What would you do?
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| Wed, 06-29-2005 - 9:30pm |
I am asking on Real Estate and Debt Q&A too, and if anyone here has advice I would really appreciate it. I have to decide between trying to buy a townhome now or waiting until next year. Here are my two options.
Option 1 is buying something now. The problem is whether I can swing it financially. I have the income to afford the mortgage, debt ratio and the other (housing ratio I think) are both good, 28% and 36% respectively. Moving would be good because it would put me closer to work and I'd save on gas and tolls. I also could put dd in public school vs. the private kindergarden she'll attend if I stay where I am. The school she's at now costs $945 per month. If she went to public school, I'd have to pay for before/after school care but that would be $200-$300 per month vs. the $945. Right now rent is $1,000 per month, and I figure I can afford a mortgage of $1,500 or $1,600 fairly easily.
Option 2 is wait until next summer. The benefit of waiting is that by next summer I could have around $11,000 saved up to put toward a down payment and closing costs. The down side is spending $6,000 for additional child care costs during that time. If I could get a mortgage now, I would still have $11,000 above my monthly bills to save, the extra $6,000 would go toward the mortgage instead of the school, I'd have a home that was hopefully rising in value and giving me a fat tax deduction.
When I checked a few weeks ago my scores were 670, 678 and 718. I had a mortgage before when I was married, unfortunately for most of 2002 we were delinquent all year (30-90 days late) due to my ex being irresponsible and not wanting to tell me about it (I found out when I pulled my credit bureau to check it out because I had applied for a job at a client). I also had two collection accounts from 2002 that were my fault, both were around $100 and were paid right after they went to collection. I have one credit card I had used infrequently and they charged me an inactivity fee that I didn't realize, and that gave me a 30 day late it was one year ago. Besides that I have credit history back to 1990, several revolving accounts in good standing (21% of available limits are owed), one car loan paid in full from 1998-2003 and a current car loan I got in January, some student loans which are in good standing with good payment history.
To get a mortgage now, I'd need 103% financing because I only have about $1,500 saved up. Is that enough? Would it work? I know they say closing costs are usually around 3% of the selling price, but when I bought a house in 2000 I swear our closing costs were around 8% including putting property taxes in escrow. I remember the relator saying something about Pennsylvania having a lot of fees/charges that can't be avoided. What are the chances I could get a 103% loan without all 3 credit scores being over 700? I know my interest rate would be higher, would it be worth it? If prices rise the same townhouse could be more expensive next year, plus I'd lose out on the tax deduction, I'd keep having to drive a longer distance to work and paying those higher private kindergarden fees.
What would you do?
Edited 6/29/2005 9:35 pm ET ET by firstamendment


Wow - that's a tough one.
All my best,
Danni
Thank you. Unfortunately prices are on the mark for a 3 bedroom townhome in the this area, I mean in the inexpensive areas (still nice areas though, about 1/2 hour from where I work). Where I'd really like to live (really close to my work) the townhomes are in the $350,000 range, and know there are some in the $400,000s. These aren't homes, they are just regular sized townhomes! It's outrageous because I bought my 3 bedroom single family home with a huge back yard in 2000 for $128,000. We sold it when we separated in 2003 for $171,500 and thought we did great. Who knows what that house is worth today, but I don't even like to think about it.
I know I could swing an $1,800 per month mortgage (my budget has me living on $11,000 less per year than I bring home), and I might be inclined to go for it given that the same townhome next summer could be $50,000 more expensive and interest rates might be higher too. The question is would someone lend me that kind of money with none in the bank, will 3% cover the closing costs, and will they believe I can swing that mortgage payment, and I guess I will only know once I ask. I have never heard of an 80/23 loan, only an 80/20 one. The benefit I know is that you can avoid PMI because the primary loan is only 80%. Do you know where I could find out more about an 80/23 loan and who might offer those?
I would start with talking to people you know and asking if they have any recommendations on who to go with in terms of mortgage brokers.
All my best,
Danni
All my best,
Danni