I am looking to buy a house. What am I in store for???

hosnatcher · Jan 5, 2009

I am looking to buy a house in Orange County, California. I am probably going to go in as partners with my brother, My credit score is either 700 or close to 700. My brothers credit isn't that great so I am thinking about getting the loan in just my name if it helps with the financing.

I have made about 90k a year for the past 4 years and am looking for a three bedroom house. I want to keep my payments at $2000 or less if I can. What type of down payment am I going to have to pony up and what price range should I look into?

Also how difficult is the house buying process. I hate buying new cars because I don't like to deal with the greedy sales people. Since this is my first time looking for a house I don't want to get conned into paying more for a property then I should be.

romer · Jan 5, 2009

How do you make 90k a year?

Hitman26 · Jan 5, 2009

You need at least 25% down and go for a 15 year fixed note. If the payment is more than 25% of your monthly take home pay, you can't afford it and find a cheaper house or rent until you can up your down payment to get the monthly payments below 25% of your take home pay.

shdw01 · Jan 5, 2009

get a realtor....someone who you are comfortable with....they will tell you what you need to know....

For starters....I'd look at 20% down

pulling the number out of my ass....a $500,000 house would require $100,000K down + closing costs (maybe closer to $115,000 or $120,000 if you pick up pts) and your monthly comes out to about $2200/month (used 5.125% cause it was default)

There are other things to consider which I haven't (still looking and haven't purchased my first house)....but I think that is a good starting point.

shdw01 · Jan 5, 2009

Hitman26 said:
You need at least 25% down and go for a 15 year fixed note. If the payment is more than 25% of your monthly take home pay, you can't afford it and find a cheaper house or rent until you can up your down payment to get the monthly payments below 25% of your take home pay.

for a dual income home, would you recommend 25% of both take home pay combined?

(please everyone keep in mind if you are buying your first house, your take home pay can increase dramatically as you can decrease your W-2 withholdings since you now have this huge deduction on your tax return)

Hitman26 · Jan 5, 2009

Yes combining the two take home pays is ok. I'm giving very conservative advice but it's sound. There is no shame in buying a 50k house, having it paid off in 5-10 years and moving up to a 150k house and so on and so forth as you get richer.

Hitman26 · Jan 5, 2009

http://www.bankrate.com/brm/rate/calc_home.asp

Great tools here to find out what you can afford. Look under "mortgage caluclators" and input your info.

Betallsports · Jan 5, 2009

shdw01 said:
for a dual income home, would you recommend 25% of both take home pay combined?

(please everyone keep in mind if you are buying your first house, your take home pay can increase dramatically as you can decrease your W-2 withholdings since you now have this huge deduction on your tax return)

Spoken like a True Tax Guy :toast:

Donnybasbl · Jan 5, 2009

shdw01 said:
for a dual income home, would you recommend 25% of both take home pay combined?

(please everyone keep in mind if you are buying your first house, your take home pay can increase dramatically as you can decrease your W-2 withholdings since you now have this huge deduction on your tax return)

But make sure you assess the impact AMT (Alternative Minimum Tax) will have on your tax liability. With your income, it may not be an issue, but you should check anyway.

Every year, I've lost more and more of my housing deduction due to AMT.

thetout · Jan 5, 2009

if your brother has bad credit and you are getting the loan in your name only i would just use your income not the 2 combined incomes. i would be careful doing anything money related with a relative.

shdw01 · Jan 5, 2009

Donnybasbl said:
But make sure you assess the impact AMT (Alternative Minimum Tax) will have on your tax liability. With your income, it may not be an issue, but you should check anyway.

Every year, I've lost more and more of my housing deduction due to AMT.

Even though I do tax returns, I have to admit I do not know exactly how AMT is calculated (besides on the computer when I input all the other information)....but I think that there have been some new tax laws put into action with these stimulus plans. You may be in for a small delight in a decrease of your AMT.

HiPockets · Jan 5, 2009

the tout said:
if your brother has bad credit and you are getting the loan in your name only i would just use your income not the 2 combined incomes. i would be careful doing anything money related with a relative.

Good point tout. I would recommend never ever doing a deal like a house finance with non-wife family. Beyond the finance numbers, there are many considerations regarding the house itself as both an investment and as a living space (schools, neighborhood, taxes, job travel, condition of roof, foundation, furnace, windows etc). Be conservative and realistic but keep your optimism and energy while you concentrate on your decision. Good Luck.

gtc08 · Jan 5, 2009

wait. your throwing money buying a house there. wait, or move.

SchlepRock · Jan 5, 2009

shdw01 said:
get a realtor....someone who you are comfortable with....they will tell you what you need to know....

For starters....I'd look at 20% down

pulling the number out of my ass....a $500,000 house would require $100,000K down + closing costs (maybe closer to $115,000 or $120,000 if you pick up pts) and your monthly comes out to about $2200/month (used 5.125% cause it was default)

There are other things to consider which I haven't (still looking and haven't purchased my first house)....but I think that is a good starting point.

In this market you can get the seller to pay closing cost. :103631605

SchlepRock · Jan 5, 2009

get FHA

shdw01 · Jan 5, 2009

SchlepRock said:
In this market you can get the seller to pay closing cost.

that is true....lots of times I notice people fudge everything to balance out between purchase/selling price, closing costs, remodeling credits, etc.

lowering one in lieu of the other....basically the same net effect.....

....if you have the choice, I'd much rather pay the closing costs and take the lower price of the house. Lot of the closing costs are tax deductible....you will have lower basis in your home, but if the value appreciates, there will hopefully still be the $250,000 (500k for married) exclusion if that is your residence.

hosnatcher · Jan 5, 2009

shdw01 said:
get a realtor....someone who you are comfortable with....they will tell you what you need to know....

For starters....I'd look at 20% down

pulling the number out of my ass....a $500,000 house would require $100,000K down + closing costs (maybe closer to $115,000 or $120,000 if you pick up pts) and your monthly comes out to about $2200/month (used 5.125% cause it was default)

There are other things to consider which I haven't (still looking and haven't purchased my first house)....but I think that is a good starting point.

Wow that much out of pocket for a down payment??? I did the math in my head and thought $2k a month x 12 months = $24k x 30 year loan = $720k. I figured I could get a $500k house and be okay with virtually no down payment. I may have to just rethink the whole thing and look for a nice rental and not have to worry about repairs and shit. Besides does anybody ever really own a home? Even if you pay it off in your lifetime before you croak the taxes will hit you hard in your old age.

Drunkn247 · Jan 5, 2009

Hitman26 said:
Yes combining the two take home pays is ok. I'm giving very conservative advice but it's sound. There is no shame in buying a 50k house, having it paid off in 5-10 years and moving up to a 150k house and so on and so forth as you get richer.

Can I ask where you would buy a house for 50k? You can't even buy a trailer for 50k

Drunkn247 · Jan 5, 2009

hosnatcher said:
Wow that much out of pocket for a down payment??? I did the math in my head and thought $2k a month x 12 months = $24k x 30 year loan = $720k. I figured I could get a $500k house and be okay with virtually no down payment. I may have to just rethink the whole thing and look for a nice rental and not have to worry about repairs and shit. Besides does anybody ever really own a home? Even if you pay it off in your lifetime before you croak the taxes will hit you hard in your old age.

You do not have to put down that much money to buy your first house...You can put down as little as 3.75% now with the new FHA guidelines. You can get a rate of anywhere from 4.5% to 5.0%. It wouldn't matter what your brother's credit is as long as he is above 580. I am in the mortgage industry and can't understand why everyone is saying you must put down 20-25%. You can also get a sellers concession from the seller to pay the a percentage of the closing costs. Of course your payment will be higher then 2k a month, but it is not that much out of pocket.

DesertDevil · Jan 5, 2009

Drunkn247 said:
You do not have to put down that much money to buy your first house...You can put down as little as 3.75% now with the new FHA guidelines. You can get a rate of anywhere from 4.5% to 5.0%. It wouldn't matter what your brother's credit is as long as he is above 580. I am in the mortgage industry and can't understand why everyone is saying you must put down 20-25%. You can also get a sellers concession from the seller to pay the a percentage of the closing costs. Of course your payment will be higher then 2k a month, but it is not that much out of pocket.

I believe with an FHA loan there is a limit to how much money they will lend you. I dont know what the amount is these days, but as of five years ago it wasnt even 200k. So I would imagine you could not get an FHA loan for a 500K house if you were only putting down 3.75%.

Im not in the mortgage business but that is my understanding.