Buying a Home (workarounds??)

[ua_guy]

In other words, you aren't poor or lonely enough to qualify. No big deal. Use your good credit and shop around for the best conventional loan. You might be surprised at how negotiable banks are when it comes to things like waiving appraisal fees, origination fees, etc. Definitely worth your time to at least try.

You are absolutely correct. $500k is the going price for a starter home in GOOD shape. I know the area well.

That said, now is NOT the time to buy in this area. I just had two homes go up in my neighborhood under $500k. Multiple offers, bidding wars, some as high as $60,000 over asking. A friend of mine has been trying to buy in Redmond for 4 months and they've been outbid on no less than 4 houses. The market is in a highly precarious position, and I would steer clear until next year. Here's why:

The high prices are due to two things. 1) Extremely constrained inventory. Within that inventory, there's a lot of crap. Good homes are commanding well above market value for only the most qualified buyers, with lots of cash. Why? Appraisals aren't coming even close to sales prices right now. Only strong cash buyers are able to make up the difference (if they feel it's worth it).

2) Interest rates are historically low. There's a rush of people that want to buy at low interest rates because in simple logic, it means they can afford more house. It also means prices are artificially high because of low interest rates. And now that rates are starting to rise, people are getting into this "do or die" mentality and are putting everything on the line to buy a home. That's not necessarily a smart thing to do, especially if your plans are short term (5-7 years). Another correction is coming. People *will* be upside down in their homes again.

My best advice is to put yourself in the best financial position possible. If that's already set, buy very very cautiously and wait for the right deal. A safer option would be to wait until the market cools in the fall, or get an early start in 2014. The only caveat there is that as things cool, inventory will likely be further constrained so your search might be prolonged.

Even as interest rates rise as the fed shuts off the money press, if rates hit 5% again, that's still historically low...

[skhoury]

... especially if your plans are short term (5-7 years). Another correction is coming. People *will* be upside down in their homes again.

I don't really agree with these statements. First, what if the OP wants to buy and hold on to it for years to come, eventually renting it out as he/she transitions to their new home? Also, I really don't think a correction is coming. Yes, the financial markets are a bit crazy now, but I don't think a correction in the form of RE prices will happen. Especially not in highly sought after areas with good jobs, etc. I think a correction in the stock market will occur soon enough (w/i 12 months or so) but that's an entirely different topic.

[bennkar]

If interest rates go up, housing prices *will* go down. The only way that wouldn't happen is if you had severe inflation at the same time (and even then prices might still drop). The big question is *when* the interest rates will be allowed to rise.

The Feds are trying to pull a rabbit out of their hat by trying to get rates to rise very slowly so as to not have housing prices drop. Personally I don't think they can do it, but maybe I will be proved wrong. Thankfully I am not in the market to buy a house as I suspect will be seeing a re-run of the housing slump, just in a less dramatic fashion.

[4theluvofgold]

I know the Bellevue area and 500k is a decent price for something safe. And I hate the 405

The area has forced housing % of income to be higher in that region and lenders are receptive of that. In those areas.

The best method is to do 20%, but there are exceptions where this could be to a disadvantage.

My situation I'm going for Rurual Development. In Bellevue that isn't an option. The home I have found has the capability with improvements to give me 40% equity stake in it. But the 20% down I have would be needed to accomplish this.
I could make a 185k into a 315k home. I would be owner occupy, no flipping planned no cheating the system. But that is the potential. I pay 20% and only owe 148k and have 37k in equity.
Or I take the other option. Improve it to be better living, more efficient (lower heating costs which is a serious cost in Alaska). 185 + the 37k invested 185k owed, 37k spent (if needing it all), 93k equity. It would be over double the extra yield vs putting the down payment on. Remainder from leftover funds from planned down payment would be secured future payments. And with the equity that way, a simple refinance would leave an excellent secured position for any lender and give me no PMI.

Sometimes no down is good if your plan justifies it. If it is just to move into and live in to get rid of rent. It isn't worth the zero down. If you don't have the down payment, then it isn't worth it.