First time home buyer advice needed!

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First time home buyer advice needed!

D S
Member since 2008 · 2 posts · 0 votes

Thanks in advance for your input.

Here's my situation. 25/year old, single. ~$60k/yearly salary, +700 credit score, no negative entries on reports (no missed/late payments EVER) I've had an auto loan for 22k which was paid in full before end of term. I also have a good employment history if that is any consideration.

I share a 2-br condo with a friend. My friend owns the condo and charges me $965/month all included. He also carries a real estate broker's license so he will be assisting me with the home buying process.

I discovered a great condo near my current location which I believe I can get in at under $240k parking included. Assessments around $150/month. I am very familiar with the area and its real estate market and this will be a good home for years and a great rental property after I've moved on.

Now onto the bad stuff. I have roughly 14k in debt spread almost evenly across 2 credit cards and 1 loan. I have reduced this from 24k in the last 4 months thus I have little or no cash to put down.

Given my debt/credit/the market/income/first time buyer programs is this a good idea at this time?

*edit on math

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  • Jason Hanson
    Real Estate Coach · Oakton, VA · Member since 2008 · 695 posts · 43 votes
    18y

    If you can afford it and you plan to live in the place for the next 5 years then I would buy.

    I would also shop around for multiple lenders. Just because your friend is a lender that does not mean he has the best prices or products. You always want to compare to make sure you are getting the best deal.

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  • Account Closed
    Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes
    18y

    Well wow. you are paying 965 a month to rent a room? wow..

    With a friend like that maybe you should use a different broker! Ha. If you have never purchased a place before, my suggestion is to honestly get educated on the house buying process.

    You will need Earnest Money, an attorney, an inspector, don't forget that you will need to put all the utilities in your name. You also have moving expenses that you will incur so please plan on those. I would hate to see a first time homebuyer have a problem with the first month mortgage because they didn't allow for all the expenses involved.

    Here is a tip, many agents/brokers put on free home buying seminars. Most do it to have you use them to buy a home. If you want to use your Friend that is fine, but you never know, you might like one of these agents better.

    Good Luck, and welcome to the american dream of Home Ownership.

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  • Frank Adams
    Loveland, CO · Member since 2008 · 1k+ posts · 123 votes
    18y

    Here comes the answer that you will NOT like. Do NOT buy this place! You can't afford it. I know it, MikeOH knows it and YOU know it. You just haven't admitted it to yourself.

    Paying $965/month, TOTAL, you have ZERO SAVINGS, despite having an income half again LARGER than the US average. Let's say you can borrow $240K, I'm guessing interest rates are close to 6%, so on a 30 year loan your P&I is $1438/month.

    I'm guessing your state has property tax, and the bank will require insurance. That's got to run you another couple of hundred a month MINIMUM, plus you said condo fees are $150/month, you'll probably want lights, heat and water, figure another $200 there. It looks to me like your total housing costs are going to DOUBLE. If you're not saving at $950, where are you going to get the extra $950?

    Let me put it this way, if I had a rental (or a seller financed deal) that was going to run you $1,000 MORE than your present rent, and you had no savings, there is no way on this earth I would rent or sell to you. Although the mortgage industry is obviously manned by idiots so maybe they will.

    Feel free to flame at me, if I dont' respond it's because I'm turning off the computer tonight as the movers are showing up at 8:00 AM tomorrow!

    Sorry to throw cold water on you.

    all cash

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  • D S
    OP
    Member since 2008 · 2 posts · 0 votes
    18y

    Thanks for replying everyone, the added expenses you mentioned really do make me wonder if I can keep aggressively paying off debt and be a homeowner at the same time.

    all_cash, @ $965/month for rent I have been able to comfortably pay off ~$2500/month in debt and have enough for living expenses.

    However with that in mind perhaps I will keep renting and putting everything I have into these cards (which I am no longer using) until they are paid in full then go from there.

    4rmgt, $965 is a steal! it's a nice place :) it's a 10 minute walk to my office in the loop and I'm saving hundreds on gas alone. Also you can't beat the view!

    I have another question...

    My roommate holds a real estate broker's license for his business (M&A). How will this benefit me when I decide to purchase? I would be given whatever bonus or commission he receives as a result of the sale.

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  • David Johnston
    Residential Real Estate Broker · Tallahassee, FL · Member since 2008 · 4 posts · 0 votes
    18y

    It won't. Find someone who does residential full time that can prove their ability to negotiate. By the way, be careful about knowingly and willingly taking part in license law violations. I don't know the law in all 50 states, but in Florida a non-licensed person who received monetary gain from a "licensed" activity is a big NO-NO...tread carefully.

    I'm guessing that wherever you live is a BUYER'S market. Do your homework and buy something with prove-able equity.

    ps - a $240,000 house is 4 X Earnings for you...don't do it.

    go slow and go low (on price).

    the real estate world is littered with the souls that financed 4-5 times earnings....I counsel 3-4 sellers every day who are facing foreclosure. None of them ever saw it coming.

    Good luck and be modest...especially at first.

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