Rent here is expensive! (Austin, Round Rock: sale, real estate, apartment)

[fretfrek]

I have been living in Austin for more than a year with my wife and we have been renting an apartment all this time. Throwing money away! We are sick and tired of renting already and are considering buying a house we can call our own. I am having a tough time finding an honest and knowledgeable real estate agent who can help us. Do any of you know of and can recommend a good real estate agent that we can work with?

I sincerely appreciate all your replies.

[Exiled Texan]

I'm not an agent, but I'll give you unsolicited (albeit conservative) advice.

Have at LEAST 10% maybe you will need 20% to put down.
Mortgage only TWICE your combined income. If you have kids, anything more than that becomes too much of a burden.
Make sure your credit rating is up to par.
Buy quality, not square footage.
Beware of new construction in suburbia unless you plan to live there for 5 + years.

[CATXTransplant]

Exiled Texan - That is not true. (and I am an agent) Depending on where he is moving, and his price range, he can probably get an FHA loan with 3.5% down. If he's looknig in some parts of Leander or Pflugerville, he can likely get USDA financing and finance up to 106%! This USDA loan is not just for rural areas. Lakelike Ranch, some parts of Crystal Falls, and many other neighborhoods qualify. The general rule is that your total monthly payment (PITI) can only be approx. 35% of your income. I have sold MANY people homes int he last few months whose total mortgage payment (with tax, HOA, insuance, etc...) was less than $50 more than their rent payment. And, that doesn't take into account their tax savings or the $8000 tax credit. Many people these days without the down payment are getting a "gift" (loan) from a family member, then filing an amendment to their 200 taxes to get the $8000 now to pay them back.

The rest of what Exiled Texan is true - don't buy anything you don't plan to live in for at least 5 years.

[Dr.Mom]

Originally Posted by CATXTransplant

Exiled Texan - That is not true. (and I am an agent) Depending on where he is moving, and his price range, he can probably get an FHA loan with 3.5% down. If he's looknig in some parts of Leander or Pflugerville, he can likely get USDA financing and finance up to 106%! This USDA loan is not just for rural areas. Lakelike Ranch, some parts of Crystal Falls, and many other neighborhoods qualify. The general rule is that your total monthly payment (PITI) can only be approx. 35% of your income. I have sold MANY people homes int he last few months whose total mortgage payment (with tax, HOA, insuance, etc...) was less than $50 more than their rent payment. And, that doesn't take into account their tax savings or the $8000 tax credit. Many people these days without the down payment are getting a "gift" (loan) from a family member, then filing an amendment to their 200 taxes to get the $8000 now to pay them back.

The rest of what Exiled Texan is true - don't buy anything you don't plan to live in for at least 5 years.

No, I'm not a real estate agent, but I completely agree with Exiled Texan's assessment. People are still getting financing for 106%? Yikes! Isn't that how we got into this economic mess? If fretfrek were to follow Exiled Texan's advice, s/he would be in a solid financial position and able to handle any emergencies that came up in life. If s/he were to follow yours, they would likely have a bigger house that they may/may not be able to afford. Sounds all too familiar...

[centralaustinite]

What's wrong with renting? This is a fabulous time to rent. There are amazing houses available at great rental rates. Renters don't pay property tax (not directly) and they do not have to worry about the value of their house going down. Putting 3.5% down for FHA is a great idea unless the market price of the house drops 10%.

[Exiled Texan]

Thanks Dr. Mom.

CATX - I just speak from experience. Bought 3 times our income with 10% down when we were DINKs. So regretted it from day one. Something to be said for economic freedom, not being house poor, etc. 15 years ago, my advice was industry standard. I personally think we should go back to that. Houses are also very expensive to maintain. I'd say the mortgage and taxes should leave $200-500/month for unexpected upkeep/savings.

[CATXTransplant]

Just because you don't put money down on your house does not mean that you can not handle a financial emergency. Some people - if they purchase wisely, you can use those programs to keep money in their bank account, so that they can handle a financial emergency. I was in NO way advising him to buy more than he can afford. Perfect example. I had a client who was paying $900a month for an 2/2 apartment in North Austin. He bought a remodeled 3/2 in South Creek (Round Rock) for $129,900. His payment (including everything) is $952. He has $15,000 in the bank for emergencies because he only had to put down about $7,000. He was renting for the past 5 years. He paid his landlord $54,000 and had no tax deductions. Now, for only $52 extra a month (not including tax benefits), he has a nice investment and a 30 year fixed loan for under 5%. He bought smart.

[TexasHorseLady]

I AM an agent and I'm a bit leery of the kinds of loans that appear to be reflective of the kind of behavior that led to this mess in the first place - they are certainly not one size fits all. I'm certainly not so desperate to make a sale that I wouldn't advise clients to look VERY carefully at their personal financial situation and the current economic situation and the kind of loan they're getting, to make sure that down the road they don't get into trouble. Not just because of them and my fiduciary responsibility to them (which overrides my own interests), and the current mess, but because I'd prefer to take the long view and have them as clients (and have them send me referrals) on down the road. (That's where my fiduciary responsibility to my clients and my own interests meet.)

So, these kinds of loans will work for those who have a good handle on their own finances and prospects in future (neither party is in any danger of being laid off any time soon, or they're a two-income family and are only borrowing based on one income) and are very self-disciplined, maybe not so well for others. I wouldn't push them just to make a sale, but do think that they are appropriate for some people.

[Dr.Mom]

Originally Posted by TexasHorseLady

So, these kinds of loans will work for those who have a good handle on their own finances and prospects in future (neither party is in any danger of being laid off any time soon, or they're a two-income family and are only borrowing based on one income) and are very self-disciplined, maybe not so well for others. I wouldn't push them just to make a sale, but do think that they are appropriate for some people.

I can appreciate what you're saying THL. The type of loan depends upon the financial situation of the borrowers, which in this case is unknown. I also like your long term view of fiduciary responsibility. It's just that with this crazy market, no one knows if we've truly hit "bottom." For that reason alone, I would personally hesitate to go for a 106% mortgage. Seems like one could be upside down in a mortgage quite easily. Hopefully the OP chooses a reputable agent and looks for deals in this market.

[CATXTransplant]

THL - your post sounds like you're accusing me of being so desperate for a sale that I would compromise my own clients interest to make a few dollars. I have been in this business for 10 years and would not still be if I had such a short sided view of things. I always advise my clients to err on the side of caution and not over extend themselves. There is nothing wrong with being a little upside down in a house if you're not selling. Money is SO cheap. If you can get a loan for 4.875% and keep your cash in the bank, and not buy more house than you can afford, there is nothing wrong with taking advantage of the great loan programs that are out there. Your "logic" assumes that everyone is a moron and isn't smart enough to know what kind of payment they can handle. Sure, a lot of people don't know, and that's what got us into this mess, but any smart investor will tell you that if you are financially stable, and money is cheap, don't forget the fundamentals. Leverage is not always a bad thing.


Moderator cut: off-topic