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Discussion Starter #1
With interest rates lower than they have been in my lifetime, I’m considering buying a house when my renters lease runs out in June. Here’s the problem. I’m definitely not going to have 20% to put down. Not that I’m bad with money or anything, but seeing the interest rates go down again was a bit of a surprise. We (wife and I) just bought a new car for about 20k 3 months ago and drained the bulk of our savings.

A decent little starter house with a nice yard, 3 bedrooms, and 1.5 baths goes for about 125k in my area. We only have about 6k in the bank and there is no physical way we will be able to bank another 14k between now and June.

So here is the question. Do you think it be worth it to put like 10-12k down right now and have to pay the additional insurance costs until that 20% is covered, OR continue to pay 545/month in rent for another year then buy the house w/20% down at what would probably be a higher interest rate.

I’m just trying to get some ideas.
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Strength and Honor
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In my area at least, I am hearing that all the bankruptcies are now causing lenders to require 20% down and a credit score of 700 or higher. I'm not saying you can't get one, but even borrowing the money from one set of parents and paying them back should be something you explore before you talk to someone about picking up a mortgage.

And I have a general take here. Yes, this is a spectacular time to buy a house. Further, I think the pent up purchasing needs for homes, cars, and a host of other things is about to (or already) break loose. Anecdotal evidence to this fact include that we just bought a car and in chatting with the sales guy he said they had an amazing month of moving units. Further, a friend's house just went on the market and in less than 12 hours already have someone coming in for a walkthrough. Never in my wildest dreams did I expect either of those two things to happen, much less both. Lastly, my Realtor indicates she is seeing more activity and considering we're in an auto-based state, that alone is shocking.

This being the first house, you actually have more flexibility than everyone else. Chat with a mortgage broker about ALL your options, including FHA loans. First time home buyers get some perks and can do things that people who already have a home can't, but I can't remember them all. Borrowing from your 401k is one option, for instance (though all financial magazines I read recommend against that).
 

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Discussion Starter #3
Thanks for the help. I know we both have higher credit scores than 700, so that's good. I just don't know about the 20% thing. I'll have to contact some mortgage brokers and see what they have to say.

I would also imagine that if we wanted to buy a 125k house we could scrape together $25,000 from my family and hers. I'm not sure on that, but it may work.


EDIT:
Just for shits and giggles I figured out that we could likely accumulate between 13k-15k by the end of my lease. We'd only need to borrow about 10,000 then, not counting closing costs and shit like that.
 

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Money borrowed from relatives usually does have to be disclosed as we did a little of that since we failed to account for closing costs when we first started looking.
 

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When we bought our block of land, we borrowed $30k from Mrs Tree's parents to avoid having to pay mortgage insurance. We simply had to sign a stat-dec stating that the money was a gift and wasn't required to be repaid.

There are ways around things. Good luck. Owning your own home is farkin' awesome!
 

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Do not borrow from your 401k. It counts as income, and you have to pay taxes on it.
 

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When I bought my house i did an 80-20 loan. They did 2 seperate loans. The borrowed against the house in a home equity loan for the 20% to get way from the morgage insurance. That insurance is tax deductable i think. With that loan i put zero down and i do have a credit score around 730 though. Have to just talk to a loan officer at a bank. I shopped around to get the lowest rate then just went with a local bank on a fixed rate morgage. I cant see going with a broker. I rather have my loan local incase i wanna refinance and such. Hope this helps
 

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Tipp, what area are you looking to buy in?

If you weren't looking for a sizable yard, I would sell you my house.

When I bought my house, I didn't really have to have anything down except hand money for my realtor. Cost me a couple of grand. I am sure it would have helped if I had 15% down, but when I told them I didn't have much to put down, they said not a problem and worked with me.
 

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Do not borrow from your 401k. It counts as income, and you have to pay taxes on it.
You only get taxed if you don't repay the loan. I borrowed from my 401k to get our house and it's set up on a 10 year repayment term. We're not being penalized at all for it because it's a primary residence (I think you do get dinged if it's a second house, not sure on that though). As it turned out with the current economy we're better off with that money in the house because the 401k tanked recently (as I'm sure most people's have).

My only advice is that if you have to get creative with the financing, you can't afford it. Fortunately with the current economy those creative financing deals are mostly gone. We basically said if we can't get approved for a 30 year fixed rate we need to look at a lower price range.

Mainly just do your research and know about closing costs, property taxes, homeowners associations and their rules/covenants (some of these rules can be incredibly stupid), etc. For us, the main things we wanted were to be able to put up a storage shed, build a fence for the kids and dog, have a deck, maybe a basketball goal, garden, etc. Since the house we bought had all of those it was fine, but some places don't allow that. Learn what your easements are too. Most of this can be found online, just do the research so you don't go into closing and get surprised by something.
 

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Shop around at different banks - even if they aren't where you keep your checking/savings. When I was shopping for mortgages a few years ago, I was able to get a sizable discount with the bank that already held the deed for the house I was buying, and I saved even more by going with auto-withdrawal by changing banks to them entirely. There are so many options as a first-time buyer, so make sure you look at everything... there are still mortgages available with as little as 3-5% down, but the interest rates do climb at those amounts. Maybe you can look into getting just a 6month lease out of your current abode to save at least a little more cash.
 

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Discussion Starter #11
Maybe you can look into getting just a 6month lease out of your current abode to save at least a little more cash.
I'd like to, but I can't do that. My landlord made me sign a lease that ends in the spring because it's easier to rent the house out.
 

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Discussion Starter #12
Tipp, what area are you looking to buy in?

If you weren't looking for a sizable yard, I would sell you my house.

When I bought my house, I didn't really have to have anything down except hand money for my realtor. Cost me a couple of grand. I am sure it would have helped if I had 15% down, but when I told them I didn't have much to put down, they said not a problem and worked with me.
Probably down around the Bethel Park area. We actually moved from dormont last year and have been living down in BP for a year now.
 

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Discussion Starter #13
Well I called for the loan pre-approval today. I'm supposed to hear back friday or saturday.
 

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Fingers are crossed for you and the Mrs., Tipp!

Something to keep in mind, depending on your lender is that you cannot have a gift of money as any portion of your down. I remember that from our application, and when I asked why, the lender basically said they want to see that you have the financial solvency to afford the house on your own.
 

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That's interesting because we didn't have that issue. Our first home was through a major national firm and it seemed to be a non-issue, but that was over a decade ago.
 

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Fingers are crossed for you and the Mrs., Tipp!

Something to keep in mind, depending on your lender is that you cannot have a gift of money as any portion of your down. .
Our lender said it's a non issue. You just have to have the letter saying it's a gift.
 

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Discussion Starter #18
Well the wife is being lazy and unreasonable about house shopping. We found 2 houses we like. 1 like 1, she likes the other.

The one I like is a 3 big bedroom cape cod and about 10 grand cheaper but it needs work. New furnace (3 grand), 220 lines and some other electrical work (2 grand maybe?). Mine would probably also require flood insurance because it is near a stream, but I have to find out more about that. Mine has a 1 car garage built underneath a screened in sun room that could easily be turned into a second garage or a carport for free. It would also need this shitty lean-to shed thing torn down in back, and maybe a patio built. But it already has the concrete slab poured. It is also slightly more private in back.

Hers is a 3 small bedroom ranch with a leaky basement. All the bedrooms are small, and it's dining room space is tiny. The front yard would need excavated so we could park 3 cars. That would have to be done before we even moved in. It is also located at an intersection, although not a big one. The backyard on hers is also less private.

So here is what it boils down to. Mine needs some work, but the changes would likely raise it's value by a lot. This would also be spread over many years.
Hers is move in ready, just paint. But there is also nothing you can do to it. It's pretty land locked. So that house isn't going to be worth much more in the next 10 years. She just wants to move in and not do any work.

We'll see how it goes.
 

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Ugh, that stinks, Tipp! I, personally, would *lean* towards your choice, but neither sounds very appealing to me. Something to keep in mind: your lender might require the electric be brought up to code before they will approve. Try putting it into your offer, more than likely it is something the current owner will have to do before any lender will finance a purchase.

Take it from someone that has firsthand experience: a leaky basement is *no fun*! That was the proverbial straw for sh and I in our last house. This house? Sump went out while we were away on vacation (of course) and caused $34K in damages. I think kan has some water horror stories as well.
 

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Something else to keep in mind...

Most mortgage lenders will NOT approve any additional money above and beyond the appraised value of the home in order to afford repairs for a first time buyer. Last time I was lined up with mortgage papers in hand I ran into some similar issues to what you described. The roof wasn't leaking, but it was going to - just a matter of time, and some genius decided splicing modern wiring into the original knob-and-tube in the basement was a good idea among a few others. All said, I was going to need between $8-10k to make the adjustments to bring the home up to code and safe. As a first time buyer, I could not borrow anything more than the value of the home (which was coincidentally the agreed sale price) so I had to back out of the sale.

Just throwing that out there.

Also, having lived in the areas you've considered, what about looking at South Park, Library, Union Twp. or down near Finleyville? Home prices in those areas tend to be a bit cheaper than Bethel Park or Dormont - but you are further from the city, etc.
 
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