1st time home buyer with questions

[jackal2403]

i'm currently looking at homes and want to borrow 30,000 from 401k as a down payment "this is my first home".. i'm looking to spend 175,000 max for a home. i currently have a auto loan that i owe 38,000 on and my question is, do they have loans that can take that auto loan and put it on top of a home morgage. the reason i ask is because my current car payment is 515.00 a month and i would like to elimante that that payment. im hoping to take out a bigger mortgage out to where i could pay off the car loan and only worry about to home mortgage. any help will greatly be appreciated....

[jIM_Ohio]

Sure you can get a loan to do that

the issue is the bank might not qualify you for that program
or if you did qualify, you might be given a higher interest rate on the loan (for example you might pay 5.5% for 30 years instead of 5% for 30 years).

You are going to have 2 loans (401k and mortgage) if you do your plan
why not just do a 401k loan, pay off the car, then get house payment another way?

Most here will tell you to not do a 401k loan to get a house... I have done it twice and my advice would be make the 401k loan as short a term (like 12 months or less) as the plan allows- that way you get the house, but also have the cash flow to pay the bills.

Some numbers for you

i'm looking to spend 175,000 max for a home

The probable down payment you will want is 30% which is $52,500.
20% of the house price is for down payment ($35,000) and the other 10% ($17,000) is for closing costs, moving expenses, and other incidental expenses which always come up when you make such a big purchase.

If you bundle the car into the home loan, you will still want 30% of the loan amount available as cash, with 20% still going down on house (so $175k+40k=$215k, 30%=$64,500 and 20%=$43,000).

As you can see, even if you keep incidental costs down, most banks will not touch you unless you can put 43k down on the house.

Without knowing budget, I would advise you wait on house purchase until car is paid off and focus on money management in interim.

[feh]

Without knowing budget, I would advise you wait on house purchase until car is paid off and focus on money management in interim.

I agree. Owing $38K on a car and planning on withdrawing money from your 401K for a house purchase are clear signs you need to stop and re-examine your finances.

[wincrasher]

I'd agree that you are really not ready to buy a home right now. Having such an expensive car before you bought your first house shows you really need to work on getting your priorities straight. Unless your income is very high, I think you won't qualify for conventional financing.

That said, you are probably better off to go FHA (3% down) and not raid your 401k. You'd still need to adhere to guidelines. Mortgage payment no more than 31% of gross, total debt payments not more than 41% of gross. If you don't fall within those limits as well as have 2 years steady employment, then you should hold on and keep saving, try again in a couple years.

[snafu]

Do you realize if you were to add a car loan to a new mortgage, you would be paying for the car for the next 30 years! Please look at a mortgage payment schedule and realize the 1st 5 yrs you are paying mostly interest, only a few $ monthly on the principal.

By 2040 when the loan was paid off [unless you re-finance and extend it] you will still be paying for a car that bite the dust by 2015.

[segmond]

don't buy the house. or sell the car first.

[wfhouses]

If you are sure about buying the home, you need to sell the car and get one you can pay for with cash. Then take the $515 you were spending on the car and setup your emergency fund.

[snshijuptr]

Realtor.com has a great home calculator that let's you see how much home you could possibly afford. You can set things like the % debt to income and % closing costs. They give a nice conservative estimate and tell you if you need to increase your downpayment, increase your income, or decrease your debt. Its under the Home Finance tab.

[feh]

Realtor.com has a great home calculator that let's you see how much home you could possibly afford. You can set things like the % debt to income and % closing costs. They give a nice conservative estimate and tell you if you need to increase your downpayment, increase your income, or decrease your debt. Its under the Home Finance tab.

Without actually looking at the tools available, I'd be leery of using anything on realtor.com. Their purpose is to sell homes, and the more expensive the better.

Think about how much home you need, not how much you can afford.