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Buying vs. Renting

Discussion in 'Pre-Dental' started by EverClean, Dec 8, 2005.

  1. EverClean

    EverClean Junior Member

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    I have recently been accepted to VCU and my wife and I are looking to buy. The problem is we're expecting our first in April so she'll be staying home with the baby and we'll have little to no income. We do have a nice little nest egg put aside but we're not sure if we should use that as a down payment, put it towards tuition, or use it to pay off monthly bills such as food and utilities- or just invest it and borrow more money from the government. Does anyone know if banks are willing to still loan us money for a mortgage and if so, how do we make the mortgage payments with no income? How would we make rent payments with no income? Can we just borrow from the government and use that money to pay off our loan? Or are we forced to rent if we have no income? Is anyone in a similar situation that could give me the low-down as what my options might be? We have A+ credit so we should be able to qualify for most programs. Thanks!
     
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  3. 1992Corolla

    1992Corolla CheerioKing
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    first check your credit. 600+ FICO will put you in good standing to buy a house with a good %rate. Note you can still buy with a lower FICO...anyhoo. LOTS of people buy houses in dschool. A down payment talks. Get a summer job so it shows you have an income and talk with multiple mortgagers (whatever they're called) and get with some real estate agents. There are 1000's of sites that can help you with buying a 1st home. Do a google. It will take some serious research, but we're in dschool, we know how to look for answers. :D
    Down payment helps too, then pay the mortgage with your loans. You may find that renting costs the same as a mortgage but with a house you're investing.
    Also keep in mind home owners insurance, yearly property tax, maintainance, homeowners fees, etc.
     
  4. WhoooaaaBUNDY

    WhoooaaaBUNDY Senior Member
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    how about a rough idea of an average respectable down payment?
     
  5. FCIllini

    FCIllini Senior Member
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    I'm not sure how the market is near VCU, but across the country, you can still get a great interest rate. The problem the OP may run into is the fact that you will be trying to purchase a home with no steady income. And I doubt many lenders will call your monthly allowance (that you can borrow as part of your school loans) "income". It'll be tough to find a lender that will loan you money, to be paid back by another loan.

    What you should try to do is buy the home ASAP - while you still are showing a source of income. After that, even if you start school & your wife is no longer working, you have the loan/home.

    As far as putting down a large downpayment, I would say put down AS LITTLE AS POSSIBLE. In regards to home loans, money is about as cheap now as it has ever been (6% interest rates). Hold on to the cash you have to help pay the bills and if the market is good, you will start creating equity immediately regardless of the size of your downpayment (and still have cold, hard cash in hand after closing).

    As far as payment amount, I can't speak for other states, but in Texas we tell buyers that their payment (including principal, interest, taxes, & insurance) will be approx. 1% of whatever they borrow. So, if they borrow $100,000, their payment will be about $1000/month. Keep in mind though that Texas has ridiculously high real estate taxes - so in your state, that monthly payment would probably be lower.

    Hope this helps.
     
  6. Ruprick

    Ruprick Senior Member
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  7. EverClean

    EverClean Junior Member

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    Thanks for all of your responses. I've been doing quite a bit of research, seeing what I qualify for- I currently have a pretty descent salary working for a publishing company part time (17 hours week making about 40K/year) while completing my undergrad education. I have excellent credit so I currently qualify for a good sized loan as well as awesome interest rates as long as I do it all before I start school in July because they base it off of the previous 24 months and not future potential salary necessarily.

    I was offered a special program for Virginia first time home buyers by a local loan officer in Richmond (I have several connections out there even though I currently reside in Utah). It's called VHDA which entitles me to a 30 year fixed mortgage at 5.375% and little to no money down. That's a pretty sweet deal considering the rest of the country is looking at around 6% or so.

    The other thing is that the area I'm looking at, Chesterfield county which is about a 20 minute drive away from campus is one of the fasted growing areas in the nation with an average appreciation of 15% per year. Now, I recognize that does not guarantee that it will continue to appreciate at that rate for the next 4 years, but there's a very slim chance that homes will decrease in value over the next four years. Therefore, it seems to me that buying in this area could be quite a nice investment. I spoke to a current VCU dental student who is graduating next year and he did the real estate route and made money off of his first house at the end of his second year, rolled that profit into his second home he has now and will be selling at a significant enough profit to "almost pay for all 4 years of school."

    I don't expect to have the same outcome as he did, and I'm not sure what other risks he took, but even if I could break even after 4 years I still see it as a major benefit because I'd be building even better credit so when I graduate I can qualify for better interest rates etc. I just hate seeing $750/month in rent go to waste when I can get into a home for around $110,000 ($10,000 down payment) and pay 5.375% interest with payments $750/month including property taxes, mortgage insurance, etc.

    The big question I have now is should I do an interest only loan instead so I can get into a better neighborhood and a nicer house? I know I will be moving after the 4 years and an interest only ARM could get me into a better place. I've tried doing some research of my own to see exactly what risks are involved, but does anybody know what would be the smartest thing to do in an appreciating area knowing I'll be moving after 4 years? If I do a 60 month interest only ARM and sell after 4 years, do I pay a penalty? What if I get into a house for $150,000 and sell if for $180,000 after the four years and I only have $10,000 in equity, does anyone know how the end numbers work out?

    (Sorry this is so long, I've been thinking about this almost 24/7) Here's what it boils down to:
    1) Do I do a 30 year fixed mortgage at 5.375% and get into a $110,000 home with $10,000 down? OR
    2) Do I do a 60 month interest only ARM (I know a lender that can lock me into a 3% rate) and get into a $150,000 home with $10,000 down?
     
  8. Hot pickle baby

    Hot pickle baby Membership Revoked
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  9. adr12

    adr12 Senior Member
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    Another thing to keep in mind is that putting down %20 can save you from PIM insurance on most loans as well.
     
  10. Underdawg

    Underdawg Member
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