Buying my first house!

"Shadow - On your 9th house?!?! That just seems crazy to me. I hate moving!!"

Hey Shorty - four of those were company moves and that helps big time.

#9 will be the last stop before the Big Sleep.

 

Shorty,

My girlfriend and I just went through the same thing last summer. We make slighly more per year and purchased a home for $160K. The house was in desperate need of many updates, and we have been able to both update the home, make the mortgage payment, and have a little extra left over to take her out for dinner a few nights a month. It's good to think about the "what if's" and try to plan for the future, but sometimes you need to make the jump. I've yet to have any regrets, I hope you enjoy your home.

I used to write loans while in college, and leave you with this bit of information. A car loan is based off of a Principal & Interest payment. This means that if you pay (all made up numbers to give you an idea) $500 per month, $430 per month goes to pay down the principal and $70 goes to the Interest. Mortgage loans are on a Principal + Interest basis. This means that the begining of your Mortgage you will be paying much more towards interest than you will be paying towards the prinicpal. Your first payment may be (again made up) on a $1,200 payment $1,120 interest and $80 principal. The only reason I ramble about this is because it's in your best interest to make extra payments early in the Mortgage you will make out in the long run.

If you make one exra payment per year you should pay a 30 year mortgage down in 21 yrs, a 40 year mortgage down in 28 and so forth.

Lastly, (I'm not sure if Oregan law is the same as Ohio law) you should have paperwork called a "Disclosure Statement" or similair. This is probabally the most important document you need to look at. It should show you everything you need to know about your mortgage including fees, amoritization schedule, and so forth. Sorry to ramble, PM me if you have any questions.

 

Thanks Nvoges!

I've done a lot of reading and studying on this whole mortgage business and become pretty familiar with it all. I know that once we have 3 months or more saved up, it wouldn't be bad if we didn't save 7-800 every month so extra on the payments would be a huge help. We've definitely been discussing it, and putting on a little extra before then, the sooner the better.



Hey stuka, I found your video diary:

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Looks like 'bout everyone approves. It is difficult to compare house purchases here in Canada with you down south. For one I believe you can claim your Mortgage Interest on your income taxes where we cannot unless a portion of the home is used for business purposes. I'm sure if I am wrong, someone will correct me.

Way back when I bought my first, I had exactly $47.00 in the bank. (No, that is not a typo, fourty seven dollars). Bought a $55,000.00 house (brand new so yard and fence had to be done). I was making around $17,000.00 per year at the time and my wife of the day was not working That was 1980.

Now I am mortgage free with a decent income from my present employer, a disability pension and a pension from the career I retired form in 2003. My present wife makes a good income and due to retire in 2011 with some 33 years in with a government pension. Maybe I will retire again, who knows.

A couple words of advise. If you see trouble coming in the future with finances be it loss of income or unforeseen necessary repairs, see you mortgage vendor and talk to them. They will likely work with you to reduce, delay or whatever some payments to allow you to make it through the tough time. If you don't, they may not show you any sympathy if things get tough. Most likely they may suspend some payments or reduce them but tack them onto the end. This ends up costing you more in interest, but you keep the house.

Also, once a year or so, if you can, make additional payments on your mortgage. If you can do that down there, that payment usually goes directly to your principal, reducing the principal by the amount you pay. Every extra dollar you put against the principal early in your mortgage life, makes a phenomenal difference in the amount of interest you pay over the life of the mortgage. At the beginning of your mortgage life, almost all your payments goes to interest, and very little to principal. Near the end of your mortgage you are now paying down the principal because the lender has already got their profits from you.

Sit down with someone in the know who you trust and have them go over things with you.

Regardless if you find yourself having to sell the house to get out from beneath difficulties, remember, you have lived in a house that you had been paying for. Theoretically you have built some equity into this house and should recoup some of it. If you had rented during this time, then that is money gone and nothing in return.

Welcome to the life of painting, cutting grass and all. You will love it.

 

You beat me to the punch line. Good to see it is the same down there. A great manouver.

 

Thanks Randy.

There are lots of tax breaks down here, so that really makes the house just that more affordable for us. It really seems like it came around at the right time for us. I've also heard that the mortgage companies will work with you if you say something BEFORE you begin missing payments. At the very least if something did happen, at least we're both young enough to outlive the massive credit slump it would cause for us.

I just hope you didn't boot your previous wife for not working! :wink:

 

Nope,

I kicked her our so that she could go live with her boyfriend. I kept the house. This allowed me to meet and marry my present LOVE in 1986. I have never looked back in sorrow. Life's been grand so far.

 

I use a few rules for house buying. I firmly believe in them, and would never stray from them, just to keep my piece of mind.
1) Have 3-6 months of expenses in the bank for emergencies.
2) Be debt free, except for the new mortgage.
3) 20% down payment (to prevent PMI)
4) Payment no more than 25% of take home pay.
5) 15 year FIXED RATE mortgage.
6) Hire a real estate lawyer to help with the closing (not the one the bank pays for because he does not work for you, the bank pays him/her therefore he/she works for the bank) A lawyer will only cost a few hundred dollars, but can save you tens of thousands later.
Your feeling in normal and will allow you to own the house, insted of it owning you. I went from $150.00/mo rent to $335.00/mo mortgage, while making $7.00/hr (yeah I know, I'm old) I was scared to death, but the above guidelines saved my a$$ a few times. There is no other experence quite like buying your first house, so enjoy it, and good luck.

 

One of these days, I have to get off of my dial-up connection and onto the evil Comcast cable so I can see what I am missing...

 

Eddie,

You are correct, these are all good things in a perfect world, but I would disagree. 25% of your take home pay isn't going to get you a resonable house in any urban area. With that being said, a fixed rate is definetlely a do, too many people have been involved in 5 year ARM loans etc. only to be screwed when rates go up.

 

I'm with you Lg!

 

It looks like VFRshorty will meet the 25% rule with room to spare. The only thing I'd worry about is the car and quad payments.
One thing is for sure, an ARM is asking for trouble.
Around here, rates are about 5.5% for a 30yr fixed rate mortgage, but you'll save about half a point if you stick with a 15yr.
The difference between a 15 and a 30 year mortgage is staggering!!! On a 30 yr, a 165,000 mort @ 5.5% would be a payment of 936.85 for 360 months = $337,266. For the same loan, but for 15 years @5% would be 1304.81/month for 180 months would be $234,865. For a savings of $102,401 over the life of the loan!!! That's right, over $100,000 in intrest savings!!! No wonder the banks have such fancy buildings!!

 

my two cents- if you guys are planning on only living there less than five years, i think you guys could handle the arms loan. mine is fixed at 5.25% for the first five years (my first house- barely any credit). i think you can handle it- i used it as a motivator to get my ass to work and squeeze that sweat equity out. a bucket of paint is cheap! i see a lot of sweet sweet sweat equity in that place. good pick! im trying to sell without a realtor- got lucky as heck- my neighbor thats been a jerk since id owned the place for literally three hours (he apologized later- but it's still awkward), i walked over and told him i was wanting to sell and i was coming to him first (we're kind of in the country- but it's close quarters) turns out his wife is a real estate guru of some sort, so is he, and he's a deacon of his church- he's got three potential buyers in my face like that! it's in his best interest to put someone he wants in my house. yeah until you get a good four or five payments under your belt it is nerve wracking- but then you get bit by the real estate/equity bug and get real pumped about home ownership. good luck!

 

Good advice,
you should never take 20+ amortization the banks just love long amortization if you need to take a 25 or 30 yr to qualify make sure you can make extra payments @ the end of 1 yr on a 30 yr mortgage you could actuarially owe more than original loan. the surest equity builder is to pay down your mortgage @ the beginning.