waiting for my own terms
In conversations with my Mom over the weekend, I told her about my current My Own Home balance ($9,000.00) and credit score (808) to apprise her of my progress, and she wanted to know why this weekend’s neighborhood tour of houses was a trial run and not actual house hunting. Her opinion is that ten thousand dollars, which I’m not long from having saved, is a fine down payment for a house, and with my credit, I should be good to go. Right now the story is that it’s a buyer’s market, so I should go ahead now, while I’m employed, and move.
First, $10K is still thousands shy of the 10% of the price I expect to put down for the kind of houses I’ve been looking at, and that isn’t even counting the closing costs and moving expenses necessary to get me in the door. I want, for my own personal satisfaction, and for the sake of my monthly mortgage payment amount, to put down at least 10% and have at least another $5,000 (in my emergency fund) available for other expenses. Ideally, I could get some help from the seller or a first time home buyer’s program, at least on the other expenses, but I realize I may not even be able to get that.
Also, a buyer’s market for whom? Not Philadelphians - not unless they’re looking for a condo in particular areas. From what I’ve been reading, the single-family-home market in my city hasn’t missed a beat. Places may stay on the market a little longer, and the prices are a little stagnant, but the houses are still moving. I’m not counting on the media’s wink-wink, nudge-nudge, "Buyers, take advantage of the weak market and buy a house now before it’s too late" message that I’m constantly hearing. I think that depends on your situation and where you are. The last wave of people who bought houses without thinking it through are renting now, if they’re lucky.
I also think that doesn’t mean you can should buy a house with too little down. This is how people come to consider loans that are bad products for them - they’re buying something they can’t yet afford. I’m already anticipating that an ARM will be marketed to me, since I’m putting down only about 10% instead of the recommended 20% and will need to borrow more than 80% of the purchase amount. I need to brush up on my reading (for what seems like the eightieth time) so that when I am mortgage hunting, I will understand the jargon from lenders I don’t trust.
One more very, very important thing. I am employed, but I am a temporary employee with scant benefits and very little job security. Until that changes, no matter what my credit score is, and no matter how much money I have to put down, I have no business entering into a mortgage agreement. Period. Especially with the job market the way it is now. Exclamation point. (That said, I bet other contractors buy homes, and I wonder how they do it.)
I’m just going to have to keep working and waiting and educating myself. (And taking my well-meaning but never-entered-into-a-conventional-mortgage mom’s advice with a rock of salt.) Don’t get me wrong, I am insanely eager. But I’m not much of a gambler.
Keep going with the downpayment on the house fund because it’s amazing how much a house really costs. DH and I bought our home last year with a zero down program. It wasn’t our first choice to do this but the timing was off financially for us. We had just paid off a substiantial amount of debt from DH’s student loan and found our home which was a HUD house that was put on auction with less than $10K in our bank account. Our credit was like yours 820-816 but we weren’t offered those “awesome” rates that everyone always talked about. We got a 100% down with 6.0% interest from a bank which was good for the time but you should have seen all the crazy options that we were shown from the mortgage brokers (they were actually preaching arms to us!). We finally started putting $200 towards prinicipal last month but it would have been wiser to go in with more money, really you are doing terrific and I’m always inspired by your determination.
Thanks Kellie - I keep thinking that no matter how much I educate myself, it can’t be too much, because all those options could be overwhelming otherwise. I am fully expecting this process to be complicated. I just don’t want to rush!
Comment by Kellie — May 20, 2008 @ 9:13 am
Keep doing what you’re doing. I don’t think anyone should rush into buying a home. It’s not like there won’t be houses on the market next month, next year, or the year after!
That’s exactly it - there will always be houses to look at, but either way - now or later - I will still have to be prepared.
Comment by K. — May 20, 2008 @ 10:07 am
HA! Your mom and my cousin must be having meetings. My cousin was already trying to get me to look at houses online in DC and get in because now if the time to buy while the market tanks and since I’ve paid off my credit card, I have money… yada yada. I’m looking at her like she just got finished with a pound of crack. You cain’t just buy a house! O-KAY! I haven’t begun to get my plan together to even window shop, much less start talking mortgages and homeownership. She’s nuts.
You sound like you have a plan. You’re doing better than most people. Just keep doing your thing.
And I highly recommend a homeownership class. I took one and it was a major eye opener. It’s what stopped me from moving toward buying a home while I was down South. I learned that I was just NOT prepared. Not even close. And then the market tanked, so that class saved my life!
Thank you for the suggestion… as I get closer to my target savings amount, I’ll get more serious about finding a first time home buyers’ program.
Comment by Debt Hater — May 20, 2008 @ 10:32 am
“to put down at least 10% and have at least another $5,000 (in my emergency fund) available for other expenses.”
spoken like a financial sister Well, thank you
Avoid ARMs, I will to the best of my ability
I would take it a step further try to get a 15 year mortage fixed, knock it out in 10, you will be a true baller!!!!
In my favorite fantasy, I own my own home outright by the time I’m 50 - or even earlier!
Comment by Moneymonk — May 20, 2008 @ 12:06 pm
You are on the right track, don’t let anyone take you off course. I started looking at home buyers calsses recently. Also, with me being a municipal employee I have great job security and great benefits. However, it does not mean I am ready to buy.
Too many people rushed in which is why we have the mess that is going on now.
You are absolutely right about rushes making messes. This is great about you preparing to buy a home, though! I hope that you blog about it, so we can learn from each other!
Comment by tiredofbeingbroke — May 20, 2008 @ 9:03 pm
Its best to stick to your plan. You have to be comfortable and prepared to march into something like that. My sister pressures me on issues like this. She seems to love to pressure me about having kids and tells me that I’m screwing myself over by waiting. Ugh
Comment by Dolly Iris — May 22, 2008 @ 9:34 pm
Congrats on being so practical! Just because house prices have fallen a lot, doesn’t mean they won’t fall more. I totally agree that you should wait until you have a decent down payment (avoid PMI) and a cash cushion (worst case scenerio problems are always possible).
Comment by SavingDiva — June 4, 2008 @ 11:03 am