Should I buy a house? Can I afford it?

[NickB79]

My wife and I have been thinking of saving up, buying a few acres of land south of the Twin Cities, and building a geodesic dome home. Then last week, we went for a random drive and found that exact style of house for sale 2 miles from my job! 3.2 acres of land, 3 BR, 2.5 BA, a small Ben Franklin stove/fireplace in the living room, built in 1983, and only $179,900!

My wife and I are 29 yr old, already have newer cars that are fully paid off, no credit card debt, credit scores over 700, $8000 put away saving for a house, and our only debt is my wife's $18,000 in student loans ($250/mo). I make $36,000-$38,000/yr as a lab tech in a food safety lab connected to a dairy plant, have been there for 4 years now, and our company is actually growing; we've hired 6 new people in the past 3 months. We're also part of the Teamster's Union, so I have a fairly good feeling of job security. My wife is a pharmacy tech, but due to shift cutbacks at work she only makes $12,000/yr right now.

As it is, we already pay almost $1,000/mo in rent for a 2-BR apartment, not including heating, electricity, garbage, water, etc. We would have to pay $2000 to break our lease early, but we would be able to take advantage of the $8,000 tax rebate that is being offered for new home owners this year. I could probably borrow $8,000 from my family if I promised to pay them back with the $8,000 at tax time next year, which would allow me to put down more of a down payment.

So, are there any financial wizards here on DU that can critique our ability to purchase a home?

[Oregone]

1. How much you putting down?

If you only have the $8 grand, that wont cut it. You will need 100% financing probably, because the closing costs associated with the loans. Hence, you will take out a 20/80, and the $8 grand will dissapear in fees. The 20 is a short term, high interest loan.

[NickB79]

2. We were thinking $12,000

$4,000 of our own savings, plus $8,000 from my family. We could probably put down $15,000 safely though, but that would be about it. The plan would then be to pay bi-weekly rather than monthly to pay it off faster.

[taught_me_patience]

4. Put down 3% and get a FHA loan

It's better to keep cash in pocket and borrow as much as possible in this low interest rate environment.

[NickB79]

8. FHA's are all my coworkers recommend. It sounds like a good idea.

[Oregone]

10. Even with low interest, its not always "better"

Its only better if you can have a better return (or use) on the money than spending it on principle.

Even at 5%, you still pay back 190%+ on whatever you borrow (for each thousand you keep, you pay back an additional $900 if taken to full term). If you sell before full term, you've already paid down the interest before the principle, so borrowing is normally always a losing game unless 1) you can invest the money into a high yield hedge fund ponzi scheme or 2) you need it for critical medical expenses.

Everyone has a whimsical trust and belief in the concept of "borrowing". Break out an amoratization calculator and run side by side comparisons. See what the money will actually do on paper to improve your wealth (liquid/equity) in the short and long term.

[create.peace]

106. here

http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

[kjackson227]

12. ITA.

[pipoman]

26. I couldn't disagree more

Every one (almost) of the people who are now facing foreclosure are on 100% mortgages...bad idea IMHO. Historically there has not been a better investment than your own home, it's a good place to invest your money.

[ohheckyeah]

30. It depends on what the home actually appraises for.

We had a 100% loan but the house appraised for a good bit more than we paid for it. We got 100% financing at 7% for 3 years and then we refinanced to a much lower interest rate. Our mortgage was only about 1/5 of our take home pay so we could well afford it but we hadn't had the opportunity to save a lot of money because of job moves that cost us a lot. Lots of those facing foreclosures were adjustable rate mortgage loans, not just 100% financing loans.

[Oregone]

5. Ok, but do you have anything left over for closing costs?

Which will be $6 to $7K. Without 20% down you will also have to have a high mortgage insurance premiums.

You need to get a good faith estimate before you can run the numbers really.

You will be paying over $1000K in interest/fees monthly maybe. So it takes a bit to break even with a renting scenario. Add in property taxes/utilities/home insurance and home maintenance, and you never know, to be honest.

[REACTIVATED IN CT]

9. Do you have a 401(k) ?

If you need $ for closing costs, you could look into a hardship distribution for those. You can take out what you put in. There will be taxes and penalties but it is an option you might want to include in your analysis

[Oregone]

13. Totally true

Most have mandatory paybacks, but you will get a much better deal than borrowing it from a bank instead. You need to always leverage your wealth (liquid and otherwise) as much as possible.

[MercutioATC]

20. With many 401k's, you can take a loan against your contributions.

(not your employer's matching contributions, just what you've put in)

You pay your 401k back as you would any loan and there are no tax consequences.

[XemaSab]

64. Paying a million dollars in monthly fees?

XOMG!

(I think you added something extra to that number. :P )

[Oregone]

66. haha. Yeah

I mean $1K a month, unless you got really, really screwed by your mortgage company :)

[taught_me_patience]

3. Yes

Traditional guidlines used to be 3x income, but with interest rates so low, you can easily do 4x income.

However, the number one guidline should be: "Are we prepared to live in the house for ten years if need be?"

[NickB79]

11. We're prepared to live the rest of our lives in south-central MN.

It's close to where we grew up, our families are here, close to the Twin Cities, and despite all that our Republican governor has done, we still love the state.

So yes, we are prepared to live in this house for at least 10 years.

[taught_me_patience]

16. Go for it!

Bargain hard and good luck.

[liberalmuse]

6. Go for it!

If you buy a home before 12/1/2009 there's also the $8,000 tax credit. It looks like you will not have a problem getting a loan for $179,000 at your income. Get a good realtor and have him/her check to see if there are any programs in your state that will help you put up a 20% down so you won't have to pay mortgage insurance, and then there are FSA loans. Washington state has 'Homsight',which will give you enough of a loan for 20% down at 3% fixed rate interest. You can also defer this over 30 years. There might be an equivalent program in your state.

[ohtransplant]

54. Good point!

There's also recent info that the $8000 can go directly against closing costs somehow when using an FHA loan. The realtor should be able too fill in the blanks.

[dionysus]

7. i'd say you're in great shape to go for it, just be responsible with your personal spending.

and interest rates are good.

[MADem]

14. Are geodesic domes popular in that part of the country?

Do you think that house will move in a hurry? Or will it sit on the market for a while? In other words, can you take your time and run out your lease?

Do you think you could shave some off the asking price?

How does that house compare to others in the 'hood, cost-wise?

Is the home in good nick? Have you had a guy go look at it, to inspect it for issues?

Have you been in it yet, to see if you really like it and not just the idea of it?

Do you now how much it will cost to heat it, etc?

Is it on town utilities, or are you dealing with a well and septic of your own?

[Oregone]

17. Good questions

Im surprised how many "Go for it" people are here.

When you add in the costs of borrowing against the price of homeownership and the potential ability of liquidating the asset later in life, a much different picture can materialize. Sometimes for the better, and sometimes for the worse.

As someone who is paying a mortgage on a home I cant sell, in a country I don't live in, after Ive put down $20K in principle, $40K in improvements and $28K in interest, my picture looks a tad bit blurry. Home ownership isn't everything its cracked up to be always. Appreciation almost never keeps pace with interest payments, expenses, taxes, and realtor fees. Life isn't so black and white.

[MADem]

23. I should have also asked "What are the taxes on it like?"

And "Is this a regular sale, or a foreclosure?"

Sometimes forclosures have issues--everything from people trashing the place in anger, to ripping out the copper pipe and selling it for spare cash. Sometimes, too, there's back taxes owed on the thing, or there's easement issues. Gotta get that title insurance!

[NickB79]

51. The home has been on the market for over a year

It was listing a year ago for $194,000, so the price has come down quite a bit. It could very well be that the unconventional design of the home is to blame for the lack of interest in it. The problem is that our lease doesn't expire for another 9 months, so we would lose out on the $8,000 tax rebate for first-time homebuyers :-(

Cost-wise, it is at least $40,000 less than a comparable property we looked at last week, and is much closer to work for us.

We haven't seen this home yet in person, just the virtual tour on the realty website. We have set up a showing for Friday.

If we like it, we will DEFINITELY have a home inspection before proceeding further.

Heating-wise, the house should be quite a bit more energy-efficient than a comparable house due to the geodesic design and construction.

It is on a private well and septic system.

[Grinchie]

53. Offer 125,000 and go from there

Never be in a rush to purchase any property. If the cards have been dealt, you will get it, otherwise don't sweat it.

My rule of thumb is to look at the past history of an area and offer 40% below what that price was.

Although, I believe that 40% below may be too generous looking at the trends to date.

While it may have acreage, it really depends on the lay of the land. Steep, scrubby land is hard to make productives, and will cause premature aging if you plan on doing any agriculture. Not sure what your climate is like, but lots of water is always good when you have acreage if you want to grow any crops.

There are so many factors is selecting good property that I recommend looking at as many as possible while building up your unless Hyperinflation kicks in abruptly, which is the current thinking on the street.

[quiller4]

69. If the property checks out , yes buy but do some homework first.

Make any offer contingent on the results of a home inspection. You also should have the well checked. Having owned and maintained rural property, I know something about the cost of well work.

You should be able to find out what the current assessed value of the property is and get details of past sales from the county assessors office. In my area you can do that research online at the county web site.

If everything checks out make an offer contingent on your ability to get financing putting the smallest amount you can down in an earnest money agreement. Given what you've stated, I make a purchase offer somewhat less than the current asking price and I'd probably retain the services of a local real estate attorney to handle the transaction.

Investifate Farm Home Administration--the other FHA- as well as FHA financing.

[MADem]

73. Virtual tours give one a nice idea, but keep in mind they're designed to

lure you in, not highlight the leaky roof or the bad window joins.

Make sure your home inspector does a good check of the well and septic.

Is the tax rebate a federal thing or a state thing? I'm not in the market so I haven't kept up. Any chance it will be extended? What controls? The day you sign a purchase/sale agreement, or the day you occupy and make your first mortgage payment?

Maybe you can do both--ride out the lease AND buy the place?

If you can possibly see the thing when it is raining like mad, do so. I've always had great luck with houses that I've looked at in rainstorms. You definitely get a sense of if the joint leaks.

If you make an offer, lowball it in a big way. You can always do some dickering.

Also, check out what the real estate taxes are, and how much the town is saying it is worth. If you get it for less, make them lower your tax assessment.

Most importantly, find out WHY the place is being sold. Who owns it? The BANK? If so, they're dealing with carrying costs every month--taxes, particularly, even if they've got the lights turned off.

You might want to take a camera (video or still) and take pics while you look at the place. It helps to refresh your memory when you go home and "talk it over." Also, if the lights are off, bring a big flashlight.

Good luck. Take your time, be critical and reluctant--you'll get a better price!

[Dappleganger]

93. Make sure to look up your area's SUPERFUND sites

http://www.epa.gov/superfund/index.htm

If the house has a well you need to make informed decisions about what is seeping into the water.

[rox63]

15. Go for it!

Even though my mortgage is currently upside-down, I don't regret having become a first-time homeowner. Markets change, and real-estate values will eventually recover.

Also, don't forget about the mortgage interest deduction you'll get every year. Because of that, I have actually started looking forward to tax-time, because I know I'll have at least $2K coming back to me as a refund. You'll never get that from renting.

[Godhumor]

18. You don't need to borrow the money (Advice for anyone pursuing FHA)

Find out the yearly taxes, so you get a better view of yoru monthly payment.

Does your state require that a year of taxes be filed in escrow? If so, add that to your closing.

That said, borrowed money is generally not allowed to be counted towards closing, as you must show money earned (When we closed, any deposit made over $1000 not attached to payroll or tax refund had to be explained with documentation.). However, you might be in luck, because FHA loan holders can allowed to pursue the 8K grant now to put towards closing:

http://portal.hud.gov/portal/page?_pageid=73,8026894&_dad=portal&_schema=PORTAL

"FHA's rules allowing state Housing Finance Agencies and certain non-profits to 'monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments."

[izquierdista]

19. Go for it!

The numbers you gave all sound pretty reasonable, so I would advise yes. You've got to have some place to live, and if this is a house you like, you will be taking an expense (rent) and turning it into savings (equity). But be sure to negotiate to get a better position: offer less than the asking price, see if you can sublet your lease, shop around for a good fixed interest rate loan that you can pay down faster than 30 years.

Good luck with it!

[Dappleganger]

21. Not a wizard

but it sounds like a great thing that you've found the house you want so close to your employment! Building a house is pretty expensive and there are always, ALWAYS extra costs involved. It is highly stressful as well.

Like someone else mentioned, try to put down as little as possible so you can have the emergency cash on hand.

[TexasObserver]

22. Invest in having a new appraisal done of the property.

Make sure the appraiser understands your concern that you have current values, rather than values based upon sales from one or two years ago. The county tax appraisal may be higher than the current fair market vallue.

It's very important that you not overpay for the property, even if you can afford the note payment. If this place is only worth $120,000, you need to make sure you don't pay more than that.

I know you want that type of home, but you need to understand that there are few buyers for such homes. It's a very small percentage of people who find such homes acceptable, so financing in a bad real estate market may be more difficult than with a standard home. Also, if you buy it and then find down the road you need to sell, you will be looking at far fewer potential buyers.

From a financial standpoint, it appears that you are able to swing such a purchase. I would not do anything quickly, however. This property is not going anywhere, except maybe foreclosure. People who have their homes on the market now don't have any choice. They likely have to sell. It's a buyer's market, and time is on your side, not the seller's side.

[pipoman]

24. The problems which led to the current mortgage issues are demonstrated here

25 years ago before bank deregulation and before mortgage requirements were dropped this is what you would have been looking at.

180,000 home. 20% down could not have been borrowed or gifted...you had to demonstrate that you earned it or it had to be in your name for 1 year before you could use it for the down payment, thus you would need $36,000 down payment. In addition your total debt, including credit cards, autos, student loans, AND mortgage (including principal, interest, taxes, and insurance) couldn't exceed 35% of your gross income.

These rules are what kept most people out of trouble.

The result would be that your $8k down payment would limit you to around a $40,000 home. Your gross incomes of $50k would allow for no more than around $1450 per month all inclusive. So your PITI house payment couldn't exceed $1200 per month after your student loan payment. So depending on your taxes and insurance rate, you would likely be in the $900 Principal and interest area. So P&I payment on $135k is $898 (7% fixed for 30 years).

Google 'amortization calculator' to find your payments. This will only be principal and interest, taxes will vary with the property and insurance will vary depending on local area, flood hazard, etc.

My advice if you were my son would be to either wait and save up more money or better yet, find a property which is far less expensive with good potential for an increase in value over the next 5-10 years. Avoid the 100% mortgage trap at all costs. Starter homes are called that for a reason, they allow you to build equity and start with equity. The biggest problem which can be foreseen is that you have to get out from under the payments. If you are on a 100% mortgage, this will be impossible for some time to come, if you start out with an 80% mortgage you should be able to sell at any time without having to pay out at the closing. The appreciation on the property combined with the original down payment will make the 36k down more doable in a few years. Just my $.02.

[Godhumor]

31. Bad advice in this market. Current issues have a lot more to do with Alt-A lending

than not having 20% down payments on fixed rate loans.

&8,000 in the bank is low for this kind of purchase, even today, and you still cannot claim a gift towards closing or downpayment for a fixed rate loan (As I stated earlier FHA borrowers can receive the 8K tax credit now to apply towards closing). That said, with rates what they are, it makes a lot more economic sense to buy now if you can.

Let me apply this to your example:

Say he waits 3 years to earn 20% down and buys a house at 180,000 at the 7% you made an example of (Also, a decent assumption for a couple years from now, I think). His monthly payment is roughly 958 dollars. Let's say he buys it now with 3.5% down and at 5.5% (Average FHA rate from earlier this week). His payment is roughly 986 dollars. Not exactly a compelling reason to wait if he can put together the closings costs in the next few months.

Heck, even assuming he locked in at 7% today at 3.5% the difference is less than 200 dollars a month. Economically, if you can qualify for a fixed rate loan and you can cover closing and prove good "dollar sense" there is absolutely no reason to follow the 20% rule.

Edit: Should add that the payments do not include PMI which you would have to pay monthly until you hit 20% equity (Usually between $20 and $100 a month depending on the value of the house, etc.).

[pipoman]

114. The OP may be fine

in general, I think it is a terrible idea to borrow 100%. And I disagree as to the cause of the current issues.

The change in lending standards which made 100% loans the norm, completely changed the way people bought homes. There suddenly was no impediment for young first time buyers to start in their real estate market by buying their "dream house". For decades before the deregulation and lowering of mortgage standards first time buyers particularly were forced into purchasing smaller homes in older neighborhoods, often investing in improvements, building equity for a period of time, then selling their "starter home" cashing in their equity to make the larger down payment for the nicer property. This period also served to solidify the younger buyers financial status and their job time making catastrophic loss of income less likely. This system kept the housing market in check, toward the end of the housing bubble new homes were selling at an unprecedented rate against existing property.

There used to be a show on HGTV which each episode followed the purchase of a first home by a young person or couple. It demonstrated this week after week and I knew that we were headed for trouble (it didn't take a Pulitzer economist to see). Every week a new young buyer(s) would tell of their entry level job as they were driving their new car(s) around looking at $200k to $500k real estate. It would come time for the closing and the host would explain that the buyer had no down payment and was hoping to finance enough additional to buy all new stainless appliances, living room furniture and maybe a new entertainment center. Then off to the closing they would go in their new cars, finance 80% for 40 years with a 5 year interest only deferment, and 20% which was actually 25% to enable the purchase of all of the new amenities desired. The payment totaled 50% of their gross when you looked at PITI payments. There has never been another time in history that I am aware of that lending practices have been so lax for such a long period. This is the basis of our current housing/mortgage problem IMHO.

[tomreedtoon]

25. No, and no.

Save your money for the firearms, bottled water and survival rations you'll need when the economy has its final crash and the rioters start tearing up your neighborhood.

[prolesunited]

27. Seriously?!?!

[CoffeeCat]

29. Yeah, that's an option too...

I think there's about a 75 percent chance of your scenario happening.

However, the part of my personality that enjoys the warm glow of denial, just
answered the OP differently.

Any idea on when the shineola will hit the fan?

[NickB79]

52. LOL, already have the guns and ammo piled up

Seriously, I am well-versed on the doom-and-gloom forecasts for the future. I have all the survival gear I need in a worst-case scenario. If the shit truly hit the fan, I have my dad's side of the family in rural, central MN to move back in with. All family farmers, each with hundreds of acres of land to work on and live off of.

Trust me, I have that part covered.

[CoffeeCat]

28. In this economy, do some research...

Is this house listed with the County Assessor in your area? In our area (Des Moines) there
is a County Assessor home page, and every house in the county is listed. Included on this
page are details about how much the home is worth, the price the current owner paid for it
and major renovations that have been done to it.

This will give you a good idea about what the property is worth. Sometimes, if a previous
owner overpaid, they will try to price the house higher, to recoup a loss. Don't fall for
that.

Look up the house on the Assessor's page. Google the address as well. Find out who owns
the home, and Google them as well. Find out everything you can.

Also, use www.zillow.com which also gives extensive information on most houses in the US. It's
a great resource.

Also, when first putting in a bid, I would go well below asking price. They can always reject
your offer. However, they may accept it. This person may be in dire straights or may have
all ready moved--and be willing to take a much lower price. I haven't seen the house, obviously,
but I don't think it's unreasonable to go 20 percent lower than asking price--even lower. I have
talked with so many people lately who have put in outrageously low bids that were accepted. I know
someone who put in a $220, bid on a $300k house and it was accepted immediately. You never
know...

Also, is this house listed with a realtor and is there a sign out front of the house? If so, don't
call that realtor. They work for the seller. You need to find your own realtor who will work for
YOU! Someone who will negotiate for you.

Another tip...when we purchased the house we are currently in--we felt the asking price was near fair
but we wanted them to go down a bit. They wouldn't budge. We told them the price was a bit high
and they stuck to their guns. So, we had a friend go through the house--then when the realtor called
our friend to find out if she liked the house, she said, "It's a bit too pricey". So, when we called
back a day or two later, they were a bit more open to negotiation and they did go down a bit. Underhanded?
Sure. But hey--we felt they were being unreasonable by refusing to negotiate at all.

This is just my 2 cents.

[Telly Savalas]

99. Take what Zillow says with a huge grain of salt.

My next door neighbor's house has been on the market for about 6 months listed at roughly the price Zillow has cited for our house. His house is considerably nicer than ours. So if he can't move his house at that price, there's no way in hell we could sell ours at that price.

Moreover, the zillow price is about 150% of what we paid when we bought it a year ago.

That said, it may be a good tool to get relative values of houses within a neighborhood, just not absolute ones.

[Lars39]

32. I wouldn't do it.

Just gut instinct here, but if you have to borrow money for a down payment, you aren't ready to buy. The house also sounds too expensive for your combined income. I'd look for a cheaper house. Also, debt is debt. Pay off the student loan. I don't mean throwing everything you've got at it, but making serious inroads on paying it off while also continuing to save money.

One of the big mistakes people make is trying to pay off a large debt but not saving money at the same time. Best case scenario is to be debt-free, have a sizable down payment and buy less house than you can afford. By buying less house than you can afford, you are leaving yourself wiggle room to pay it off early or to cope with some sort of financial disaster.

All it takes is one or a few bad cases of luck and you could be losing the house, especially in this economy. Just my 0.02.

[Godhumor]

34. I agree the house is expensive for what they saved

But a certain amount of debt as percentage of income is desirable when applying for a mortgage--it shows ability to handle debts. Please note, I am not disagreeing with your assertion that, in general, it is better to be debt free, but it is important to note that for a loan a debt ration needs to be beyond 0 to be favorable.

[Lars39]

36. Showing that you paid off debts in a timely matter should be worth more

than being in debt.

[Godhumor]

38. Sadly, it is not always true

Carrying a zero balance causes your credit score to go down which negatively affects your mortgage application. Odd but true.

Edit: This applys for school loans, etc. as well. No school loans means you might have received money from family, etc. You don't have a history of handling debts. Paying off school loans all at once shows the possibility of being "gifted" the money or earning it as a one time bonus. Proving you can make regular on time payments is extremely desirable.

[Grinchie]

57. Bingo on pointing out the Gimmick to promote debt...

Of course, it doesn't make any sense in the real world, but to the Moneychangers, it almost forces people to carry debt in order to maintain this illusionary thing called a Credit Score.

Of course, it's not illusionary when they use it to deny credit, but it has served it's purpose.

[Godhumor]

58. One of my friends carried a zero balance credit card as his only credit

His loan officer's advice was to buy a TV and let it roll over for x number of months to build credit.

[Grinchie]

55. Good advice.

It is more important to be liquid and have the assets to find those once in a lifetime bargains that are all over the place these days.

While I have my proerty needs covered, I'm set to pounce on the really good opportunities that show up without warning. It is much better to have the ability to be flexible in this environment than to tie yourself down, especially if it is the buyers first time in buying property.

So many people fall for the Home Ownership marketing that they don't do a proper business plan and calculate how long they could survive with the current assets on their back, and the amount of cash they have in savings.

Always add Insurance, Taxes, Telecomm, Heating, Electricity, Water and maintenance costs into the annual outlay for Mortgage as well. A lot of people don't seem to associate those ancilliary costs of the Money pit of a home, and wonder why they can't make ends meet after food, clothing, healthcare education and entertainment.

[Ms. Toad]

72. Ditto on that advice.

I am all in favor of home ownership over renting BUT only if done wisely.

First, you should have savings in the amount of about 6 months of living expenses socked away that you don't need to touch in order to buy the home.

Second, you need to have enough saved to make a substantial down payment.

Third, I always advise underbuying (3x your income or less).

The first two have as much to do with whether you have the habits that you will need to survive if there are bumps in your financial road as they do with having the cash on hand. In addition, houses can come with unpredictable and large expenses (furnace konks out, roof leaks, toilet runs over while on vacation and takes out two floors). If you can discipline yourself to put aside that kind of money, chances are you will be able to handle an economic downturn - or large emergency house expenses, particularly if you underbuy rather than overbuy.

When we bought the house we live in currently (19 years ago), we were pushed (by lenders and the real estate agents) to spend the maximum our joint income would allow on a home. We knew that 30% of our income was disappearing at least temporarily when we moved - potentially for 5-6 years. We bought a house at double the income that we knew was continuing.

That income vanished 12 months later. It was replaced by an income equivalent to 30% of our combined income at the time we bought the house, which we lived on with some adjustment for inflation for nine years. We were able to survive - even with most of our savings intact because we had developed habits that favored saving over spending on luxuries, and had bought a home that cost considerably less than we qualified to borrow.

There will be time enough later, after you are better established, to buy a bigger, fancier house - in the mean time, think small and concentrate on spending less than your paycheck each month to get ready for your dream home down the road.

[ohheckyeah]

33. I think I would find a realtor

and first run the comparables. Find out what the house is actually worth in this market.

You can ask the seller to pay the closing costs. We did and the seller paid the closing costs. We had maybe $500 out of pocket for the whole thing.

Don't forget tax and insurance when figuring your payments. Is the house in a flood zone? If so, what would flood insurance cost? Is the house near a fire station? (Proximity to a fire station and hydrant can affect your insurance rates.) What would your regular insurance on the house cost.

Be sure to get a home inspection if you decide to buy and you can also ask the seller to purchase a home warranty for you - it costs about $400 - $500 a year. If they won't buy it consider purchasing it yourself. We did and we ended up having to replace the heat pump. The total cost to us was $60 for a new heat pump. We also purchased the home warranty that covered the hot tub and it saved us about $400. If the home is older and you know that you are pretty sure you are going to run into problems with the heating and cooling unit, or appliances it would behoove you to purchase the home warranty beyond the first year. We did and we used it a number of times. In two years it probably cost us between $700 and $1000 (I don't remember the exact cost and we had hot tub coverage as well) and saved us at least $5000 as it also paid for a repair to the refrigerator and well pump.

Be sure you understand what you are signing before signing.

Owning your own home can be a complete joy but it's a lot of responsibility. Remember to factor in costs to purchase things you might not have and will need like a lawn mower and weed eater.

[RufusH]

35. Sure is a good time to. I would if I were you. I doubt prices will get as low as they are now.

At least I hope not, my home has already lost all its equity in the last 3 years.

[county worker]

37. You cannot borrow a down payment. It has to be a gift.

At least that was the rule years ago.

[Godhumor]

It varies, but for many banks it now has to be earned

Not borrowed or gifted. Usually verified when you formally apply for a mortgage through a pretty intensive review of bank records.

[IdaBriggs]

39. I was taught to take your income, and double it --

That is how much house you can afford to buy (minus any down payment).

You can therefore afford (per those calculations) to buy $100,000 worth of house, plus your down payment.

I would also be leary of 'banking' on your wife's income as you are both in primary child-bearing years, and the reality is you might not be able to depend on her income for a period of time. (I spent 5 months on bedrest, and then my twins came early; if my husband hadn't made enough to support us, we would have been homeless.)

Good luck! :)

[ContinentalOp]

45. Thank god that's not how the lending industry was operating over the past decade!

Otherwise nobody in California would have been able to purchase a house. In 2000 the median family income in L.A. county was $39,942 but the median home price was $215,900. I would say quadrupling your income is more like it. That's roughly what my wife and I did and we have no trouble making our payments.

[NashVegas]

67. Yeah. Wasn't the Housing Bubble and Mortgage Crisis FANTASTIC? What Would We Have Done Without It?

[ContinentalOp]

70. Oh yes, I forgot it was the people buying houses who are to blame for the crisis!

Heaven forbid we should the possibility of home ownership within reach of most Americans. Only the elite should be allowed to own property.

And of course banking industry shenanigans and nonsense like mortgage backed securities had nothing to do with the crisis.

[NashVegas]

78. People Buying AND Selling

4x one's income as acceptable housing was a con job.

[ContinentalOp]

84. It works for me. It's nice to know you don't think my mortgage is acceptable though.

I'll ask for your permission next time.

If you buy a house that's 4x your annual income, with a 30 year fixed mortgage at say 6%, your monthly payment would only be about 28% of your monthly salary. And that's with no money down. If you can't make that work, what the hell else are you spending all of your money on?

[NashVegas]

92. My Calculator Is Different From Your Calculator

That would be 35% and it doesn't include anything for maintenance

I could make it work, but I'd have nothing left for savings and a life. There are these little things that happen like medical emergencies, "downsizing," gas prices doubling, etc, etc, that tend to fuck with tight budgets and send people into bankruptcy.

[ContinentalOp]

96. Hmm, it's still 28% over here.

Say you make $50k a year, buy a $200k house with a 30 year fixed @ 6%. Your monthly payment would be $1199, which is 28% (well, actually closer to 29%) of your monthly income. What am I missing? :shrug:

[NashVegas]

100. Taxes + Insurance

etc.

[ContinentalOp]

102. Well, yeah I'm not including those obviously...

since I have no idea what they would be in another state. If we include those numbers we should also include the writeoff you get from the mortgage interest.

[taught_me_patience]

48. This is much too conservative

3x used to be the norm but now 4x is ok because interest rates are so low.

[tammywammy]

56. Maybe that's because you're in California

I just bought my first house two years ago and was told 2 to 2.5 times your income is how much house you should buy.

[NashVegas]

68. "Norm" vs "Optimal"

What you and others seem to think is "norm" is high-risk and it caused this little thing called "mortgage crisis."

[taught_me_patience]

74. I have to disagree

I worked at Countrywide Home Loans in the Subprime lending division and have a great perspective of what caused the mortgage meltdown.

1) 100% financing made it too easy to walk away
2) Bush allowing loan forgiveness to not be taxed as income accelerated foreclosures as people could walk away with just an impact to their credit.
3) Subprime borrowers who had no business buying homes. I saw plenty of loans to people with 550 ficos.
4) Alt-A loans
5) Extremely high leverage. For example, the median home price in California was 500k while the median income is 50k. We're talking 10x leverage here. 4x income is NOT a problem.
6) HELOC abuse.
7) Macro Economic factors (job losses).

[NashVegas]

75. Of Course You Do

You were there to make a profit off of it.

[taught_me_patience]

77. I did not profit. I worked on a salary

that had no relation to profit. I was disgusted with the "mania" in housing and predicted its collapse well before most.

[NashVegas]

80. Meaning You Got Paid

Most people call that profit.

[ContinentalOp]

79. Republican propaganda.

The mortgage crisis was not caused by home buyers. Tell me how did I help contribute to the crisis if I bought a house that's 4x my annual income and yet am able to easily make the monthly payments? :shrug:

[NashVegas]

81. The Mortgage Crisis Was Caused By Everyone Involved. EVERYONE

Just as corporations convinced themselves to count access to debt as an asset to be used, so did the average idiot.

As for how you could afford it, I'd guess ARM from the sound of it. This is, of course, assuming you're still in the same place making the same payment.

[ContinentalOp]

85. No ARM. 30 year fixed. 6.5%

Our monthly payment is about 21% of our monthly income. What's wrong with that? :shrug: It's about the same percentage of my monthly salary that I was paying in rent years ago anyway.

[NashVegas]

94. "I Bought" "My Income" "Our Payment" "Our Income?"

Which is it? 4x YOUR income, or 4x your AND your partner's income?

[ContinentalOp]

97. Want me to just send over my tax returns for you to review?

:P So my writing was inconsistent. 4x our combined income.

[NashVegas]

98. Sure Why Not?

:P

Everything I'm coming up with, even with taxes, points and insurance taken out of the equation, comes out at .2877 at lowest .. this is going up to a 742k home w/no down. How high you have to go to get to .21? (Should I assume you are applying mortgage deduction to make the gap?)

Regardless, most people don't make that kind of money. Most people - like the guy who started this thread - would have only a few hundred dollars a month left over after mortgage, taxes, insurance, utilities, and food. Now, add in clothing, add in gas, add in savings. Add in entertainment - oh, you don't.

[ContinentalOp]

101. Oh, sorry for the confusion.

I wasn't including taxes or insurance, and we put 20% down. So I was comparing the original purchase price to our current monthly payment, which is on a loan amount that is much smaller than the purchase price after the downpayment plus seven years of payments and a refinance.

And I will concede that these kinds of personal budget considerations don't really scale with income. So the whole discussion is kind of moot. 30% of a million dollar income is nothing while 30% of a $20,000 a year income might mean the difference between eating or not, after all other expenses are figured in.

[ContinentalOp]

103. I also just realized another major source of confusion.

I'm self employed and am counting my pre-tax income while most people probably think in terms of their take-home pay with taxes already taken out of their paycheck. So that also explains why my numbers are off.

[NashVegas]

109. Gotcha

g'nite :hi:

[NashVegas]

82. delete

agh.

sorry

[NashVegas]

83. self-delete

[quiller4]

87. When I bought my first house in 1973 the lenders' rule of thumb

was the loan amount should be no more than triple my gross annual income and my mothly house payment including reserve for property tax and insurance should be no more than 30% of my monthly take home. I bought my first house with Farm Home Administration non-farm contract with no down payment and the rate was only 3%. That was a program to help lower income folks purchase rural homes.

Today most lenders are willing to look at loans that are 3-4 times annual income if the credit score is good and there is little other indebtness.

[taught_me_patience]

89. Interest rates on a 30 yr were not 5% either back then

It makes a huge difference when talking about debt to income levels. 4x is ok in the current interest rate environment.

[BeFree]

40. Make lowball offer

Can you peel off an acre and sell it, or build another dome on it and sell?

House prices will never return to the level they were, or even where they are today unless hyperinflation hits. Then, if you keep getting raises, you will be paying the house off with inflated dollars if you live that long. Good luck!

[NNN0LHI]

41. It will be difficult acquiring a loan for a geodesic dome home

Not impossible. Just difficult. At least it is around here. Same for log cabins or anything other than a conventionally designed home.

Reason being if someone doesn't make the payments and it goes into foreclosure it will take a "certain" person who will be interested in purchasing a non-conventionally designed home so they are hesitant about loaning money on them.

Hate to be the bearer of bad news on this. And I am sure you will eventually find someone willing to finance the home. Might just take a little shopping around?

Good luck.

Don

[Uncle Joe]

59. Which is kind of ironic because

I believe a geodesic home would stand a better chance of survival than a squared off house with sharp corners, should a tornado occur, although neither would withstand a direct hit.

[colinmom71]

42. My gut says no....

I firmly prefer the "3 years income = maximum house price you can afford". This house is way over your current income caps, following that rule.

But the real reason my gut says not yet is that your math doesn't account for funds that may be needed for emergency home repairs. You'll be paying the maximum monthly mortgage payment you can possibly afford with your current combined incomes, and that's not accounting for the chance that our wife's hours may be even further cut back in the future. If you have an emergency repair issue come up, where will the money for that come from? Considering that geodesic dome homes are custom builds, you may find that repairs are more expensive than for say a simple ranch style house (thinking particularly of any roofing or foundation issues).

I'd recommend that your first step here is making an appointment with your local CCCS for some financial counseling and get an independent professional opinion on whether you can afford that house. Include questions on issues like the escrow for taxes and hazard insurance, a home warranty, and establishing a repair savings fund. Have the CCCS counselor run you through a pre-qualification process to see how much house you truly can afford.

Good luck, and I hope it works out well for you!

[ContinentalOp]

43. Go for it. There's too much financial handwringing here.

If this is your dream home, if it's exactly the home you were looking for I would say buy it! You're not going to find a geodesic dome for sale every day, and building is a nightmare that you may not want to get into. My wife and I bought a house that was probably not exactly what we wanted or needed and now we're kind of stuck in it. If you pass up this house, some years down the road you're probably going to buy another house that's not a geodesic dome and regret passing up this opportunity. If you're already paying $1000 a month rent, this mortgage payment should be really similar so I don't see much of a downside. Put in a low offer and see what happens.

[Grinchie]

62. Get the Dream Home idea out of your head - There is no such thing

To perpetuate this myth is promoting disaster. There are no proeperty's that are too good to pass up if the financials are not right. If they aren't and you lose it, "Your Dream Home" will be taken by the Bank or Bankruptcy Trustee" without a second though, leaving you to cry in your beer.

There are simply too many besutiful properties out in the world right now, and the only way to choose is with financial sense with an eye toward furture value, such as agricultural capability, location, climate and environment, taken into account with the Overall cost of ownership?

The only way to do this is to take your time and look around. Don't be afraid to take ladders, gloves and work clothes. Don't be afraid to walk the corners. Visit at all hourse of the day.

And that's only after the financials work out. It's ok to walk away from a Dream Home. Another will show itself sooner or later.

[ContinentalOp]

86. The dream home may be a fantasy...

but "agricultural capability"!? WTF kind of fantasy land is that? I can't even be bothered to engage with the rest of your post if that's the point of view you're coming from!

[create.peace]

104. I totally agree.

i have owned 10 homes in three distinct areas of the country, built one of them, built a triplex next to one of them. i had the dream home at least three times, but the dream relationship only once, now, living in no ones dream house. you have no idea how much money in maintenance you will be paying, you may be paying 1000 per month but no taxes, insurance and maintenance. owning a home can be great, but you want wiggle room for circumstances you can't foresee. my daughter and my son both bought homes about the price of the dome you are looking at, but they put more down, and still have money in the bank and no student loans any more. they are 29 and 32. one is married. if you can find a home for 135-140k, you will be in better shape. my two cents. btw, i sold real estate during the reagan recession in montana, interest rates were 16% fha.

[Yo_Mama]

44. Questions

I can't tell whether you can afford this or not.

Your P&I on a $170,000 loan is probably going to be around $973. Add MI, taxes, and property insurance. Find out those numbers as well as heating, utilities etc. Then sit down and figure it yourself - WITHOUT TRYING TO FIGURE ANY TAX BENEFIT. Tax benefits should generally be reserved for emergency fund/maintenance. How long do you expect to keep your cars? If you are going to have to replace one or both within the next 2-4 years, figure it as if you had that car payment already.

This type of home is not a strong seller, so that is a real drawback. Your chances of taking a loss if you had to move are very high.

Before you even considered it, you would need an independent appraisal plus an engineer's inspection to tell you what the real maintenance would be. You should pay for these yourself if you are thinking of doing it, although if you go FHA I believe they will require it.

But first you need to sit down and really discuss things at home. Do you want to have children? It seems to me that this purchase might require deferring them.

Because I am not familiar with geodesic homes, I cannot figure how much you two would need to save each month to cover expected maintenance. The worst trap I am seeing is that first-time homebuyers are getting in too deep, and then they cannot maintain the home.

How much do you two currently save per month on your current income? Tough economic times are going to be with us at several more years, so your chance of significantly increasing your income are much less than experiencing a slow decline in real income.

Under no circumstances should you two overpay for this home. Right now you appear to be on the way to financial security and independence, but if you overpay for this house, you may find yourselves in a much worse situation a few years down the line.

A couple of guidelines:
1) Don't buy if you won't be able to start out with two months mortgage payments in the bank, and keep them there.
2) Don't buy if buying will prevent you from saving at least $150 a month for expenses.
3) Don't buy if you really want to have children and you are not both prepared to do what it takes to stay in this place, including deferring children if necessary. Otherwise, you mess up your marriage, and you may wind up losing your marriage AND your dream home.
4) Don't buy if you aren't prepared to stay 7 years, because it could well be that long before you even recover your dp even if you don't overpay.
5) Don't buy if you have to borrow from family. That is a signal that you can't afford it and shouldn't do it.

The advice about always leveraging up is horrible. Your income stream will be relatively fixed, so every time you incur debt, you reduce your ability to save and control your risks. Your goal at a minimum, given your position, should be to get to where you have enough revolving cash to never have to finance a car. That alone, over the course of your lifetimes, will net you about $200,000 extra by retirement. (Figuring two cars, two incomes). The savings come from no interest, cheaper insurance, etc.

Most people who end up in financially secure positions do so by always living under their incomes and saving. Life is always going to throw you some rough patches, and if you have to borrow more to get through them, you'll wind up in your fifties having to hit the lotto to feel like you can retire by your later 60s.

My hunch, although I can't know, is that you can really afford this only if you two commit to buying used cars for the next 10 years and adopting moderate lifestyles otherwise, as in no vacations, deferring kids, etc. The most you really should be borrowing is 150K, so you are going to be about 20K short.

[taught_me_patience]

47. I agree with most of this

except "The advice about always leveraging up is horrible. Your income stream will be relatively fixed, so every time you incur debt, you reduce your ability to save and control your risks"

At 29, the OP can expect his income to rise significantly over the next twenty years. His wife's income is $12k/year. It will likely rise a lot in the future too.

[Grinchie]

63. Ah yes, a 7% Growth Person...

While that may have worked in the past, the days of 7% growth are over.

Don't count on it, because it can end overnight as soon as they outsource their jobs.

I would have agreed with you in 2000, but after watching the DotCon Bust, and the destruction of the IT Industry almost overnight, I'm skeptical.

[Yo_Mama]

76. No, No, NO

Their income over the next 20 years is not relevant to this decision. Their income (and expected expenses) over the next 3-7 years is. Most foreclosures occur between 3-5 or 3-7 years. For this type of home (less marketable), you have to use the 3-7.

Yes, his wife could earn more, but the reason she isn't earning more is that she has had her hours cut due to the bad economy. Unemployment in Minnesota is over 8% as of April and rising. It will probably continue to rise for another year or so. Mortgage interest rates are rising.

If they get into the house, they will not be able to get out under their own power (by sale) for some years. Thus overleveraging themselves now is quite risky. The tax credit is a point for buying now, as are lower interest rates. However, mortgage interest rates are rising, which would imply that even if this is the "right" price, the house will devalue further within the next few years. So they are going to end up underwater or close to it within a couple of years.

If they could carve off an acre to reduce their indebtedness, that would help. Without that they'll end up with about a 170K mortgage and 18K in student debt, for a total debt load close to 190K which is about 4 times their gross income. If they have to buy a car in three years, that will take them up probably to around 205K.

Leveraging only works when you leverage yourself just enough. If you overleverage, you get into a situation in which you have to keep borrowing to deal with reverses, which happen with some regularity. I'm not saying they should never buy a house. I'm saying they may not want to buy this house right now.

Assuming no federal income tax, their FICA plus state tax is going to be around 12%.

So 38,000
- 4,560
__________
33,400

$2,786 a month on which to live. If total P&I, property tax, prop. ins, MI add to $1,200 a month, that leaves them $1,586 a month. I'm not sure they can get MI on this, which may be a problem.

-$250 student loan leaves them $1,336. -$150 required savings leaves them $1,150 a month. That is doable or not depending on their current living standard. If they are currently saving $500 a month, it's probably not doable. If they are currently saving $700-800 a month, it may be.

They probably pay at least $300 a month for auto/medical insurance. Utilities and phone? $150-200? You have to eat and buy clothing. Heating in that climate is probably going to be at least $250 a month? I think the next car payment would put them past their safety zone unless they are willing to go used, omit vacations, etc. If they want kids in the next 5 years, I wouldn't recommend it.

You generally have to give up a lot for your dreams. Before buying for the first time, couples are well advised to figure out what they are going to have to give up and try living on the resultant budget if it is a significant change for at least six months.

If they really can swing it, they might see if the seller is willing to hold the second, which would get around the MI problem.

I always wanted a geodesic house myself! I understand the draw.

[taught_me_patience]

88. One correction

they make 50k, not 38k, so their take home is 3,600 not 2,800. An extra 800/mo helps a lot in this case. Also, the OP stated that his company is doing good and is expanding. This suggests that there is room for income growth within the next 2-7 years.

I agree with what you said below wholeheartedly. However, the OP said he'd be happy to live there for over 10 years, so this is less of an issue.

***
If they get into the house, they will not be able to get out under their own power (by sale) for some years. Thus overleveraging themselves now is quite risky. The tax credit is a point for buying now, as are lower interest rates. However, mortgage interest rates are rising, which would imply that even if this is the "right" price, the house will devalue further within the next few years. So they are going to end up underwater or close to it within a couple of years.
***

[Yo_Mama]

110. Yeah, yeah, you're right

I've been in shock since I read about the various medical plans. I may not be normal for several days. I never in my life thought it would come to this. I asked my husband what he thought at dinner, and he is just as stunned as I am.

I keep subconsciously taking the wife's income out of it because I am wondering if she wants to have kids. That is really the major issue for this couple. On her current income, it would hardly pay them for her to work and pay daycare, so that's why. If they can defer or don't want kids, the picture changes quite a bit.

People are so very different in how they live that it is almost impossible to say whether they can do this or not. They'll be a bit overextended by standard terms, but if they are willing to live a very conservative lifestyle, they can do it. But I think buying this house would make it impossible for them to have kids for some years, so I think that's a question they need to settle together. I have known quite a few couples who got in real marital trouble from putting themselves in that position. It's not worth it.

It is quite illegal for a creditor to ask that question, which is why I keep harping on it. If the economy weren't so tough right now, I'd think there'd be more wiggle room. See, they are making it now on their current income, so if she could increase her hours for several years and they banked it, they'd be fine if she wanted to have a kid in three or four years. But it's not that realistic to expect her to do that right now, and the employment picture will get worse before it gets better. She'd be working those hours if she could get them.

There might be more negotiation room on the place. When they figure out what they can really do, they could always make an offer. I like the idea of trying to split off an acre or so to take the mortgage down a bit more.

[taught_me_patience]

113. You have given great advice on this thread

welcome to DU!

[Matariki]

46. Yes. Sounds fantastic.

even if you have to scrimp on things for a few years, you'll quickly catch up - rents will continue to go up and your mortgage will not.

[SoCalDem]

49. BUY IT..if it's for a PLACE TO LIVE, and not for an investment

Since it's a "specialty" home, if there are no offers and no one particularly hot to buy it, you might even get it for less than you think.

We are of the school that says put down as much as you can, and get those payments (30 yr fixed) as low as possible. Pay it off early , if possible.

There is no feeling in the world like having affordable living expenses, and having a paid off home BEFORE retirement.

If you are looking to live there a few years and then move-up, this advice may not be applicable :)

Happy Hunting :)

[Dead_Parrot]

50. Sounds good

I'm guessing you could do quite a bit with 3 acres... ;)
The only thing I would add is to have a good look at the land with respect to water supply & flooding potential, and checking if there are any regs on land use and/or new buildings which you may want at some point.

What's on the land at the moment?

[earth mom]

60. I wouldn't buy that type of house simply because they are hard to resell.

I know you love it, but you may change your tune later and then you will have a tough time selling it.

I'd keep looking for another place. There has to be some great buys out there right now.

[CTyankee]

61. DO YOU HAVE A BUDGET?

Sorry to shout but you need to draw up a budget and put a line item for household repairs/maintenance in it. Unless you can do some of these repairs yourself, such as carpentry, plumbing and flooring, you will end up with expenses. We had to keep up with other houses in our price range so that when we DO sell we will be competitive. That meant house painting, an updated kitchen and baths, window replacements, carpeting, fencing, heavy landscaping work, upgrading of electrical service and installation of air conditioning, new furnace, replacement of vertical plumbing pipe. You name it, we've done it.

Of course, we bought a house built in 1941, so it's a bit different. Even tho some improvements had been made over the years, there were always more...

I keep $1,000 in the annual budget for just maintenance.

[NashVegas]

65. You Can Afford a House. You Can't Afford THAT House

You should hold the line at something that's about $110k, but preferably less than that.

It's not enough to be able to make your mortgage payments. You've got to be able to put money into savings after you send the check out each month.

PS - a mortgage calc shows you'll wind up paying $467,674.30 for the house over the course of the loan.

[ChimpersMcSmirkers]

108. I agree. Try to find a cheaper house.

Other things to factor into buying a house are the maintenance and usually higher heating/cooling/electricity costs. I own a 20 year old house that will need to be painted and have new shingles put on. Appliances die and need to replaced. Expensive stuff. Keep it in mind when figuring your budget. A very rough guess might be 2-5k a year. This site says 1.5-4% of the house price. http://www.coldwellbanker.com/servlet/News?action=viewNewsItem&contentId=700662&customerType=Buyer

Good luck!

[montanto]

71. Buy it!!

By the time you write off the interest you'll pay less than rent, you'll build equity, along the way your pay will increase, and in a few yours you'll be glad you did. My first house payment was $1400 per month and I was scared. Now that would be nothing. You can't get a decent appartment here for that.

[JVS]

90. How long-term and safe is your job? Is there a smaller cheaper option?

That's a lot of house there

[aikoaiko]

91. ball park esimate: you're on the line.

Anything goes wrong and you're in trouble. risky but doable. I forsee lots of beansand rice and lots less entertainment in your lives.

[Mike 03]

95. Not now. I would not do it unless I could pay with cash. NT

[create.peace]

105. no wonder what kind of loan make sure you have NO penulty for prepayment from the beginning

then you can make one extra payment at least every year and cut down your length of the mortgage. get a fixed rate, you can always refinance down the road. http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx
amortization calculator

[create.peace]

107. sorry, penalty

[ima_sinnic]

111. check USDA Rural Guaranteed Loan Program: 102% financing with no PMI

I am closing on a house here in Maine in less than 2 weeks that I am financing through the USDA Rural Guaranteed Loan Program. Is the house in a "rural" location? The program is designed for purchase of rural property and to help people who don't have a down payment. No private mortgage insurance is required, because USDA IS the mortgage insurer. Only certain lenders do these loans. I am working with a mortgage broker, and would highly recommend that, rather than individual lenders. There are income guidelines (125% above the poverty line max), but I believe your income would fall within the guidelines. It requires a FICO score of 640 minimum, but it sounds as though you are fine on that.
The USDA fee is 2% of selling price, but because the loan can be as much as 102%, that is covered by the loan.
There is also a USDA Direct Loan program, but I think the income guidelines are much tighter for that.
More information: http://www.rurdev.usda.gov/rhs/common/indiv_intro.htm

Tips: if borrowing any money for closing costs, do it NOW and have it in the bank for 60 days before you apply for a mortgage. That way, you will not have to account for it. Within 60 days of the application, they will want to know the source of any funds. If you DO need to borrow, a relative can write a letter "To Whom It May Concern" a few weeks before closing stating that he or she intends to give you X amount of dollars and this does NOT need to be repaid (whether or not it really does). The relative will also have to provide a copy of a bank statement proving that he or she really does have the money to give. That last part seemed kind of loathsome to me--I had been thinking of asking my brother for a little help to cover my closing costs but hated to ask him to send his bank statement to the mortgage broker, so I scrimped and scrounged and got it all together on my own.

Buy the book "Mortgage Rip-Offs and Money Savers" by Carolyn Warren. It explains all the hidden, potentially unnecessary, and negotiable closing costs and fees.

I found that working with a realtor was very helpful. She was good at looking OBJECTIVELY at a house and knowing all the ins and outs, when things in the process should happen, paperwork needed, etc. Here in Maine, the seller must pay both the seller's and the buyer's agent, so a realtor did not add anything to my closing costs.

You could also ask questions at the Mortgage Loans forum at myfico.com. Mortgage lenders hang out there and give very helpful advice to specific questions about eligibility, financing, and other aspects of getting a mortgage loan.
http://ficoforums.myfico.com/fico/board?board.id=loans

[BoneDaddy]

112. Wow that is funny...I was looking at some geodesic home specs

just today.  Good luck.

[NickB79]

115. Thanks to everyone who commented on this thread, it was VERY informative

Unfortunately, another couple just put in an offer at full asking price, so we're not going to pursue this property. But, the discussion here has given me a lot of information to consider and the impetus to do more research into everything that purchasing a home entails. I even appreciate the input from those here telling us things we didn't want to hear :) We're going to wait until next year when our lease runs out before moving, which gives us 9 months to save more and look around for other properties and first-time homeowner assistance programs. And with any luck, the $8,000 tax rebate will be extended into 2010.

Thanks again, everyone :hi: