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I'm planning on applying for a mortgage in about a month. In my city, the typical home value is around $100K to $120, but for my first home I'd really like to spend just $50K. (I know getting into a home that cheap will mean sacrificing some things, and that's fine with me.) Here's some more background info:
* I make $40K a year.
* I'll have $10K in savings. I'm planning on using $5K for the down payment, and hoping to that closing costs will be around $2500 so that I can keep $2500 in reserves.
* I have a $2000 student loan.
* I have pretty good credit history with no late payments.
Does all this seem reasonable or do I have unrealistic expectations? Also, I've heard that if you try to buy a home that's too cheap, you might hurt your chances of actually getting a mortgage--is that true?
I would say that you are really on your way! BUT...I would get my student loan paid off, get my credit score up more, and have more than $2500 in savings reserve. You can do it, though, in no time at all!
At $50K in a $100-$120K market, you will probably sacrifice location, appreciation and resale potential. You are better off to either stretch more now ... or hold-off until later. Interest rates are a big factor, since they are as low now as they have been in a long time (allowing you to buy more house for a lower mortgage); however, it appears that rates will remain low for some time to come.
Keep strengthening your loan position by paying off your debts and increasing your savings. You might also start building a bank relationship. Then, stay flexible for when the right opportunity comes along (eg; if you are handy, you might benefit from a distress or foreclosure sale).
You seem to be doing quite well in both your financial discipline and in planning for the future.
The $50K single family home is likely to have enough repair and deferred maitenance issues that in a few years you'll discover it's far too expensive of a home for you.
If you really want to buy, I'd go for a modest 1 bedroom condo in a complex that seems to be on solid financial footing.
No, I'm in Green Bay. In an ideal situation I wouldn't want to throw away PMI money, but isn't paying rent pretty much throwing money away too?
Yes it is, but there are "initially costs"
Just
Ike with renting yo uhave to put down security deposits for utilities.... When things break you need more than $2,500... Because in addition to the cost of move in.... Your going to need "stuff" to fill the house.
It adds up quick!
If I were you I'd go on a rice and beans, beans and rice diet for another 1-2 years and then buy a nicer house with more "move in" money.
When you move with little cash in hand... Murphy moves into the Spair bedroom!
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