Mortgage Question for Young Buyer

[Seeker]

You need to look beyond those numbers. If you buy a condo, YOU are responsible for utilties, maintenance and repairs. You are responsible for taxes. You are responsible for insurance as an owner, not just as a renter. You will need to insure the structure, not just the contents. HOA fees can and do go up regularly. If any significant repairs or upgrades are needed to the complex, owners get a special assessment that can be hundreds or even thousands of dollars. For example, if they decide to repave the parking lot or put a new roof on the building, everyone has to pay their share. So it isn't as simple as just looking at the fixed monthly payment. You need to be sure you have enough room in your budget to cover the many added expenses that come with ownership.

#1
I'm not sure if California laws are different, but when you purchase a condo here, everything exterior is paid by the Home Owners Association fees. For "major" expenses they will come back to each owner and charge a Special Assessment (like painting the exterior, roofing, etc).

Yes, I pay utilities, and insurance on the contents of the condo... but not insurance on the building (as I pay a portion of those fees through the association which does go up regularly due to earthquake fee rises -- which we elected to keep on paying at a HOA yearly meeting vote). Also, I am quite sure that if something were to happen to the building, a Special Assessment would be due. Anyone who pays for insurance on the building is also paying for the people upstairs/downstairs and next to them? Not sure how that would work legally.

And there are also maintenance costs for you internally. Say your water heater breaks down; you are going to be solely responsible for that. There's another $1000 (approx) surprise cost that you will have to accommodate.

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#2
I would also advise you to rent for a period of time.

Make sure the job is a match, and the area is comfortable for you. All financials aside, a mortgage is a commitment. You need to be very sure that the job is right for you before signing that promise.

You can try talking with bankers, but I'm pretty sure that it's going to be difficult for you to get a loan without the job history that they would like to see as far as income. Is the part-time minimum wage been consistent?

A new job that you have not even started would be too great a risk to most financial institutions.

[am_vanquish]

It is the non-financial issues that bother me.

I understand your points, and I agree that financially it is best to purchase but intangibles play a big role. As I said earlier today in another thread, we are risk averse by nature, and must be considered. I'd like to discuss some of your issues and see if you think I'm justifying a pruchase or reasoning rationally.

Make sure you like the job.

The position I've been hired into is an 18-month development program with a pretty competitive selection process. Although the contract I've signed stiupalates that my employment can be terminated at any time, no one in the 12-yr history of this development program has quit/been fired during the 18-months (a pretty hefty bonus for completion of the program helps). In terms of job satisfaction, I could be content in any environment, so I don't see myself wanting to leave. There are 3 other firms in the same area that are hiring now and pay comparably (subject to change in event of recession).

Make sure you like the area. Spend time getting to know the town and what areas you would most like to live.

I've vacationed in this metro area at least once per year for as long as I can remember, so we're familiar with the area and have a few distant family friends in the area who say only positive things about the area we're looking at. We spent a week in the town looking at places and driving through the traffic areas to/from offices/schools/etc. Also, I will be in this city for at least 3 years while my fiancee finishes her degree program. This is the soonest I can foresee us wanting to leave and my biggest concern. If we want to leave in 3 years, will we be able to sell/leave without losing too much. As someone has already mentioned, the market is difficult and I can get a GREAT price on the condo (although the mortgage might be another issue). If we stay for more than 5 or 6 years, I'm confident in the decision. If I want to leave after my fiancee finishes her degree 3 years from our move, I fear we might not do so well.

Sorry this got long, but thanks for the advice guys! Right now, I'm leaning toward calling a lender who has lots of experience with first-time buyers (got his contact info. from one of those family friends) to see what he can do in approval/rates, then re-evaluate and go from there.

[disneysteve]

The position I've been hired into is an 18-month development program

I've vacationed in this metro area at least once per year for as long as I can remember, so we're familiar with the area and have a few distant family friends in the area who say only positive things about the area we're looking at. We spent a week in the town looking at places and driving through the traffic areas to/from offices/schools/etc. Also, I will be in this city for at least 3 years while my fiancee finishes her degree program.

I think this info does change the picture considerably. It sounds like you know plenty about the area. The fact that your fiancee is attached to the area due to school helps, too.

Three years is a little iffy to me, but that's because I think selling a house is a huge headache, especially if you have to do it while living elsewhere. Not everyone shares my hatred of that process, though. I think buying may be a perfectly reasonable option for you guys. The market is down now, so it is a good time to buy, and you don't anticipate selling for at least 3 years and maybe longer. Hopefully, the market will stabilize or even recover some by then.

[Seeker]

I think this info does change the picture considerably. It sounds like you know plenty about the area. The fact that your fiancee is attached to the area due to school helps, too.

Three years is a little iffy to me, but that's because I think selling a house is a huge headache, especially if you have to do it while living elsewhere. Not everyone shares my hatred of that process, though. I think buying may be a perfectly reasonable option for you guys. The market is down now, so it is a good time to buy, and you don't anticipate selling for at least 3 years and maybe longer. Hopefully, the market will stabilize or even recover some by then.

One more thing bothers me, and nobody else has touched on it....

This is an Apartment complex that is being "converted" to a Condo. In other words, not really designed for separate units and I would try to gather as much info as I can about this building before purchasing. How old is it? What can you expect in terms of maintenance? How's the parking?

How much of the utilities are integrated or separate (in other words, do you pay water & power separate for what you use or do you pay through HOA fees (if the pluming does not have separate meters, you will be "sharing" the utilities through HOA fees -- and when people "share" there's not any real control over waste of resources and HOA fees will rise maybe not appropirately).

I'd be talking with the residents in the complex and finding out how they feel about this conversion and how long they indend to remain there themselves. Ask them if there's anything a potential new buyer should be aware of.

Conversion essentially means that owners do not want anything more to do with renting or managing the property. Why? There could be good reasons and there could be negative ones.