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Wife and I have lived in STL for almost two years now. The first year we paid $800 rent plus utilities (approx. $950 total per month) for a beautifully updated place off Manchester in The Grove. However, this year we downsized into an all-inclusive CWE studio - it sucks, I know. However, we're both now within walking distance to work and school.
We will likely remain in Saint Louis for another four to ten years, therefore we've been looking at houses ranging 50K-70K - generally in decent shape, "transitional areas," and typically with a garage.
Financially, I have excellent credit, four credit cards (Amex/Cap/Barclay/Com), three previous car loans paid in full, and have never missed a payment in my life. Matter of fact, I have a zero balance on all four accounts, a five year old luxury sedan that is paid off, approx. $8-10K in a Roth IRA, and our only financial liability at the moment are my student loans. However, considering my career path and long term goals, I'm not too worried, whereas higher education isn't cheap anymore. Lastly, I had three years of stable employment throughout undergraduate prior to moving to Saint Louis. As of now, I make $400 a month at best via University on the side.
My wife on the other hand has almost two years of history as a nurse with the same company, good credit history so far (nothing bad, no revolving debt, she just lacks history), and no student loan debt. She has approx. 8K in her retirement. She makes about $2,200 net per month, however that number could be higher if we didn't put away $400 a month into retirement.
We're both under 24.
So.. I tell you all this because we're interested in purchasing a home for numerous reasons. First, interest rates are at historic lows, a mortgage will help build both equity and credit during these next few years, and will save us an estimated $300 dollars a month on housing expenses in the short term versus rent. Additionally, we'll likely put down $5-10K as a down payment.
Two questions:
1) For anyone with mortgage application approval history (underwriting, I guess), do you think my wife and I make excellent candidates for approval of a 50-70K 15 year note with %5 down, assuming everything I told you is true, which it is.
2) We've driven past a few properties near Mount Pleasant, Carondelet, and surrounding areas. All of them are within our range, have a garage (a must for our car), and have been recently rehabbed (new appliances, tuck-pointing, roof, etc). Do these two locations sound reasonable for our goals?
You said you plan on remaining in STL for another four to ten years. The general rule I have heard is that if you plan on staying for five years, then you should buy, but personally I would not buy real estate if I did not plan on staying in the area for good. Your finances seem fine for the price of houses you are looking for, but I would weigh heavily towards whether you want to deal with the pain of having to sell when the time comes.
Your questions..
1) Hard for me to say, but I think you'd be approved. I would not advise to stop your wife's retirement contributions. If she's putting 400 away with some company matching at her age, she will be in great shape and should keep it up. I'm sure your income may be an issue but maybe the bank would suggest approval for a 30 year note instead.
2) The real estate market in STL is average, but I doubt you see high returns in 5 years in Mount Pleasant or Carondelet. I think you may have a better chance in areas showing more progress like McKinley Heights, Fox Park, the Grove, and Benton Park West.
Interesting proposal. I'd really ask what makes you consider moving from STL in 4-10 years? For my wife and I, we're finally "home" even though I'm open to moving if the job situation was right, St. Louis is where we were both from and had a feeling this is where we'd be once we started having kids. Purchasing here will likely be ok, as we'll probably be in the house for 10-15 years, possibly more.
The home we purchased in Kansas with the intentions of staying in for 4-6 years wasn't such a good decision! I really didn't take the type of bath when selling it that some friends had to, but even still I had to write a check for close to $10,000 to make the bank happy when it came time to sell, and we sold it for only a thousand dollars less than we paid a year earlier.
The reason we ended up moving was job related. I went through a substantial pay cut at my then employer, and was offered a job making a salary similar to my "pre-pay cut" salary in St. Louis, so, it was either live on Ramen while the housing market crashed further, or, get out and take the new job...we chose the latter, but there are many many times where I really wish I hadn't purchased that 1st home...and there are plenty of friends who've said the same thing.
Our situation was similar to yours, I was making about $70k/yr but in an unstable industry, my wife was a teacher making $30k/yr and we were both in our early 20's. We did have 2 car notes at the time, and my wife had student loan debts (yuck). Personally, if I were in your shoes, i'd live as cheaply as possible (it sucks) and try to save some $$ for the home you want to purchase in a few years. It'll allow you to be more mobile, make that move to another city with ZERO regrets or problems, and keep more money in your pockets as opposed to dumping it into a home that you're going to have to live in. There's also an old adage "What works in an old home?" the answer is "You do!"...Even renovated older homes have "secrets" and as they start to show up, they tend to go looking in your wallet like a teenage daughter.
I had three years of stable employment throughout undergraduate prior to moving to Saint Louis. As of now, I make $400 a month at best via University on the side.
My wife on the other hand has almost two years of history as a nurse with the same company, good credit history so far (nothing bad, no revolving debt, she just lacks history), and no student loan debt. She has approx. 8K in her retirement. She makes about $2,200 net per month, however that number could be higher if we didn't put away $400 a month into retirement.
For anyone with mortgage application approval history (underwriting, I guess), do you think my wife and I make excellent candidates for approval of a 50-70K 15 year note with %5 down, assuming everything I told you is true, which it is.
We bought in the St Louis region three years years, and the down payment was a big sticking point. Even with 800+ credit scores, we could not get under 10%. Maybe that has changed in the last couple of years, but when we purchased it seemed like 10% was pretty much mandatory in this area.
Thank you all so far for your feedback. As of now, we've intentionally decided to use the Roth IRA as a vehicle for a potential down payment, whereas you can utilize it without tax penalty.
Why move? I cannot help but laugh here, however I do not want to be rude or disrespectful toward STL natives. We're both from a completely different area... Saint Louis is nothing like where we're from politically, crime and overall well-being. In SWMO most if not all of the houses are as large as the "mansions" off Lindell and are half the price (and twice as nice); also the "security" most West County people proudly remind you of all the time is only relative to what you see inside the City. Springfield, Nixa and Ozark/Branson on the other hand is collectively a whole different world when compared to Saint Louis City (and County for that matter), hence we do not want to be here!
Therefore, the property will likely be an investment/rental property when I'm done with my medical training. I'll likely rent it out to prospective medical students and take a little off the top. Plus, I may keep it in my back pocket for a family member during tough times or due to their lack of proper retirement planning.
I'm not trying to be rude, but Saint Louis is nothing like SWMO - the houses are newer/nicer/cheaper... The schools are A+, even the public schools, and the money is flowing into Christian/Greene county. Matter of fact, Christian County was one of the top fastest growing areas in the US over the past ten years and as of late has one of the lowest unemployment rates in the nation...
Get our education... and get out of here! But, in the meantime, we'd like to use the difference gained from owning to pay medical loan interest along the way.
The best decisions don't always lead to the best outcomes, because "stuff" happens. My wife and I moved here thinking 3-5 years max, now we've been here almost 11 years (uhg.... careers and stuff). No bank will deny your request if everything you say is true and there are no other lurking variables on your credit report. Mt. Pleasant is kinda rough in my view. Parts of Carondolet are okay. You might be able to squeak into South Hampton, The Hill, Dogtown, TGS... these might be other areas worth checking out. You won't make a killing when you go to sell, but you won't lose your shirt either. If you find a place you like and it fits what you want for a good price, I personally would go for it, but I am also less risk averse than some renters.
The best decisions don't always lead to the best outcomes, because "stuff" happens. My wife and I moved here thinking 3-5 years max, now we've been here almost 11 years (uhg.... careers and stuff). No bank will deny your request if everything you say is true and there are no other lurking variables on your credit report. Mt. Pleasant is kinda rough in my view. Parts of Carondolet are okay. You might be able to squeak into South Hampton, The Hill, Dogtown, TGS... these might be other areas worth checking out. You won't make a killing when you go to sell, but you won't lose your shirt either. If you find a place you like and it fits what you want for a good price, I personally would go for it, but I am also less risk averse than some renters.
You sound risk averse because you're familiar with statistics, considering choice of words.
Why move? I cannot help but laugh here, however I do not want to be rude or disrespectful toward STL natives.
I'm not one who goes nuts over people wanting to or not wanting to stay, that's a decision that's up to you! For me (in your situation) I wouldn't purchase a home here, at least not to live in. Now, for an investment property, it may not be a bad idea, especially if you can find something for a decent price in a location that will be easy to rent out. Not every home makes a great investment, and managing an investment from 250-300 miles away isn't fun either. You can have a management company handle the repairs, collections, evictions, etc for you but you won't really feel the profits the way you could without them on the books...and an important part about having an investment property is being near to handle "disasters".
If i were you, I'd rent, make payments on your loans as much as you can, and when the time comes move on. Once you establish yourself in the place you want to be, setup some roots, and look at buying an investment property at that time. I've been in a similar situation to you, and it's just my advice...you don't want to have the headache of trying to sell a place 3.5 years after moving into it, just so you can save some dollars a month on rent, all with the hopes of recouping that money when you finally decide to move. And you really don't sound like you'd be happy to be "stuck" in St. Louis if selling the home doesn't make financial sense, and you can't get a renter on the property. Just my $0.02!
You sound risk averse because you're familiar with statistics, considering choice of words.
No doubt I enjoy stats, but I rarely choose the safest path, particularly when it comes to investments - no fun or fortune in that. That's why I probably wouldn't rent. Rates are good. Banks are starting to lend again, I think you might even be able to find an 80-15-5 the way the market has heated up these past few months (plus, your price point and credit profile make you a very low default risk). I would make a bet on a neighborhood that appears to be headed in the right direction. Everyone has an opinion on this, and I am assuming you'd be more or less cool with something small, maybe even 4 rooms and less than 1000 sf since you are accustomed to apartment living, but given your criteria I would probably check around:
1) The Patch, within a few blocks of the Ivory Theater
2) Within a block or two of Morganford just south of Tower Grove Park
3) Anywhere within a quarter mile of downtown Maplewood (probably out of your price range, but maybe something there).
4) Cherokee row - somebody mentioned it here in a recent post. Seems like big upside, maybe even a couple blocks west of Jefferson.
anyway, I'm sure you'll be fine renting too, just thought it was an interesting question.
I think it would be a good idea for you to buy, if you could find a property you like at a fair price. As far as approval, larger banks all go through a central application process. Often the person will be from some other part of the country and call ya for information and to get to know your situation better. I never cared for that way. The smaller home town banks just outside the large metro's still make their own decisions about people. Like all the banks used to do many years ago. I think it makes the process much easier to deal directly with the decision maker face to face.
I do think if you ask questions of people on a particular forum, its important to show respect and not to put down their area at all, even in a backhanded way. After all people are replying to be helpful to you.
Last edited by todd00; 02-28-2013 at 09:38 PM..
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