First time homebuyer

[rutgers07]

We generally have a surplus of 1300/month but that's only with about 6% going to retirement and that's without my 2nd job and all overtime. But that's a good point; maybe now is a good time at paring down some of our budget. It's crazy how quickly Netflix and other subscriptions can add up too! You wouldn't think a few bucks here and there add up to much but they sure do.

I did look at some mortgage amortization charts and it sure is crazy. I didn't realize at all that the first few plus years all that money would be going towards interest with only a little towards principal.

[Jluke]

I did look at some mortgage amortization charts and it sure is crazy. I didn't realize at all that the first few plus years all that money would be going towards interest with only a little towards principal.

On the chart, put 50 or 100 (or another amount) extra on during the first year and see how much the interest decreases. kind of becomes a game to see how much interest you can save by paying extra early on.

interest is tax deductible but even that isn't a great incentive, but it's something.

[rutgers07]

Anyone have an idea when pre-qualification makes sense? I'm having a tough time understanding figuring out when to do that. As you know we don't have our 20% down yet and when a bank called us after we filled out the pre-qual app he said they needed to verify the money in the bank which was confusing to us.

[Jluke]

Anyone have an idea when pre-qualification makes sense?

Right before you go out to buy a house. The point of the pre-qual is to show sellers that a bank says you can afford the offer you are presenting to them.

[Eagle]

Also, should we have our down payment ready before we even start looking to get prequalified?

@Rutgers07

We bought our first house in October 2013.

1. Put 20% down payment to avoid PMI (Private Mortgage Insurance). This could easily shave $70-200 off your mortgage payment.
2. Buy a house where you can afford a 15 year mortgage (or 20 years). Worst case scenario go with 30 years and pay it off early.
3. Keep your monthly payment at 25% or less of your monthly payment.
4. Save 6-12 months of expenses. (Why? 3 months for the most part is not enough. Trust me. We spend 3 months expenses on furniture, new fridge, yard items, etc. Plus we had our 2nd kid so think hospital deductibles and co-pay.)
5. Do not purchase a house that costs more than 2 times your annual household income. We qualified for a 170k house. We bought a 135k house.
6. Budget your mortgage payment solely on your income. That way if one of you were to lose a job it won't create such an income vacuum.
7. Consider schools when buying a house. Do you have kids or hope to have any in the future? Location becomes important regarding schooling if you plan on sending kids to a local public or even a private school.

Also don't buy a house simply because you want to get out of a bad neighborhood. Take your time and shop around. If that means renting elsewhere for another year or two while you knock out your debt and increase your emergency fund so be it.

Hope this helps!

[Eagle]

@Rutgers07
Lets get back to the basics. How much debt do you guys have? What do you owe including student loan, credit card debt, car loans, medical bills, and personal loans?


We had all credit card, student loans, and car loans paid off before buying our house. That's what I would recommend.

[rutgers07]

@Rutgers07
Lets get back to the basics. How much debt do you guys have? What do you owe including student loan, credit card debt, car loans, medical bills, and personal loans?


We had all credit card, student loans, and car loans paid off before buying our house. That's what I would recommend.

Forgot to respond to this. Wife has about 50k in student loans, no CC debt, and 16k in a car loan which is @.9 APR. Maybe ~500 in medical bills and no personal loans.

We took a hard look at things and realized we are rushing things because of our current living situation. What's sad is that we just walked outside a few days ago and found a hypodermic needle on the ground (which isn't unusual for this town but by us it is). We may look into just continuing to rent for now while we hammer away at saving up for a down payment and hammering away at the debt.

We need to get a better handle on our budget. I didn't realize how easily money gets lost month to month and I look at our savings and it doesn't grow as quickly as I expect it too. We're working (slowly) on trimming some fat in our budget to accelerate things.

[snafu]

CreditCardFree generously offered the pdf for ynab [You Need a Budget] which has a different point of view of Money Management. I'm not advocating buying this program, but it points out the importance of discussion and planning. Like you, it says so much money gets spent mindlessly.

http://www.youneedabudget.com/downloads/10DayCourse.pdf

http://ynab.refr.cc/X4CF4XD

hope the link works...

Meanwhile I hope you're looking at the housing market in your community to fully understand pricing per square foot, identifying features that are important to you both, tracking who offers the lowest interest rates while doing your best to find the balance between paying down debt and saving for downpayment and closing costs.

We've not discussed 'starter' [initial] home and those 'tricked-out' for the highest profit. Yet another point is the value of various financial institutions and your value to them as a client.

[Jovanny]

Assess your total expenses and income to get a clear idea of your finances. Do set aside funds for the downpayment and utilities for your new house.