advice for first time home buyer?

cantsitstillbr · #1 10-09-2007, 01:07 PM

Cliftnotes: Semi-newly wed 23yr olds thinking about home buying. Combined income of 72k. Looking at houses in the 110-140 range. I have no credit history. Any suggestions/what should I expect.

Background:

I'm 23. Married 5 months ago. Currently renting. I figure my wife (23) and I are about 6-12 months out from buying a house. Neither one of us knows much about real estate. We both moved to Huntsville, AL when I graduated college for my job. I work in project-management for a defense contractor. Good industry, good future. She works in retail. We have no plans to leave Huntsville in any foreseeable future. The cost of living is pretty low around here. We dont have kids, and plan to wait until we are about 30. Once we have kids, my wife will not be working.

Financials:

I make 42k/yr. I can expect 4-8% raises every year with my current position/job. However, 100k/yr is a extreamly attainable by the time I'm 30 as long as I switch jobs/positions a couple times. There are like a billion defense contractors in this city. My wife makes 30k/yr and it will probably not ever substantially increase.

Our only debt is 15kish in student loans from my wife. We just finished paying off her credit card that had about 5k on it. Her credit score should be pretty good. No late payments ever. I assume I have a credit score of 0. I've never barrowed any money. I just applied for a credit card last week for the first time. I was given a $1000 credit line. In general I hate debt. I plan on using the card and paying it off each month.

We have about 10k spread accross savings/checking. On our current budget we are saving 2k/month(I assume this will end up going towards a down payment.)

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I think (unless someone has some input on this) we will be looking for a house in the 110,000-140,000 range. I also think I would like to do a 15/yr mortgage. We would plan on living in this house until kids time, so a 3/2, 1250-1600 sq/ft house isnt too small, and is what we are looking at.

Any suggestions/input? Anyone have first-time home buying advice?

BG1124 · #2 10-09-2007, 01:30 PM

Credit history ratings are a very important part of owning a home. In order to get the best possible rate for your mortgage I would recommend 2 things. The first is to pay off that 15k student debt as fast as you can to get it off your credit history. After you have done that, you should probably co-sign with your wife as it seems her credit history is more established than yours with all her payments being on time.

It's good that you've already applied for a modest credit card. It would be a good idea to use it to try to build up your own credit history. I would recommend trying to get 1 or 2 more down the line (after you've had a good history with your first card) to show that you can handle purchasing on credit and making payments on time without a problem.

cantsitstillbr · #3 10-09-2007, 01:51 PM

[ QUOTE ]
The first is to pay off that 15k student debt as fast as you can to get it off your credit history.

[/ QUOTE ]

So given our current situation of wanting to buy a home within the next year, you feel we should pay off the student debt before saving for a down payment? Originally I was thinking along those lines, however recently I've been leaning the other way. The money we are saving is going to go towards on of the two things, which ever makes more sense financially. Your advice is actually the opposite from what most have told me. Are you considering our time frame into your advice?

prohornblower · #4 10-09-2007, 01:56 PM

It seems silly for you all to be buying a home.

Why are you rushing into this? I know that isn't your question, but I'm stumped as to why you feel the need to rush into a home?

cantsitstillbr · #5 10-09-2007, 02:05 PM

[ QUOTE ]
It seems silly for you all to be buying a home.

Why are you rushing into this? I know that isn't your question, but I'm stumped as to why you feel the need to rush into a home?

[/ QUOTE ]

Rent prices for a 2 bedroom apt in our area are aprox 800/month. Rent for a small house is aprox 1100/month. We have no re-location plans. We both hate living in an apartment and would like to get into a house. We also figure it makes more financial sense. Thats about our only reasoning. Why would buying be silly for someone in our situation?

prohornblower · #6 10-09-2007, 02:22 PM

You're so young, and you aren't planning on having kids for 7 years. Why need a big house?

And why do you need a 2 bedroom apartment? 1 bedroom is enough, no? I'm guessing you live in a 2 br apartment because you feel cluttered based on your "hate renting" comment.

I don't know man, owning a home is a big responsibility. It's kind of nice when you live in an apartment and the water heater/washer/dryer/dishwasher/refrigerator/stove/microwave/toilet breaks and you can just call the maintenance dude to fix it.

Owning a home comes with a lot more hassle and stress and mowing a yard. lol.

BG1124 · #7 10-09-2007, 02:28 PM

[ QUOTE ]

So given our current situation of wanting to buy a home within the next year, you feel we should pay off the student debt before saving for a down payment? Originally I was thinking along those lines, however recently I've been leaning the other way. The money we are saving is going to go towards on of the two things, which ever makes more sense financially. Your advice is actually the opposite from what most have told me. Are you considering our time frame into your advice?

[/ QUOTE ]

By paying off the 15k before you apply for a loan as opposed to after, you may be able to save a large amount of interest added on to the loan by getting a substantially better rate. Every case varies obviously, but if you think you can save more by adding to your down payment then by all means go that route. My personal experience has seen that paying off large debts can have significant differences on loan rates, but I encourage you to do your own research for your case. My advice comes from helping a friend throughout his first home purchase after college and my not be applicable to your case.

cantsitstillbr · #8 10-09-2007, 02:33 PM

BTW the student loan is a stafford federal loan with a 3.75% interest rate if that makes a difference. Obviously debt is debt, but I've heard certian debt like federal student loans are looked at differently.

prohornblower · #9 10-09-2007, 02:40 PM

[ QUOTE ]
BTW the student loan is a stafford federal loan with a 3.75% interest rate if that makes a difference. Obviously debt is debt, but I've heard certian debt like federal student loans are looked at differently.

[/ QUOTE ]

I still have $11K left of student loans but am not in a rush to pay them off because I thought of all debts you could ahve, these are like the best. Low low rates and the monthly minimums are really low also they don't hound you when you fall behind.

I'm sort of in the same boat..could pay this debt off tomorrow if I wanted, but I'm looking to buy in 12-18 months and assumed the money would be best spent as downpayment. Basically I'd tell the loan dude "Would you rather me pay this debt off, or put it down on the house?" as I could go either way of course.

EDIT: Cantsit...do you and your wife have any car debt?

cantsitstillbr · #10 10-09-2007, 02:47 PM

zero debt besides that student loan.