Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Hey everyone! This is going to be a little long so please bear with me
I'm a single 25 yr old looking to buy a condo or townhome in the burbs next spring. I've got excellent credit and I want to take advantage of the first time home buyers tax credit extension, plus I'd rather put what I'm paying in rent towards a mortgage (currently paying $900 a month for 2 bed /2 bath, almost 1100 sq ft in East Plano). Plus I don't want the maintenance hassle of a single family home.
My budget is around $80k, can probably go a little higher as long as the mortgage is not higher than what I'm paying rent-wise. I can put about 5% down, I'll likely go with an FHA loan. I don't want too long a commute, I work in McKinney so I want to stay in the burbs or Far North Dallas. The condos I've found in this range are older in Richardson, like late 70s and 80s. Don't know if that's a good idea to buy an older condo....
I've also read that condos/townhomes don't resell well here, which is a little discouraging...I'm from California and they're pretty popular there. Once I decide on a condo here, I plan on living there for the next 3 to 5 yrs.
Basically I need all the help I can get! I'm looking 2 bed/ 2 bath, 1000 or more sq feet, we can get into other features if you like. What are the desirable areas (zipcodes please) where a condo/townhouse would have a reasonable resale value? And if I can find a single family home in this range, please make some suggestions, I'll get past the maintenance part if it's worh it long term. Thanks so much!!!!
Ok, please listen to me & take my advice. You should ONLY buy property when you have already checked every item on this list off:
1. Have enough cash saved to put down 20%. This will protect you if your home loses value and you need to sel. It will also ensure that if your property doesn't appreciate much or at all in 3-5 years, that you will have enough equity to not have to bring approx $6-8k to the table when you sell for closing costs and realtor commissions.
2. Have 6-12 months of emergency fund in cash after you have put your 20% down. This will protect you if you lose your job (need 12 months saved if you are a single income household) or have unexpected medical expenses or home repairs. Figure that you will spend 1-2% of the purchase price in home repairs each year.
3. Are you maxing out your 401(k) and/or Roth IRAs? When you are young, you have the gift of compounding interest on your side. You can always buy a house, but did you know that at the historical 8% annual return rate on the market, your money doubles every 7 years?? That can mean the difference of retiring with $500k saved vs $1M or $2M vs $4M. You can never get these years back!!
4. Do you have enough money saved to buy furniture and paint/ remodel/ decorate? I know for most girls, we want a pretty house and we want it now! It can be very tempting to pull out your credit card to buy that new lamp, table, painting, etc. Figure $3-20k, depending on how little furniture you have now.
5. Speaking of debt, do you have credit card debt or personal loans? If so, pay them off now before you buy. Your credit card debt will only grow after you own a home if you haven't taken care of it.
6. Since you're interested in a condo/ townhome, you will need extra money saved (I'd say $2-5k) in case the HOA needs to assess the owners for major repairs. This will absolutely happen if you own for 3+ years. Buildings need painting, roof repairs, fence repairs, etc.
If you said "yes" to all 6, congrats! You can buy a home. If you can't, it's ok. Life is nit a race and I'd rather see you get on good financial footing before you commit to the biggest purchase of your life. Our country- esp California- is in a really bad place right now because people did not get their financial house in order before buying.
Ps- I would strongly advise against a condo/ townhome anywhere in the Metroplex other than Downtown/ Uptown Dallas. They do not appreciate quickly and jf you research properties in the suburbs, you'll see thar most have lost value steadily over the past 5 years, well before the market softened.
Ok, please listen to me & take my advice. You should ONLY buy property when you have already checked every item on this list off:
1. Have enough cash saved to put down 20%. This will protect you if your home loses value and you need to sel. It will also ensure that if your property doesn't appreciate much or at all in 3-5 years, that you will have enough equity to not have to bring approx $6-8k to the table when you sell for closing costs and realtor commissions.
2. Have 6-12 months of emergency fund in cash after you have put your 20% down. This will protect you if you lose your job (need 12 months saved if you are a single income household) or have unexpected medical expenses or home repairs. Figure that you will spend 1-2% of the purchase price in home repairs each year.
3. Are you maxing out your 401(k) and/or Roth IRAs? When you are young, you have the gift of compounding interest on your side. You can always buy a house, but did you know that at the historical 8% annual return rate on the market, your money doubles every 7 years?? That can mean the difference of retiring with $500k saved vs $1M or $2M vs $4M. You can never get these years back!!
4. Do you have enough money saved to buy furniture and paint/ remodel/ decorate? I know for most girls, we want a pretty house and we want it now! It can be very tempting to pull out your credit card to buy that new lamp, table, painting, etc. Figure $3-20k, depending on how little furniture you have now.
5. Speaking of debt, do you have credit card debt or personal loans? If so, pay them off now before you buy. Your credit card debt will only grow after you own a home if you haven't taken care of it.
6. Since you're interested in a condo/ townhome, you will need extra money saved (I'd say $2-5k) in case the HOA needs to assess the owners for major repairs. This will absolutely happen if you own for 3+ years. Buildings need painting, roof repairs, fence repairs, etc.
If you said "yes" to all 6, congrats! You can buy a home. If you can't, it's ok. Life is nit a race and I'd rather see you get on good financial footing before you commit to the biggest purchase of your life. Our country- esp California- is in a really bad place right now because people did not get their financial house in order before buying.
Ps- I would strongly advise against a condo/ townhome anywhere in the Metroplex other than Downtown/ Uptown Dallas. They do not appreciate quickly and jf you research properties in the suburbs, you'll see thar most have lost value steadily over the past 5 years, well before the market softened.
1. I'm not at all close to having 20% saved. But I thought as a first time buyer, there are programs that help you not to have to put so much down (ie. NACA)
2. Nope on that too
3. Currently contibuting to my 401k, if thats what you're asking. My employer matches
4. No but I figure I can gradually buy furniture, decorate, etc...
5. No credit card debt, I have student loans but they're less than 10k
6. Don't have that saved either...
Wow, that was discouraging. So........are there any areas with single family homes you could recommend in the lower 100k?
No- you cannot presently afford a condo, townhome, or single family hone. You just can't.
But it's not the end of the world. Not even close. You are not "throwing" away money by renting. You are providing a roof over your head which you need. If you would like to save more, I recommend moving to a smler less expensive apartment and direct depositing the difference in rent into a high interest savings account.
Buying a home just to get the tax kick-back is absolutely the wrong reason to buy.
You will be much better off if you focus on saving all that you can for the next five years and then revisit when you are 30. Just think of how much your income will go up in five years. I am 30 and I make $60k more now than at 25!
When you are ready to buy, you should buy an average house (excellent condition, but not the nicest & most upgraded) in the very best neighborhood you can afford. That way you will always be able to sell. If you like the suburbs, I'd recommend Richardson (west of 75), Lake Highlands (northeast Dallas but Richardson schools) and the older, established neighborhoods in central Plano. These are all in excellent school systems and are far enough from the new housig developments that those are not your competiton.
You should make a 5 year budget. Make goals for yourself, like focus on saving a 4-6 month emergency fund this year, then work on saving 4- 6 more months Emergency expenses next year. Then if you get a promotion the next year, increase your 401k contribution from 6 to 9% of your gross. Also begin working on your down payment that year. Make a final push to save for your down payment and decor/ furniture in years 4 & 5.
By then, you'll be shocked at how much money you've saved. You'll have more income and be able to afford a much nicer house than you can now, and that house will be less of a financial burden on you.
And along the way, I can guarentee you'll spend $800 on new tires, $500 getting a root canal, and $1,000 on a last minute plane ticket to go to your grandparent's funeral. Maybe those won't be exactly what you spend your emergency fund on, but you'll need to spend a few thousand on unplanned expenses and you'll be so glad you're reaching into a savings account to pay for them!!
1. I'm not at all close to having 20% saved. But I thought as a first time buyer, there are programs that help you not to have to put so much down (ie. NACA)?
Yes, I'm sure there are programs out there to "help" you. Just like interest-only loans and no income documentation loans were allegedly "helping" millions of first time homebuyers in the past 15 years. Many of those who were "helped" have lost or are losing their homes to foreclosure because they couldn't actually afford the loans they were approved for and they did not have adequate savings when their interest rates adjusted or they lost their jobs
If you want real help, HELP yourself by learning to save, save, save and follow a budget!
Yes, I'm sure there are programs out there to "help" you. Just like interest-only loans and no income documentation loans were allegedly "helping" millions of first time homebuyers in the past 15 years. Many of those who were "helped" have lost or are losing their homes to foreclosure because they couldn't actually afford the loans they were approved for and they did not have adequate savings when their interest rates adjusted or they lost their jobs
If you want real help, HELP yourself by learning to save, save, save and follow a budget!
Um...a lot of these are HUD approved programs, they're not predatory lending schemes.
I actually do save and follow a budget too.
No offense, but I highly disagree about not being able to afford a home....I'm an engineer, therefore my income is pretty high for single person, and I always have a good amount of disposable income every month.
And I'm not doing this just for the tax credit...I'm trying to build my net worth.
Pay off your student loans before even thinking of buying a house. BTDT. It will also greatly improve your credit rating to have those darn things GONE!
On all of the other things, I TOTALLY agree with Turtle Creek. Even though you THINK it will be a good investment to own your own home, at this point in your life, you will be much better renting. There is much more finance involved in owning a home than just paying the mortgage.
On the more practical side: when/if you find Mr. Right, you will likely end up selling the condo to buy something for the two of you. If you're stuck in a depreciating property, or one that you're upside down on, you won't be able to get rid of it. Also, keep in mind that you will pay capital gains tax on the sale of any property that you do not occupy as a primary residence for 2 years. This can really bite you, too.
And, I hate to say it, but $80k isn't going to get you anything decent, and likely nothing that will hold or increase its value.
An FHA loan requires only 3% down (which my wife and I did), and I am a big proponent of cash in the bank versus cash invested in something like a house.
But without knowing your income and job stability and things like that, it's too difficult to say with certainty.
I do think the above poster's list is extreme and not a very good guide. According to him, you need about $50K to $60K in the bank before you can even consider buying a home, which is ridiculous.
I think your biggest issue will be finding a condo/townhome, as they are not popular outside the city proper, and the fact that they are a tough sell around here. When you are ready to sell, you might find it very difficult to unload.
Um...a lot of these are HUD approved programs, they're not predatory lending schemes.
I actually do save and follow a budget too.
No offense, but I highly disagree about not being able to afford a home....I'm an engineer, therefore my income is pretty high for single person, and I always have a good amount of disposable income every month.
And I'm not doing this just for the tax credit...I'm trying to build my net worth.
Any second opinions?
I'm really not being rude. I know it's hard to read posts online when you can't communicate tone of voice.
If you have quite a bit of money left over every month, why don't you have enough savings to put down 20%? Where's the money currently going (eating out, shopping, travel, etc) and what makes you think you'll change your spending habits once you're a homeowner? Just asking questions, not threatening you....
If you truly want to increase your net worth, then put invest your cash in cd's, bonds, gold, stocks, emerging markets, etc. Those are much more likely to increase in value in 3-5 years than a $80k property in the northern burbs.
Plus, financing 85% of a home isn't increasing your net worth, it's adding $81k to your debt load.
All I'm saying is if I were you, I would wait until I could afford property that was worth owning & showed future potential for land value appreciation. You're going to need to spend at minimum $175k to get into those neighborhoods in Richardson/ Plano.
I have a friend whose parents bought a home in the late 1970s on the east bank of White Rock Lake for $40k. They could have had it paid off this year and the lot value today is around $500-600k. After paying interest on that $40k loan, they would have had a net gain of $425-500k. Not bad for a 30 year investment. Instead they chose to move to Richardson (east of 75) and buy a brand new home in the early 1980s for $80k. That home is currently worth about $125k. Figuring the high 15% interest rates in the early 1980s, they will end up spending $200k+ for a home that is worth $125k. They actually LOST money in the long-run. I have a strong feeling that this will happen in parts (not all, but parts) of McKinney, Allen, Frisco, Little Elm, etc as people want new homes and don't thin about what is really going to gain value long-term.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
