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Originally Posted by billybob
OK- here's my situation:
I have been thinking about buying a house. The problem is, I don't really have any money to put down. Here are my stats:
Current rent- $1200
Outstanding CC Debt- $800
Other Debts- $0
Amount I am currently able to save (once CC is paid off) - $700/month (not including 401k)
Closing costs- I could borrow from parents
Downayment amount - $0
Housing price range- $200k - $250k
What do you think? Does it make sense for me to buy a house with no money down, or should I wait a few years, renting (a lot of $$ down the tubes), until I have a substantial downpayment?
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You really want to be able to put down something, or at least still have a little bit of savings as you take ownership into a house. Remember that you will be furnishing the house and paying for the upkeep (if the roof leaks, its your baby, not your landlord's).
You want to also take into account ALL of your costs of owning a house. If you think renting is a lot of money down the tubes, just wait until you're paying property tax and PMI.
You also want to keep in mind these days that both the realtor and the banker want to get you into a house, no matter whether its good for your financial situation or not. (6% closing costs and 20% PMI)
You also want a loan situation that builds equity and is straightforward to budget against. ARMs, I/O loans, and neg amortization loans are none of these. At best you are treading water; you've traded a landlord for the bank, an entity that knows nothing about plumbing. At worst, your house is sinking you because when the ARM readjusts and you have no savings, your "rent" goes up, and you have to sell.
I know I sound like a doom-and-gloomer, but is saving a pile of cash while you dream such a bad thing?