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The ideal situation is certainly for her to get a job and for us to rent in Sac while we look for the right place. But we don't always have the luxury of waiting for an ideal situation. To make an informed decision we need to be able to assess all of our options; I was hoping there might be a way to fold some of our closing costs into the loan principal if a seller concession is off the table. I don't know how likely we are to get the seller to split the closing costs in the case of an REO or short sale, but I suspect we have exactly two chances of that happening (fat and slim).
The ideal situation is certainly for her to get a job and for us to rent in Sac while we look for the right place. But we don't always have the luxury of waiting for an ideal situation. To make an informed decision we need to be able to assess all of our options; I was hoping there might be a way to fold some of our closing costs into the loan principal if a seller concession is off the table. I don't know how likely we are to get the seller to split the closing costs in the case of an REO or short sale, but I suspect we have exactly two chances of that happening (fat and slim).
Is renting there terribly expensive? What's the rush?
I'm guessing that this is because the home is clearly out of the "commute zone" for her employer.
I think you'd be in a better position if she got a job there before you buy.
You got it exactly. It's not that SacramentoBound wouldn't have an address in the area, it's that the employment is out of the area.
SacramentoBound - now one idea you may want to run by your lender is if you are both on the application, she remains 4 hours north (Eugene or something?) with the job and living up there, and you would occupy the home in Sacramento. This would need to factor in her housing expense where she would remain, but it could then be purchased as a primary residence since you would be occupying it. Limited down payment is needed in that situation (5%) but both the lender and the private mortgage insurance company have to be on board.
@meh_whatever: Well, I lived in Boston most of my life so my idea of "terribly expensive" might be skewed. That having been said, no, I don't think it's terribly expensive to rent in Sacramento; it's just cheaper to buy. Best I can tell, the realistic minimum for so much as a studio apartment in the city is $500; we'd probably end up paying closer to $700 for any apartment that would meet our needs. On the other hand, there are lots of homes on the market in the $60-75,000 range, and fixers closer to $40,000. Even at the top end of that price range, our combined monthly payment with taxes and insurance would be less expensive than the studio. And compared to renting a similar property? Forget about it! We're not talking about 700 square foot, 1bed/1bath cottages in the middle of the ghetto, here. We're actually more worried about being able to support ourselves while renting than if we were to buy.
@ShanetheMortgageMan: That's the kind of idea we've been tossing around, but we weren't sure whether it would do us any good or not. It wouldn't be fun to be separated like that but those might be lengths we'd be willing to go to in order to be in a safer neighborhood (relatively speaking). Thanks for the input.
Is renting there terribly expensive? What's the rush?
The other half of the couple, chiming in here to add that because renting would be more expensive than buying, chances are that we'd have to tap into our savings to make ends meet, especially if I can't find a job right away (I'm working really hard to try and find one, and I'm employable, but it's tough from over 200 miles away). I'm afraid that we'll basically spend a chunk of our down payment on rent, and then buying a house will be out of the question. If the market recovers, even a little bit, we'll basically be priced out of the market, and frankly, this is the only shot we've got for the next decade or so at least. Living with my parents has been an amazing opportunity to save up this huge (for us) chunk of money, and since we won't be living with them anymore, we will be living month to month. We won't be able to save up a down payment on a house again until both of us are working in jobs that pay well. It could be 10 years, or longer.
The other half of the couple, chiming in here to add that because renting would be more expensive than buying, chances are that we'd have to tap into our savings to make ends meet, especially if I can't find a job right away (I'm working really hard to try and find one, and I'm employable, but it's tough from over 200 miles away). I'm afraid that we'll basically spend a chunk of our down payment on rent, and then buying a house will be out of the question. If the market recovers, even a little bit, we'll basically be priced out of the market, and frankly, this is the only shot we've got for the next decade or so at least. Living with my parents has been an amazing opportunity to save up this huge (for us) chunk of money, and since we won't be living with them anymore, we will be living month to month. We won't be able to save up a down payment on a house again until both of us are working in jobs that pay well. It could be 10 years, or longer.
The market isn't gonna recover before you find a job.
Unless it takes you more than a year or two.
I'm in NC, but I have friends in Sacramento who are making very good money and were advised to strategically default, just this year.
My advice, since you have no kids? Rent a cheap studio apt. Find a job down there... THEN buy a house.
What if your other half is in school there for a few years and then gets a job elsewhere because you never could? This talk about being "priced out" will be irrelevant, as you'll have a house in Sacramento and 2 people with no jobs there.
Unless you are planning to start a family in the next couple of years, why the rush to buy? Sure, you can get a bigger place if you buy, but if that is the only motivation with just 2 people? I'd rent.
You are NOT losing money if you rent. Rent pays for a place to stay. Period.
Find the MOST affordable (small) place you can possibly find. Save your money for a downpayment.
Then, buy.
Seems logical enough. Do you feel that you must have a larger place right away? If so, why?
If you had a family of 4 or 5, it would make more sense.
It's not an issue of size - we don't care how big or small our home is, since, as you pointed out, it's just the two of us. The issue is that we can't rent and save at the same time - all of the money I earn will go to paying rent and bills. We can not save up while we're renting, and buy later. If we can find a cheap enough place, we may be able to preserve the down payment we've saved up, but more likely not. If we buy, at least some of the money I earn will go toward home ownership. So while renting, and losing our savings, is FAR from the worst that could happen (we'd have a place to live, which is hugely important), we certainly would be losing money by renting vs. buying.
Edit from the husband, to add: We appreciate your advice and understand that it is honestly given and generally sound. But quite frankly, we aren't here looking for advice about whether to buy or not. We're committed to at least taking the necessary steps to take advantage of an opportunity that makes sense both personally and financially, even if it never presents itself and we end up renting after all. We would be fools not to at least be ready for that opportunity.
Last edited by SacramentoBound; 05-17-2011 at 10:55 PM..
You can always ask for closing cost assistance, whether it's Fannie Mae, REO of some other type, short sale or regular sale. This amount will always be taken into consideration when looking at your offer. The problem is that even after closing costs are paid, you have your down payment, and often your escrow accrual to pay.
The issue you would face now is that the recent regulation changing the way mortgage brokers get paid make it not profitable for them to give mortgages under about 90K. Good luck finding someone that will. Too bad, the new rules were supposed to help the consumer but since it's some bureaucratic morons making the rules, they have no concept of what the implications of their actions are. Or they don't care because they got a good 30-second sound bite on what they are doing for their constituents.
I agree with the other posters, wait until your wife finds a job here before buying something. The market probably won't be any/much higher next year and the last thing you want to do is to try to sell the property you just bought if your wife doesn't find a job, since the market probably won't be any/much higher next year.
Similar situation:
Hi guys (and others with solid advise),
I've been reading your posts and have gotten a lot out of the replies, as my wife and I are in a very similar situation to what you were in a few months ago.
We are hoping to move to Sac, buy a fixer. My wife is employed and I'm a grad student with just a thesis left to do (from any location). Thing is...
We live in Hawaii.
My parents live in SoCal, where I'm from, and I have some other family around Sac, so I know the area roughly. We have a down payment of about $20k with some possibility of borrowing much larger amounts from family. We want to ask for as little as possible from family, though.
So my wife's employment situation and how it ties into a mortgage loan are issues. If we move to Sac, she loses her full-time employment as a preschool teacher at $33.5k a yr (She has an edu masters). If she stays here in HI though, I'm guessing they'll count our $1025/m rent against us (her, I mean, since the loan will be all her), even though she'd move there when she gets a job. Sort of feel like a catch 22 here. Everyone seems to have advised you two to move there first, wife finds a job, and rent... I can understand how this would have been hard. It would be even harder for us, as we are crossing half the Pacific and the teacher pay there is much lower than here.
At this point I am thinking we may try and borrow 100% from family to buy (minus our saved down payment) , but even my parents may want her to have a job there first, I think.
So on the other hand, we are thinking of just moving there and renting from a (my) student loan, hoping she'll get a job quickly in the same field.
We're looking at Rancho Cordova and West Sac right now, Folsom may be preferable, but it looks pricier.
Anyone wondering why we would leave "paradise" for Sacramento: it is cost of living vs income. How much do you pay for a gallon of milk where you live? A used car? (A HOUSE???) We can choose: a studio condo on a 30yr leasehold in Honolulu or a 3/2 house with .20 acre in Sac. We will miss the beaches and papaya, but that's what vacations are for.
@SacramentoBound: feel free to PM me or let me know if I can PM you guys with some specifics to our situation.
I'm also wondering if houses are generally closing below asking prices there. I'm mostly looking on Zillow.
Zillow isn't a great place to look for houses to buiy as it tends to be quite out of date and doesn't keep up with price changes or status changes. OTOH, it does show sold prices which can give a good look at what things are selling for. Realtor.com is probably your best public source for currently listed houses. Real estate agents are also a good source.
Generally speaking, houses are selling for about 94% of original list price here. But it's so specific as to how the property is priced vs. the market. Some go for more than asking, some much less, and some never sell because they are priced way too high. Better to look at recently sold houses to see market pricing than to look at % of list.
Good luck with your move. I would recommend not buying a house until your wife finds a job. It helps with the mortgage approval and location and setting budget.
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