity.

    One other thing - it's a LOT cheaper to buy a used home than a new home at the outset. Try pricing out window treatments for example. Or at 29 perhaps the Newpaper in the Windows route woudl still work for you. ;-)

    Chicks also like guys that own their own places....
     
  28. Smurfette

    Smurfette 500+ Posts

    Lowball em.

    Worst thing they can do is say no.

    We lowballed on our offer when we bought, and the owner countered, only coming down about a grand off the asking price. But, what that did was let us know we were going to have to come up, but that he was willing to talk and deal.
     
  29. tallgrant

    tallgrant 250+ Posts

    Wife and I bought a home in Cedar Park last summer. We originally offered about 10% under asking price and ended up at like 6-7% below.

    The financial side has been well covered, so I'll give my general search advice- think about what you want to do and how the floorplan should work. Counters and fixtures are much easier to change out than walls. WEI bought a house where I could easily see a football game while serving food in the kitchen or watching the smoker. I've been pretty damn happy with it too. [​IMG]
     
  30. iamtigerwoods

    iamtigerwoods 500+ Posts

    given your situation, I can not see where buying a house makes sense.
     

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