Profile picture for Liebe73

Buy or continue renting?

I have about 5K saved up and am currently renting at $900/month. I've heard of house payments half that price. My credit score is fine and my total monthly expenses besides rent is about $350. By my own standards I've estimated I can afford a 90K-100K house but I don't have a big enough down payment. I am sick to death of renting. My question is, should I bother with a FHA loan or rent a couple more years to save up 20%? I figure I would pay additional fees and insurance with a FHA loan but if I wait then I run the risk of paying a higher interest rates. Thoughts?
  • September 17 2010 - Northville Township
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Answers (24)

Now is a great time to buy if you can do it. The 1st step in determining if you are ready to buy a home is to speak with a lender in your area who can let you know what options may be available to you and get you pre-approved so you have an idea of what price range you should be looking in. It would also be a good idea to find a buyer's agent who can walk you step by step through the process and guide you along the way.

Best wishes & Happy buying!!

  • September 24 2010
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Contact a Mortgage lender and get pre-qualified. I would try to buy now. there are a lot of good programs available. Interest rates are record low, and you can get a good deal and own a home. FHA loans are very attractive and you don't need to save for the 20% down payment. Find a buyer's agent that can help you with some of your closing costs. Good luck!
  • September 23 2010
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Talk with a reputable lender.  Though there are very few $0 down programs available today, often they can research and suggest a down payment option you hadn't considered yet. I have to agree with your second statement, waiting will only increase the odds of increased interest rates.
Good luck, and happy hunting!
  • September 23 2010
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Venture out and put your toe in the water so to speak. Grab an agent who is willing to let you kick the tires and go kick. Only you can answer this question because it is as much emotion as it is dollars and cents. Good luck and I am glad to hear of a buyer who is thinking it through. -Jim
  • September 23 2010
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Bond Programs coupled with Energy Tax Credits could put you in a home with little cash down. Owning a home could be the foundation for your financial success.
Good luck,
Steve
  • September 22 2010
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There are still $0 down options out there.  Talk with a reputable lender.  Often they can 'find' a down payment option you hadn't considered yet.

Good luck!
  • September 22 2010
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Profile picture for Dunes....
What did you Think Agents in a National Housing Market with Few Buyers were going to advise?

Become informed about your Market of Choice...Are Prices declining, whats the employment situation look like, are local Services (Police, road maint., fire depts, schools ect.) being affected

$90,000 may sound great but if the same Condo is $70-$80,000 in 6 months or a year, rates stay low? You buy now and in 5 years it's back up to $90,000 in value but rates are 6%...

Don't be a Speculator gambling on a bunch of "ifs".. be a smart Buyer...Learn about your Market whats going on with Rates and other factors affecting your Market and be informed....Huge Financial Decision deserves a Huge effort to make informed and wise Decisions

Plenty of "Landloards" selling at a a loss right now across this nation to dump upside down debt on a Large Financial obligation because they followed bad advice from salespersons with little real Market expertise, according to them it's been a good time to buy, rates are low ect. since 2006...
You do not Buy they do not make Money....The Advice may sometimes be a Tad  Biased
  • September 22 2010
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The time to buy is now.  Just make sure you get a good deal, a good mortgage broker and a good agent.  
  • September 22 2010
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I think you should purchase if you could afford it.  There are condos going for $90,000 right now and you could do FHA loan on it with 3.5% down payment and your payment will be less than $900/month and you will have equity and tax benefits.  you have to start somewhere and if you wait couple of years maybe the properties will be more expensive and you might be priced out.  The best thing to do is talk to a lender and see what you could qualify for and then start looking for your new home.  There are great deals out there now.  Let me know if I could be any help to you.

  • September 22 2010
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Liebe73,

Good Evening.

Most everyone will have an opinion on your question. Many time it's a mind set. Rates are low and that's a good thing. In many areas there are super deals on homes, however, you need to have enough for a down payment, closing costs should be covered, but to feel safe, you may want to have "x" amount saved for anything that life will throw at you. I started with a 4 plex in NY and never looked back, however, it's my profession, not a once n a while kind of thing.

Run the numbers gather the facts and make sure that you can cover the total amount, including a "kitty" for the what-ifs.

I hope that helps.

Have a BEAUTIFUL night.

-Shawn
  • September 21 2010
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Profile picture for wetdawgs
A good time to buy is when you have a hefty down payment saved up, plus closing costs, plus 4 to 10% of the cost of the house in repair funds plus six months of living expenses in case you get laid off or have another reason for not being able to work for a while.

With $5k saved up, you most likely could find someone who could put you in a house today, but assuming you don't want to move, would you still be in the house in ten years with the house with a good roof over your head, all the utilities working etc or would you be struggling?  I don't know, but know we personally have preferred to plan for the ugly what ifs of life and have been pleased we have.

Getting ready to buy has several steps.  You are doing the first one, and have made progress on the down payment.   There is nothing wrong with having a plan that covers two to five years to get to your goal.

Good luck.
  • September 21 2010
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Profile picture for the_country_hick
I would first ask you a tough question.
WHAT HAPPENS IF you buy a house and the roof leaks, the furnace dies, a window gets broken and you have to pay for all of that? Your $5k is gone. It turned into a down payment and closing costs. What if the plumbing breaks, the electricity stops working and $15k of repairs are needed? How can you pay for any of it?

Repairs can happen. I know someone who is house poor. They want to do some minor repairs and can not afford them. WHAT IF?

To more precisely answer your question look at the links below. You can use your numbers and see which make more sense for you.
"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

Sometimes paying more renting is really the best way to go. For an unconventional way to look at this read the blog below.
"Why rent if you could buy for less money? Valid reasons inside."

Also, look into the foreclosure and bad loans made near you. Then look at the unemployment numbers. Then consider how interest rates going from 5% to 7% take away 23.9% of buying power. That could turn a $200k 5% mortgage payment magically into a 7% $152k mortgage payment at the same level of cash leaving your wallet. I can not see how house prices can not fall when interest rates rise in this economy.

Nationwide foreclosures are coming through 2012. Mortgage modifications (which fail) could push that to 2013. Then you have well over a year supply of housing inventory. So maybe by 2014 or 2015 prices will stop falling and begin to rise. If the economy does not improve it could be even longer. Just things to consider. 
  • September 21 2010
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Profile picture for sunnyview
The New York Times rent vs buy calculator that another person posted here is one of the best ways to run the raw numbers. Keeping your costs of renting and buying close help protect you from instability in the market. 

I am not a fan of renting myself, but you need to make sure that you are financially ready to buy since as an owner you have to pay maintenance costs. I guess if it were me, I would try to save up a little more before buying. The market is not rising beyond reach and even a few extra thousand dollars might give you a better cushion as a homeowner. I think that you should collect information on your market now and keep saving, so that you are ready to buy when you see the right place.
  • September 21 2010
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Profile picture for Liebe73
I am using zillow to research my options but the best you can do is point out my ignorance on the subject. I don't understand the details of an FHA loan only that it allows you to put as little as 3% down so I'm trying to get more information to determine whether or not I should bother with this kind of loan or continue renting at $900/month.
  • September 21 2010
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you have to do your own buy/rent analysis.

However, please IGNORE all of the agents who said it is a great time to buy  due to low interest rates.

Forgive those agents, they can't think so obvious things escape them. They are far too simple to understand anything that requires more than a couple steps of thought.

If rates go up, prices will go down even more, so NO low rates are not a good reason to buy.
  • September 17 2010
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Hi Liebe,

My advise is shop and look, it costs nothing to look around and get familiar with local prices. That way if/when you see something you like, you will know if it is a good value or not.

In addition to the mortgage payments, you have to consider taxes, insurance, utilities, maintenance and repair. When you are looking, also think about selling that house down the road. So try to find something over 1,000 square feet with a basement and garage.

Sounds like you have done your homework on the loan end. Yes, you can get an FHA loan with as little as 3% down and you can also ask for seller concessions of 3% too. Lenders should be able to tell you how much home you qualify for and provide with a pre-approval letter ... these should be free of charge!

Feel free to use my website to search for a home. I also have a property tax estimator on my site. Property taxes can range from 33 mills to over 50 mills, so it pays to check those tax rates!

Contact me with any questions you may have - there are no stupid questions when you have your life's savings on the line. I am a local realtor.

Good Luck Liebe!
  • September 17 2010
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Profile picture for waitingtobuy
"It is a good time to buy. If you wait, not only do you run the risk of higher interest rates but also higher home prices."

You're kidding me right?  People are barely buying with historical rates, tax credit, and supposed great prices.  How's that going to work when my interest rate goes up but yet my monthly budget remains the same?  My advise, buy when the interest rates go back up, let's see what that does to your "great prices".   You get more of a write off anyway...
  • September 17 2010
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Profile picture for broker_GRI
Lieb73,
I'm going to respectfully point out that agents always think it's a good/great time to buy...our livelihoods depend on it.

For the last several years...prices/interest rates have never been lower and before that prices/interest rates were on the rise so..."buy before your priced out!" ? !

I know that my voice will likely end up in the minority here but once again...no rush...no matter what the starving agents say
  • September 17 2010
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Profile picture for dacolan
It may indeed be a good time to buy if local mortgage payments are significantly less than rent, but do not base your decision solely on interest rates. Unless incomes/wages increase proportionally to a rise in interest rates, higher rates will diminish buying power and put further downward pressure on house prices.

The NY Times has one of the best rent vs. buy calculators I'm aware of, and is a good place to start the process:

link
  • September 17 2010
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Profile picture for broker_GRI
Lieb73,
You have plenty of time to make this very important life changing decision.

No rush.
  • September 17 2010
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It is a good time to buy. If you wait, not only do you run the risk of higher interest rates but also higher home prices. And remember that FHA guidleines are changing all the time. When you finally decide that it "is" a good time, the loan may not be available to you anymore.

My advice would be if you can do it now, then it is time to start the process. Interview a few loan officers and find a loan. Then interview a few Realtors and start looking for homes.

Don't wait too long, you may miss the boat! 
  • September 17 2010
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This is a great time to buy, as long as you know your employment is stable.  Talk to a couple of local lenders about FHA financing, so you have an idea of what your monthly payments will be (you need a loan officer who provides good client service).  Talk to a couple of Buyer's Agents to determine what you can get with the monthly payment you can afford (never go to the max of your loan approval - - you need to be able to have discretionary spending).  Choose a Buyer's Agent who is willing to give you personal service.  The Buyer's Agent will protect your interests, but the Seller pays the commission.  You are at a time when the interest rates are at historical lows and home prices are also very reasonable.

Pat Pribisko
Team Pribisko
  • September 17 2010
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My opinion, yes you should buy if you have the means to.  My reasoning, the interest rates currently are incredibly low. 

On a 100K home @ 4% interest rate is $477 a month.  Same home at 6% interest is $599.  That is a difference of almost $44K in interest in a 30 year loan.

Interest rates will go up and they won't go up slowly.  One day you'll wake up and they will have increased, and you've missed an opportunity you'll not see again.

Also check in to first time buyer down payment assistance, many areas have this assistance and it is based on income.

Good Luck!

  • September 17 2010
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Profile picture for broker_GRI
Lieb73,
You should contact some lenders/RE agents and start the process.
There are rent Vs. buy calculators (if someone doesn't post one in the next couple days I'll find it for you)

Take this time to gather all the information you will need.
Pay close attention to the types of conversations that you have with the agents/mortgage consultants.
When you feel they are consulting as opposed to selling...you'll have a great foundation to start with.

Zillow mortgage market place might be one resource to take advantage of.

This can be a very exciting time!
Wishing you much luck,
Tanya
  • September 17 2010
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