Profile picture for Sejimenez

Buying a townhome to rent because of good deal, but really want to buy ahouse

My landlord wants to sell me the townhome we have rented for 4 years now and it shows that it is currently worth 140k.  He is willing to give me 10k for closing costs, DP, ect... plus sell it for 130K.  I really want to buy a house, but i don't have the $ for the DP right now.  Would this townhome be a good investment to buy then rent after a few months so I can buy a house or will that mess up things for me trying to qualify for another home loan??? Please help????
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October 29 2010 - Thornton
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To me it sounds like your attempting to get in a little over your head.  If you are sure that you want a house, I would recommend saving and purchasing a home when you are ready.  To jump into buying a town home that you don't necessarily want to own would be a mistake.  If you didn't have any plans of being a landlord it would be best to be patient.  Being a landlord is a lot of responsibility and in this case two mortgages is not better than one. 
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October 29 2010
The first thing you need to do is talk to one or two local lenders for a free pre-approval for a mortgage loan, so you know the maximum funding your lender will give you. The Lender will also tell you about FHA mortgage loans, which have a 3.5% down payment.  Don't let your landlord push you into buying your townhouse.  If you want a house, then buy a house.
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October 29 2010
Profile picture for Nick Zappa
I would get with your lender and see what options you will have for financing, you might be surprised at what is available right now. You might also calculate how much rent you have paid and also get some comps to justify his price. You might be able to have a stronger position after he sees how much you have paid in. I would also consider the house option strongly and do some research as to what is out there.
It sounds like you have some room to negotiate.
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October 29 2010
Profile picture for BryanRoberts23CO
I agree. A home purchase can be a big investment and I think the past lessons show we need to be sure before we jump!
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October 29 2010
Several considerations:

Is the townhome really a good deal?  How do you know it is worth $140,000?  Many properties are not worth what the seller thinks and you cannot go by, county auditor valuations or the ones on Zillow or any other online valuation.

Wouldn't you also need a downpayment for the townhome and how would that compare to what you would need for a house?

Speak with a lender and find out what you can actually afford to do.  If you really want a house, I would look more into that before buying the townhome.

Buying the townhome and renting it later will affect your ability to get a loan for a home.  Any cash you invest in the townhome (down payment, closing costs, repairs etc) will not be available for the home later.  Your debt on the townhome will also work against you in qualifying for a home loan and the income in rental property will not give you full credit against the payment.  Ask the lender about all of this. 
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October 30 2010
 
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