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Old Feb 27, 2013, 07:12 PM   #1
JGC1986
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Buying Our First House - Short Sale?

My wife and I are thinking about buying our first house, but are concerned about the amount we can afford. I have been looking at short sales, but don't know much about them. We don't have any money to put down, and a Realtor told us we could possibly qualify for grants for closing costs/down payments.

Basically, together we make around 43k annually. Right now, I am renting a 2 bed 1 bath apartment (750 sqft) for $798 a month, and it will be increasing 6% in July. I am comfortable with that payment now, but of course would like a cheaper payment.

Any first time home buyers out there that can offer us some advice from their experience? Starting this process is very stressful, and I think its because I am going about it the wrong way.
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Old Feb 27, 2013, 07:22 PM   #2
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I have been looking at short sales, but don't know much about them.
A short sale is essentially a sale where the price the seller receives is less than the amount the seller owes. The lienholder (mortgage company or bank) agrees to accept less than the full amount owed instead of foreclosing. As far as you, the buyer, are concerned, it's all the same; you're making an offer and a purchase.
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Old Feb 27, 2013, 07:31 PM   #3
JGC1986
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Thanks Tomorrow! We are really clueless about this process. Some say a short sale is everything but short and the process is much longer, so I was a little worried.
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Old Feb 27, 2013, 07:53 PM   #4
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people notoriously back out of short sales too. Sometimes it works though.
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Old Feb 27, 2013, 09:22 PM   #5
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A short sale is a exercise in patience. Unlike a regular sale where a seller has the final word, it is a bank that has the final word in a short sale. And they don't care if you have to wait a couple months to find out if they accept your offer. It can be done, but you will need to be deliberate, patient, and calloused to rejection. And you are going to need your own realtor (not the seller's) for this one. A short is complicated enough that you are going to want someone you know is on your side.

Having been through the house buying/mortgage process lately, let me give you some advice.
1) Don't get "house fever". Yes, it is a good time to buy. But a house is a big deal. It can stress your finances, you, your family, and your marriage.

2) Be sure you are in the right financial position. I have heard the following advice time and time again: Have 20% down and make sure your mortgage is no more then 25% of your take home (net) pay. That will go a long way in keeping your house from wrecking you financially.

3) Surround yourself with professionals (banker, realtor, home inspector, etc.). Hire these folks like you would a doctor, contractor, or any other professional - and don't be afraid to seek a second opinion. If any of these folks have the attitude of a used car salesman - run for the hills. Check out the ELP's (Endorsed Local Providers) at www.daveramsey.com. Love him or hate him, he trains people to take care of their clients. I have dealt with several ELPs over the years and have never been disappointed.
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Old Feb 27, 2013, 10:19 PM   #6
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Quote:
Originally Posted by JGC1986 View Post
My wife and I are thinking about buying our first house, but are concerned about the amount we can afford. I have been looking at short sales, but don't know much about them. We don't have any money to put down, and a Realtor told us we could possibly qualify for grants for closing costs/down payments.

Basically, together we make around 43k annually. Right now, I am renting a 2 bed 1 bath apartment (750 sqft) for $798 a month, and it will be increasing 6% in July. I am comfortable with that payment now, but of course would like a cheaper payment.

Any first time home buyers out there that can offer us some advice from their experience? Starting this process is very stressful, and I think its because I am going about it the wrong way.
I am licensed realtor, but most likely not in your state, so take this for what its worth...

If you want to PM me we can speak more, but a few things to point out.

What price range are you looking to buy in?

One potential down side is that short sales can take a a really long time. Basically the banks takes the attitude itll happen on our schedule not yours, and if you facing a timeline where your rent renewal is coming up it could problematic.

If you have no downpayment, you really aren't ready to buy. Good to save up a down payment.

Your monthly payment plus PMI and interest should be about 25% of your take pay home. Which based on your income, would be less than you are paying in rent now. With zero % down that be a house price of $125,000 or less.
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Old Feb 28, 2013, 12:01 AM   #7
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If you are this unsure about your footing I would sit down and discuss everything with a real estate agent. They can walk you through the process and help answer any specific questions that may come up.

As far as the finances go, I do agree that 25% of your take home pay should be your upper limit. That said...I wouldn't go into this unless you are sitting on 20% down and at least $10k in a home emergency fund. If you don't have that, you really shouldn't buy a house right now. PMI is a ripoff and is only going to serve to keep you in debt longer.

My advice....keep renting and save your pennies.
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Old Feb 28, 2013, 01:08 AM   #8
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thanks for the information
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Old Feb 28, 2013, 10:59 AM   #9
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Quote:
Originally Posted by ejb190 View Post
A short sale is a exercise in patience. Unlike a regular sale where a seller has the final word, it is a bank that has the final word in a short sale. And they don't care if you have to wait a couple months to find out if they accept your offer. It can be done, but you will need to be deliberate, patient, and calloused to rejection. And you are going to need your own realtor (not the seller's) for this one. A short is complicated enough that you are going to want someone you know is on your side.
I have heard the same things about short sales. Honestly, since you are a first time home buyer, OP, I would advise against pursuing a short sale.

----------

Quote:
Originally Posted by ugahairydawgs View Post
If you are this unsure about your footing I would sit down and discuss everything with a real estate agent. They can walk you through the process and help answer any specific questions that may come up.

As far as the finances go, I do agree that 25% of your take home pay should be your upper limit. That said...I wouldn't go into this unless you are sitting on 20% down and at least $10k in a home emergency fund. If you don't have that, you really shouldn't buy a house right now. PMI is a ripoff and is only going to serve to keep you in debt longer.

My advice....keep renting and save your pennies.
This is good advice, I second it.
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Old Feb 28, 2013, 11:21 AM   #10
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Originally Posted by Tomorrow View Post
A short sale is essentially a sale where the price the seller receives is less than the amount the seller owes. The lienholder (mortgage company or bank) agrees to accept less than the full amount owed instead of foreclosing. As far as you, the buyer, are concerned, it's all the same; you're making an offer and a purchase.
Exactly the only thing that will really effect you is the time in escrow. Escrow may take a little longer, but a lot of the front end work is down by the seller. You just make an offer and the bank will say yeah or nah. Once accepted they may do a 60 to 90 day escrow. Just like other purchases that involve the bank the bank can say no and shut down the deal all together.
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Old Feb 28, 2013, 11:22 AM   #11
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I'm sorry, but with a combined income in the low 40s and no money for a down payment, you have no business looking at buying a house. With credit as tight as it is, I can't see you getting approved for a mortgage. If you're set on buying a home, you need to start with getting prequalified for a mortgage so you know what you can spend.
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Old Feb 28, 2013, 11:27 AM   #12
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I'm sorry, but with a combined income in the low 40s and no money for a down payment, you have no business looking at buying a house. With credit as tight as it is, I can't see you getting approved for a mortgage. If you're set on buying a home, you need to start with getting prequalified for a mortgage so you know what you can spend.
That is not true, there are plenty of area's around the US, where that would qualify. I wouldn't say go out and look at 500-800K houses, but they could qualify for a nice house that is under 120K say the 70-120k range. He/she is already making a $700.00 rent payment. A mortgage on 120K with today's interest rate would be even less money monthly that he/she is spending now, even with no money down.

Of course I do not know the area he/she is looking to buy in.
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Old Feb 28, 2013, 11:40 AM   #13
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That is not true, there are plenty of area's around the US, where that would qualify. I wouldn't say go out and look at 500-800K houses, but they could qualify for a nice house that is under 120K say the 70-120k range. He/she is already making a $700.00 rent payment. A mortgage on 120K with today's interest rate would be even less money monthly that he/she is spending now, even with no money down.

Of course I do not know the area he/she is looking to buy in.

I don't know about that. Who is still issuing mortgages with no dowpayments?
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Old Feb 28, 2013, 11:54 AM   #14
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I don't know about that. Who is still issuing mortgages with no dowpayments?
There are not many..........very very very few. I know VA loans are one (at least last time I checked)
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Old Feb 28, 2013, 12:00 PM   #15
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A mortgage on 120K with today's interest rate would be even less money monthly that he/she is spending now, even with no money down.
I don't live in the US so this may not be an issue but here that would be risky as hell. Most mortgages issued here are variable rate. So if you are budgeting on todays interest rate and cannot afford the rate to at least double you are asking for trouble.
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Old Feb 28, 2013, 12:27 PM   #16
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I don't live in the US so this may not be an issue but here that would be risky as hell. Most mortgages issued here are variable rate. So if you are budgeting on todays interest rate and cannot afford the rate to at least double you are asking for trouble.
In the US you can get a variable interest rate, however most home loans are of the 15 or 30 year fixed rate.

The variable interest rate is blamed from a lot of the problems we started to see in the US home mortgage fiasco.
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Old Feb 28, 2013, 12:28 PM   #17
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...at least $10k in a home emergency fund.
Excellent advice. I've owned a series of houses over 25 years and they've all cost a fortune just to maintain (never mind upgrade):
  • New furnaces - 2k apiece.
  • New roof - 3K.
  • New gutters - 1-2 K (double that if you want to go crazy).
  • Nice new front door - 1.5K.
  • Regular trim repair/replacement - $800 every 5-7 years or so
  • Complete exterior paint job - ~1K
  • New windows - $$$ (I'm holding out until the glass falls out!)

Bear in mind that a good chunk of the $798 you pay your landlord now goes towards ongoing maintenance on the rental property. You'll be on the hook for your own maintenance when you buy. It won't be hidden in your mortgage payment like it is in your rent payment now. Make sure you can afford it.
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Old Feb 28, 2013, 01:37 PM   #18
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Info from one of the many sites on the topic:
http://blog.amerifirst.com/amerifirs...ome-Buyer-2013

Homeowner's insurance and real estate taxes are also items to consider, as in most cases they will be added into the monthly mortgage payment.
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Old Feb 28, 2013, 02:09 PM   #19
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Info from one of the many sites on the topic:
http://blog.amerifirst.com/amerifirs...ome-Buyer-2013

Homeowner's insurance and real estate taxes are also items to consider, as in most cases they will be added into the monthly mortgage payment.

He'll also have to carry PMI insurance.
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Old Feb 28, 2013, 02:27 PM   #20
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Rule 1 about short sales: They are not short! Last one I did took 8 months. Make sure you go through the property and discount all the new stuff you need to buy. I made an offer about $40,000 less than the asking price, so that I could put tile in, bathroom refresh and new kitchen. 8 months later the bank accepted if I pay all the overdue homeowners association dues ( something like $8000, I believe ). I said no thanks, but if the seller was willing to cover the $8000 that they owed, I'd still be interested in purchasing the property. Week later the bank called and said yes. I now rent it out with new paint, kitchen, tile and bathrooms.

I had 3 short sales fall through before that, not sure if that is normal odds or not, but short sales are definitely a game in patience. If you become impatient it can literally cost you 10's of thousands and 100's of hours of frustration.

Good luck.
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Old Feb 28, 2013, 02:31 PM   #21
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.... We don't have any money to put down, and a Realtor told us we could possibly qualify for grants for closing costs/down payments.....
You need to actually talk to a lender to find out where you actually stand.

And if this didn't give you some very specific information about exactly who, what and where you're going to "qualify for grants...." then you shouldn't be assuming this is true until you can verify that these programs; A) exist and B) you actually can qualify
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Old Feb 28, 2013, 04:20 PM   #22
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Got some work to do on my credit, need to pay some things down...Also student loans are screwing things up...Thanks for all the help though, hopefully this info given by you all can help others!
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Old Mar 1, 2013, 03:13 AM   #23
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I was living in a 2 bedroom 2 bathroom apartment for $830/month. The wife and I bought our first house in 2010 and our mortgage was $667/month, with utilities it came out less than what the apartment rent was. But, with that being said the house was $94k and in NC. Now our second house, is $1799/month and is $248k, definitely to big for just 2 people.
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Old Mar 1, 2013, 03:25 AM   #24
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My only advice is the same as a few posters have pointed out, make sure that you factor in an amount of approx. $1000 per year for maintenance of the property.
Unless you are very lucky you will face repair bills within two years of purchase.
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Old Mar 1, 2013, 10:38 AM   #25
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Please do not get me wrong when I say you can get a house. However you do need to look at everything everyone is saying in this thread. I would not take a grant or second out just to put a down payment down.

Need to look at utilities
House and Property Taxes
Maintenance (You are no longer reliant on the apt manager to fix the problems)
House insurance
PMI if you don't come in with enough down.
etc
etc
etc

Lots of things to think about before you buy!
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