Buying first home- 100% financing?

posted 3 years ago in Home
Post # 3
Member
9137 posts
Buzzing Beekeeper
  • Wedding: November 2013 - St. Augustine Beach, FL

@Tbblount:  Save up and try to put down 20-30%. Any less and you usually end up paying higher interest rates and additional insurance payments. A 100% mortgage is super risky unless you are buying a short sale or a fixer upper that is listed way under actual value. Plus, you don’t want to be house poor when you move in because once you own a house, you are stuck with anything that needs to be fixed and unless the house is brand new under warranty, things will likely need to be done.

Post # 4
Member
5839 posts
Bee Keeper
  • Wedding: October 2010

@Tbblount:  We were able buy our house through our Credit Union  for 0% down and no PMI. (Most loans if you have less than 20% down, you have to pay PMI). But we had to pay a 1.75% funding fee. We had to pay closing costs (about 3% of the house cost). Sometimes sellers will pay this, but it depends on your market. 

You have to be a member of our CU (Navy Federal), but I read somewhere that NASA Federal Credit Union was giving loans to non-members. Also, check your local area for Credit Unions that you can join or professional groups. 

Post # 5
Member
446 posts
Helper bee
  • Wedding: August 2013

We bought a house with a 0% deposit last year and had a great experience! Very similar to your situation – made about $100K, but just out of college so we have some school loans. It would’ve taken us 10 years to save a 20-30% deposit, which in our area would be well into six figures for an average home.

We used a USDA loan through a local credit union and got the best interest rate they offered at the time – 3.15%. No PMI, no funding fees, and the seller paid closing costs. I think it literally cost us like $400 out of pocket, and that was just for the inspections. 

The catch with a USDA loan is that you have to live in a rural area and make less than ~$100K. We were right at the income max, which is why we went ahead and bought when we did. Ironically though, we ended up buying on just one income, which I HIGHLY recommend! That way, we still have plenty of wiggle room to save and make renovations. 

We definitely aren’t housepoor nor has it been anything short of a great experience. My biggest advice would be to buy on one income if at all possible to give yourself a cushion, and get everything inspected VERY thoroughly. Also, do still have an emergency fund of course! If something breaks, it’s your problem now 🙂

 

Post # 6
Member
5839 posts
Bee Keeper
  • Wedding: October 2010

I agree with @beachbride1216: about being house poor. Make sure once you buy a house you have $10,000-$15,000 left over so you can take care of any unexpected expenses or decorate. You just dont realize how many little expenses you’ll have once you buy a house and that’s even if nothing bad happens. House inspections dont catch all the problems. I cant tell you how many friends I’ve had who have had major problems within a year of buying their home.   

Post # 8
Member
416 posts
Helper bee
  • Wedding: April 2011

@Tbblount:  The other thing is a lot more goes into buying a house than you’d initially think.  I compared mortgage+interest+taxes versus rent, and for the same money we could get way more in a house.  Then once we got inspections, repairs, furniture, decorating, closing costs, etc. it ended up being a few thousand at the outset that I wasn’t expecting.  If you really want to own a house (which I think is a great idea), can you downsize and live in a smaller cheaper apartment for a year or two?  Also look at all the other ways to save/invest money, and make it a priority to at least have saved some money you can put toward all those expenses.

Post # 9
Member
4513 posts
Honey bee
  • Wedding: October 2013

I would put something down. 20% isn’t realistic for a lot of people, especially depending on the housing market where you live, but anything you put down can help. If you’re paying $1250 and are hoping to get a mortgage for $850-950 well… are the houses super inexpensive where you live? Because after PMI, home owners insurance and taxes $950 is a hard number to hit with 0% down.

Post # 10
Member
446 posts
Helper bee
  • Wedding: August 2013

Are you downsizing? What are you willing to trade to have a mortgage mayment $300-400 cheaper than rent? I definitely wouldn’t advise buying a home to save on your housing costs short-term. It takes at least 5 years of homeownership (in general) before buying becomes cheaper than renting.

Don’t forget your total monthly payment will be principal + interest + taxes + insurance + any applicable PMI or funding fees. Then you’ve got utilities and general maintenance on top of that.

Post # 11
Member
9137 posts
Buzzing Beekeeper
  • Wedding: November 2013 - St. Augustine Beach, FL

When I bought my first house we ended up having to replace the carpets and appliances right off the bat due to poor housekeeping and maintenance by the prior owners; this cost us $4,000 and let me tell you we chose budget items.  Then we had to replace the A/C unit and ducts within the next two years for another $3,500.  All unexpected expenses that we hadn’t yet been able to save up for because we spent so much closing on the house in the first place.

Downsizing is a great idea.  We live in Orlando so I get living in a touristy area.  We chose to move to a somewhat undesireable part of town where our rent is half of what is charged for rentals just two blocks away.  The area is safe, just the buildings are older.  So we moved from a 1900 sq ft house in one of the nicer suburbs where we paid $1700 a month in rent to a 900 sq ft apartment where we only pay $775 and water is included in our rent.

Post # 12
Member
8035 posts
Bumble Beekeeper
  • Wedding: September 2015

Youre monthly mortgage and interest rate will be so much lower if you save up for a 20-30 % down payment. I like the website trulia.com – pick a house that you like and use their calculator to play around with downpayment and see how it affects your estimated mortgage- dont forget property tax either!

Post # 13
Member
1436 posts
Bumble bee
  • Wedding: September 2010

Although our mortgage payment proper is about $100 cheaper than rent in our two bedroom, we also have property insurance $3300 per year, as well as about $200 a month in utilities. Just make sure you factor that in too.

Post # 14
Member
303 posts
Helper bee
  • Wedding: October 2010

@Tbblount:  

Another conservative financial rule of thumb is that your housing costs should not exceed 25% of your take home pay. Is that conceivable for you?

Also, you could give yourself a six month timeline: save as much as you can, sell things that you have that you don’t use/need, and cut back on other expenses to build up your down payment and then see where you are.

Post # 15
Member
2184 posts
Buzzing bee
  • Wedding: November 2011 - Florida Aquarium

We haven’t bought our first house yet, but we recently met with a lender to see what was possible. I was pretty terrified going into it– the unknown is scary, right? But we had looked online and tried every calculator we could find, and we needed to know the reality of the situation. I have to say, it wasn’t half bad. For ease, we went with our bank, and he talked us through the options and how much we qualify for and what we’d have to bring to the table. Having real numbers makes the whole thing real instead of some abstract idea. 

For the record, we wouldn’t put 20% down, and we also wouldn’t have a PMI. With these numbers in mind, our goal is to save enough to buy (and have money leftover) in the next 15 months. 

So, meet with a lender. Let him give you real numbers and figure it all from there. 

Post # 16
Member
6273 posts
Bee Keeper
  • Wedding: October 2013

@Tbblount:  save up to put 20% down.  you get more benefit if you are able to put 20% down. 

after that i was told you only save $20 per $1000 so better to keep that in the bank.

 

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