Good idea or just plain stupid? Home buyer question.

**Seeker** · 06-07-2009, 04:07 PM

Originally posted by akrogers View Post

I am 25, in graduate school, and also working full time in Atlanta, GA. It has always been my dream to live in Savannah, GA and a property that I have been eyeing forever has come down to $100k (from an original $185k). My mother and I are actually going down to Savannah this weekend to look at it. It is a loft in the historical district and is definitely priced to sell at $100k.

Unfortunately, I do not have a job in Savannah at the moment but I am aggressively searching and am confident that I will be able to get one since I have a lot of experience in the shipping industry and Savannah is a major port. Let's just say that I decide that I cannot let the offer go. Would it be wise to close on it and make payments until I have a job and can get down there in it? I know that sounds absolutely ridiculous but let me say that if that were the case then I would move from my apartment back in with my mother. I'm only 25 and mommy will still take me in- so long as I am serious about buying a home and have a target property, but not while I am renting up here in Atlanta (who knows why mothers make the decisions they do). Mark my words, in one way or another I will be moving to Savannah so that's not an issue... so tired of Atlanta.

In the event that the above is not completely ridiculous, would the purchase be considered an investment property or am I allowed to *promise* I will be living in it half the year, or whatever the required amount of time for it to be considered a residence is. I really have NO idea about mortgages and the learning curve for me on this subject is quite slow. Really, I don't even know if I am going to miss the homebuyer credit if I don't buy this year.

If I moved back in with the parents I could not only be paying the mortgage, but be putting a cool $1500 per month toward student loans.

Any advice from someone much wiser than me (pretty much all of you) would be greatly appreciated!

Not really a whole lot of info here (numbers info anyway):

Total Income with current job (from my understanding, you work in Atlanta and will continue to work until you get a job in Savannah -- regardless of the property)?

Total expenses? Both options (living w/folks and as current).

Total debts: Education w/Interest rates? And/or Credit Cards?

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Aside from the numbers above, I wouldn't recommend buying any property until you have a position available to walk into. I have no idea how close or far these two cities are in Georgia.... but it sounds as if you do not wish to commute daily.

Have you checked into positions available in the Shipping/Trade Industry? It is my understanding too, that shipping/trade (for various reasons) are among the hardest hit in this economy. People are not buying, and manufacturers are not producing (although this is rumored to be on the "upturn").

**gamecock43** · 06-07-2009, 04:15 PM

The homebuyer credit ends in December. So close before then and you get the money.

You must purchase a primary residence to get the $8k tax credit. You will be doing that. Even though you dont plan to live there for a few months- as long as the unit is empty at the time of closing and you have provided a letter to your lender stating why you are buying a Savannah property while you currently live in ATL- then they will give you a primary mortgage. And be happ about that because investment property mortgages cost more.

**akrogers** · 06-07-2009, 04:16 PM

I have applied for every shipping job on Craigslist, Monster, Careerbuilder, Yahoo Jobs, etc. I think that I could definitely get a job in exports (definitely on the upturn), because other countries are buying from us even though we aren't importing.

My total income at the moment is $41k, but it doesn't stretch as far as it could because I pay $900 per month in rent. Atlanta rent is high if you don't want to get shot. I am happy to report that I have $0 in credit card debt, just paid it all off. I do have student loans- one for 7k that is 6.8%, one that is 12k at 4.35%, and one that is 20k at 6.8- all of which are currently deferred until 2012 so I have time to pay them down. I am currently putting $500 per month into paying off my deferred student loans which is all of my extra income. If I do purchase in the near future, I used an amortization calculator to estimate that my student loan bills will total around $400 per month. I do have a $1k emergency fund though.

If I were to live with my parents (which, like I said, is only an option if I have a target property) my only expenses will be a small amount for rent to help my parents out with food, gas, cell phone bill, and personal expenses. I could be doing so well if I could just move back home for a few months. I be able to knock out the loans in half the time. I can definitely wait and I think my mom will soften on the moving back home issue after we look at the property. I just don't want to miss out on my dream place.

**wincrasher** · 06-07-2009, 04:23 PM

When I signed my mortgage last month, I had to affirm that I'd establish my residence within 60 days. That seemed to be a standard condition of these types of contract.

I'd say you should be in good shape if you make a similar salary in Savannah. Your mortage payment should be less than $900. You need to check on the condo fee for this building before you put in an offer. Could be the difference in whether you can afford it or not.

Good luck on the job hunt. Maybe you'll get lucky and start making more money.

**akrogers** · 06-07-2009, 04:26 PM

Originally posted by wincrasher View Post

Good luck on the job hunt. Maybe you'll get lucky and start making more money.

Forgot to mention! If I do move up to Savannah I will be doubling up on my classes since I will be a weekend student. This will put me in a position to graduate with my Masters degree next year and will make a jump in terms of income. Unfortunately I've learned that you can't just tell the mortgage people that you are about to get a degree and your earning potential will increase

**Seeker** · 06-07-2009, 11:03 PM

Originally posted by akrogers View Post

Unfortunately I've learned that you can't just tell the mortgage people that you are about to get a degree and your earning potential will increase

Do you have any savings for a 20% down payment? like maybe 20k? -- living with your folks for a year would get you the DP, but you can't be tossing that at the education debt.

How will you qualify for a loan? They'd like to see more than a one year job history...

You have 39k of education debt that you can put off until 2012... but 400 a month debt in 4 years is a good 80% of your "available" dollars now.

If you cannot do this on current dollars, you probably should not get your hopes up too high. If this is a loft in a historical district, you may have upkeep responsibilities and repair costs that will also eat into your budget. Do you have a budget per se?

**akrogers** · 06-08-2009, 04:16 AM

Right now, I have about 6k saved up for DP etc. I was really trying to save up to get 20k for a down payment, but I was told by multiple mortgage reps that I should not put down 20%. I told them that I wanted to avoid PMI but they said that if I go through the FHA that I would have PMI regardless. (Is that true?) They said that I should put down the required 3% and keep my money in my pocket. While I was shopping around, I did get 2 pre-approvals, each for $115k, which I wouldn't even need. (I have over 2 years with the same company).

I think I could swing this purchase in my current situation because I pay around $900 each month for rent, and my mortgage would be around the same amount or less, depending on the DP. Also, the condo fees are only $100 per month.

Originally posted by Seeker View Post

You have 39k of education debt that you can put off until 2012... but 400 a month debt in 4 years is a good 80% of your "available" dollars now.

Can you please help me understand the above? Do you mean that if I let the loans grow then it will consume 80% of my income in 4 years? $400 per month now is only around 14% of my income per month. Actually I am trying to be really aggressive while my loans are in deferment and am putting $500 per month toward each loan now so they don't kill me while repayment time comes around.

**EEinNJ** · 06-08-2009, 06:17 AM

Reality check? You don't have a job there, you don't have enough money for a down payment and closing costs. Just because a property has come down in price doesn't mean it's the right deal for you.
It seems like you're rushing into this. Get a job there and save some more money. Don't listen to mortgage brokers, they are giving you bad advice. Their only interest is selling a loan. Remember a lot of people are in trouble now because of bad judgment and irresponsible lending.

Sorry if that's discouraging, but buying a house can be a risky business, it's a lot of money and a long term investment. It's not just a financial decision, either. It has to be the right place for you, now and for several years.

**akrogers** · 06-08-2009, 06:30 AM

No it's no problem, I just needed a reality check or a slap in the face if I was letting my want for the property get the best of me

**ScrimpAndSave** · 06-08-2009, 07:54 AM

I guess I am in a similar situation. I am 28 years old and living at home but closing on a house in August. I moved home at 25 and have been living there ever since...all the while saving up for a downpayment. I will be putting $30,000 down of my own money and then having some help with my dad to make up the extra 4% to make 20%. EVERYONE on this board has been subject to my house fever...and I have to say that now I am at a place where I have enough to put down...have enough for closing...have enough for some furniture...I am really happy that I aggressively saved for so long.

It's a little scary seeing my bank account deplete so far - but I have to remember that I will have a REALLY nice chunk of equity in my home.

Of course, I am so incredibly lucky to have help from my father...and I realize this is not everyone's situation. But I am so happy knowing that I am able to contribute such a large amount (the majority) of the money. Savannah has a great resale value overall...so get that 20% down. I wouldn't consider doing anything less...

I used to get annoyed when people said, "If you can't put 20% down and have money for closing costs and a small emergency fund - then you can't afford the property."

After looking at the difference of what my monthly payment would be and how much I am saving in interest - I have to say that I absolutely agree. Work on getting the 20% together and see if you can get seller's assist with the closing costs! That was my initial plan. Also assume about $10,000 in your emergency fund...see how things pan out. The more you have saved, the MUCH better off you will be!

**feh** · 06-08-2009, 09:01 AM

Originally posted by EEinNJ View Post

Reality check? You don't have a job there, you don't have enough money for a down payment and closing costs. Just because a property has come down in price doesn't mean it's the right deal for you.
It seems like you're rushing into this. Get a job there and save some more money. Don't listen to mortgage brokers, they are giving you bad advice. Their only interest is selling a loan. Remember a lot of people are in trouble now because of bad judgment and irresponsible lending.

Sorry if that's discouraging, but buying a house can be a risky business, it's a lot of money and a long term investment. It's not just a financial decision, either. It has to be the right place for you, now and for several years.

I agree. Buying a property because you've fallen in love with it is not a good idea.

Housing will not be skyrocketing any time soon - wait until you've got a job in city of your choice, then look for a place to live.

**Seeker** · 06-08-2009, 01:52 PM

Originally posted by akrogers View Post

Can you please help me understand the above? Do you mean that if I let the loans grow then it will consume 80% of my income in 4 years? $400 per month now is only around 14% of my income per month. Actually I am trying to be really aggressive while my loans are in deferment and am putting $500 per month toward each loan now so they don't kill me while repayment time comes around.

No, this money is from the $500 "extra" you have each month on your current income ($400 of which you are tossing into your education debt right now -- that's the 80%). I have no idea what your income will be in the future. And I did not compute the growth of your education debts either. You can (if your forego paying on the deferred education debt) save $500 / month in your CURRENT position and location.

If your mortgage is 900 and rent is 900... that's a wash. Assuming no job change and the current income does not grow and stays the same (sorry, but one never knows about the future -- all I can assume is stability (which in reality does not exist either) and base numbers from current.

In reality, I don't think you can do this now. You don't have the savings for 20% down (and I would not take the advice of anyone suggesting 3%). You don't have a job in the area. The property is in a historic disctrict (which I believe means that you by law, are required to maintain it -- but that too may be a mistaken assumption on my part) and depending on age of the building, that could also require a good amount of dollars.

Find a job in that area first.
See if you can live with folks when you get a job in Savannah second.
Save, third.
Then, pursue your dream. Job history, credit rating, 20k DP for a 100k home, and at least enough of an EF to cover 6 months more of expenses.

**akrogers** · 06-08-2009, 03:37 PM

Seeker, thank you so much for helping me to put this into perspective. I really appreciate you taking the time to explain all of the more technical aspects to me, that's exactly what I needed

**Seeker** · 06-08-2009, 05:59 PM

Here's the answer on your FHA / PMI question:

Canceling FHA mortgage insurance

So essentially it's not PMI per se, but it's something you have to pay regardless. All the same, a 20% DP means that you will pay less of it during the course of the loan... because you've put more in upfront.

Good idea or just plain stupid? Home buyer question.