Hesitant first time home buyers needs help... (Denver: fit in, real estate)

[Gamecock2001]

I was going to post this in the real estate thread, but I saw its meant for data and charts only, so:

I've got a handful of questions and I am torn if I should buy or rent. I am aware that availability is very low and at the moment the market is very high, but interest rates are as low as they may get. The main appeal for me to buy is that I really want a nice home of our own, and not have something that will appreciate in a busy market like Denver's.

A few things about our (my wife and I, no kids yet) situation first. We are first time buyers who have put in a couple of offers. We don't have enough for 20% down, but can do 10% if we want to be stretched then (of 325-400k.) Also my wife would prefer to relocate to her family back east in 5-10 years. I could probably convince her to stay longer if I find us a perfect home that we could stay in. We also really like the small old house we are renting, but could not afford our neighborhood.

Now the questions:

• Should I wait a year and try and get enough for 20% down?
• Do I need to be in a rush to buy? I was gung-ho at first since I thought I was "throwing money away on rent," but given my situation and learning more about mortgages, I see that having a quick turn around of equity/profit isn't going to happen right away.
• Would I likely have any profit if we sold in 5-10 years?
• Would buying a condo be a smart thing to do, given that we may move in that timeframe? Any other advice on condo's in Denver?
• Am I just a indecisive millennial with no clue with I am doing?

[davebarnes]

No.
Maybe.
Who knows. Not even the gods know.
Yes.

[emm74]

Do you plan to have kids in the next 5-10 years? If yes, I'd recommend against a condo in most cases. I say that as a former condo-dwelling parent. A townhouse can work with kids as long as there is some outdoor space and direct access to that outdoor space from the unit.

But yeah, with historically low interest rates and rentals being what they are, I think buying now is worth it. Not in so much of a rush that you don't take your time to find something that is a good fit, but once you do, make sure all your ducks are in a row so you can make a quick offer as soon as you see it.

I won't predict the future to say whether you'd make a profit in 5-10 years, but on the other hand, you will have a nice home to live in during that time period and you would have otherwise paid probably 90,000 to 180,000 or more in rent. That's 1500 a month, not even counting rent increases over that time. So if you just break even when you sell or even take a small hit, it's still worth it financially IMO.

[davebarnes]

1. I am pretty sure that you can get a decent mortgage with 10% down.
(The real estate agents here can better respond to that.)
10% is only the beginning. You need more money for: closing costs (escrow for tax, insurance, etc.), the water heater that will break one week after you move in, the $500 for your first trip to Home Depot 2 weeks after you move in.

2. Never rush. "Only fools rush in."
a. Find the neighborhood you want to live in. Walk it. Get out your car. Note where you would not live in the neighborhood. Find a buyers' agent who knows that neighborhood. Ask them to suggest some other possibilities.
b. Understand prices in that neighborhood.
c. Get pre-approved. Be ready to pounce. In the current market, you see it at 0800 and make the offer by 0830.
d. This Spring will be insane. Waiting until September, October might be better. The optimal day to make an offer is the Winter Solstice. Sellers are depressed.

3. You buy because you want to paint the living room walls in your color, not for "investment". If anyone uses that word when talking about residential real-estate, just shoot them. Profit is difficult. The transaction cost of selling is 10%. If you don't understand why, then learn why.

4. Have you taken any classes about buying a house? If not, then do.

[2bindenver]

You do not need 20% down. You can go with a conventional loan and 3% down.

FHA is 3.5% down with mortgage insurance for the life of the loan. All of the metro area above $400,000 for the loan limit, so you are fine there.

What happens if interest rates go up to say 6% next year? What happens if prices are 10-15% more than this year? >Rhetorical<

[Snikt]

I didn't put very much down on my condo, glad I purchased it in 2012 cause it's already taken off like crazy.

I believe it's an FHA loan as well.

[Gamecock2001]

Definitely a kid within 3 years.
The condo is not terribly small, and across the street from a large park. It is more similar to a townhome. It's under budget and seems great. We have to renew our lease at the end of March, and if there is a significant hike I will have wished I would've been putting that towards a mortgage.

Also around $2000 of closing costs will be handled by our lender, and we have made offers on homes that were only accepting offers for that day/weekend.

[JohnnyDenver]

I could sell my house for 50K more than I paid for it 2 years ago.

[2bindenver]

Three years ago we were all commiserating as Sellers. Now the market has turned, seemingly on a dime, and the Buyers are wailing.

Only you can decide to buy. Buy or not Buy, that is the question. Call up your landlord, ask what the rent increase will be. Then you can make an informed decision.

Always get more than one mortgage loan quote. If your lender is paying fees for you - it's built into the loan cost, ie higher interest rate.

I can show a Buyer a house and write the offer on my ipad - get it into the listing brokers email along with a pre-approval letter in 20-40 minutes.

[Suzatlarge]

Before buying a condo or a townhome, you must do SERIOUS indepth review of the HOA's financial situation. Get the financials and ask a lot of questions until you understand things. Such as the age of the building(s), the maintenance, upkeep, and capital equipment replacement projects that will be needed in the next five years and whether the HOA has reserve funding in place to cover the costs. Because if the answer is "no" --> you'll be hit with a special assessment.

Several years ago I fell in love with a townhouse in a unique little complex and did NOT pay attention to the financials of the HOA. Result: during the period that I owned the place, each homeowner was hit with a $10,000 special assessment just to cover regular maintenance of painting and flat roof replacements, which had been deferred to the point of the place looking shabby and flat roof leaks all over the place. Because the complex was 25+ years old and the monthly fees had never been set at a level to build a decent reserve fund. Believe me, I was relieved to bail out of that money pit after just over 5 years, and take a slight loss on the deal. I'm now in an older condo complex which isn't architecturally lovely but built solid as hell and the HOA's finances are in very good shape. We've been replacing elevators and boilers and roofs (we have several buildings in the complex) over the last several years with NO special assessments, because our reserve funds are up to the task.

Also, by the way, ask to see the HOA's reserve study. That's the document that lists the major physical components maintained by the HOA and the schedule for their upkeep/replacement: roofs, painting, exterior doors, paving, sidewalks, garage doors, elevators, etc. - along with an assigned cost for each future project.

And if the complex has a private street? Run like hell or be prepared to spend big. The city won't fill your potholes or resurface the bumps - you will shell out for that.

Yes, I got burned so I'm probably a fanatic on this subject.

Be careful out there!