Saturday, July 18, 2009

I really need your advice!

Ya, you!

If i get my own one bedroom apartment, I'll only be able to save 6,600 next year towards a condo. If i stay with my roommate, I'll only be able to save 10,200.00 towards a condo... The government will give me $8,000.00 for free if i buy by the end of November...

I want that 8,000 since I've decided it's this year or next... and if it's next i'll essentially have less money since $6,600 that i have to save is less then a free $8,000

So, I was re-looking online at a complex that lost it's FHA approval because it had 52% of the place as renters. It's in a really cute neighborhood, near the new church building site, close to boyfriends family... and not in the city I work for... =)and has a lot of amenities. It's nice, gated, in a good area, and I'd get a garage with this one bedroom (which is nice to know that my car is safe.)and the building is a lot newer then some of the other places I've been looking.

The only thing is that because it's not FHA approved, I'd have to have a 10% down payment (not the 3.5% with an FHA loan). The listing price is 139,900 but because it's not FHA approved, its still an active listing. (because people don't have money for down payments.)If i keep my closing cost estimates as a guideline, I'd need approximately 20,241 to cover everything ( the closing costs, down payment, and a few hundred to help cover the rent of my current apartment that i'll be short each month while I'm paying for a mortgage)

I have $12,817.66 in my house down payment fund.
I have $1,500.00 sitting in my Florida vacation fund
I have $1,283.28 sitting in an account to repay myself for buying that extra work retirement.
in 2 weeks i'll have the remaining $2,000.00 to deposit in my Roth IRA...

all together that's $17,600.94

I have $7,000 in an emergency fund... (which i could borrow $2,640.06) from and still have $4,000 as a cushion. I also found out that if roommate looses her job, we an walk away from our apartment without any penalty fees so if i get a condo, and she gets fired, we can just end our lease on the basis of that and i won't have to fork over the whole rent money.

That gives me all the $$$$$$ i need.

In January when i get the $8,000 i can max out my roth ira for 2009. I'll also have gotten my raise by then so i won't need to pay back the purchase retirement money (1283.28) I can put my emergency fund back in tact and still plan the Florida trip.

At the end of August (which is more likely the time i'd have to close escrow by and fork over all the dough if i make an offer on this place in 2 weeks when i get paid again, I'll have another 1138.95 to toss toward the house downpayment fund... so i'll only have to borrow $1500 from my down payment fund.

Essentially, i'd make money on the deal in the long run because the government would be paying my closing costs... and I'd have 10% equity in the property.



  1. I would do it because you will be getting the $8000 back. Your job seems pretty secure so even if you have to dip into your EF, it should be ok. It is nice to have equity in your first place right off the bat. It seems like a good financial move.

  2. I would do it, I'm also trying to get a house before November that $8000 looking good to me also. Now is the time to buy and the price looks good, OTOH how would your bills change in a new place have you looked into that yet?

  3. I wouldn't touch my emergency fund. I would borrow the extra money needed from my ROTH IRAs, doesn't ROTH allow you to borrow & repay? Eliminating your roommate from your living arrangements I believe would give you great peace of mind. For a starter condo this complex isn't a bad idea because at somepoint you are going to marry BF and buy a bigger place and then you can use this place as a rental yourself. Also, How long has the condo been on the market? A while? Give them a really low offer, ie.$105,000 (25% off asking)... if its not FHA approved they are having a hard time finding a buyer and they may be desperate for ANY sale and their bank may allow a short sale on their end? Good Luck!!

  4. P.S. I just noticed your retirement count down clock. If you are really eager to retire, read the book your Money or Your Life, by Joel Dominguez. Also start reading the blog Early Retirement Extreme. Granted this guy is extreme, but he just retired and he's in his early thirties. Good Luck!!

  5. I wouldn't take money out of your Roth to cover the down payment while leaving your EF alone. You can take out your contributions out of your Roth at any time without penalty so if you absolutely need to down the road you can do that. I would leave your Roth as is for now.

  6. I would do it, but you may not need as much money as you think. You are basing everything off the listed price, but in this market (especially since this place isn't FHA approved!) you had better offer at LEAST 15% below asking - I'd go as low as 25% if you're in an area where the real estate market is up in the air.

    However, you'd better start this process asap. It's taking 60+ days to close a mortgage, and that's AFTER you have an executed contract. You need time to do your due diligence too - see if there are lawsuits pending, etc.

    But you won't regret it - I haven't yet! I love owning my own place. Rates are near all time lows, prices are certainly near period lows, the tax breaks are great, it's automatic "savings," and you might as well do it while the government is handing out money! Good luck!

  7. I'm going to be a bit of a downer here, but I'm sharing knowledge from my current home purchase.

    In November I purchased the townhouse of my dreams. I was able to put 20% down, so financially the purchase was a good move. If I had to do it again, however, I would have waited.

    You see, the money from the government is nothing compared to the interest I'm paying on my mortgage. Had I continued to live with roommates, I could have saved a ton more before purchasing.

    I realize I am able to deduct my mortgage interest, but in the grand scheme of things, the larger your down-payment, the better. I vow to pay for my next house in cash. Yes, it can be done. I lived with my parents and two siblings in a nasty two bedroom trailer house with a cement shower. They paid peanuts in rent for this piece of crap, but it enabled them to build our beautiful, but sensible ranch style house with cash.

    By all means take advantage of this buyers market and the government incentives, but weigh the costs carefully. The longer you can build cash reserves, the better. The "right" condo will always be there. Three townhouses in my neighborhood have turned over this year. I would have been better off purchasing now than 8 months ago.

    Oh well. Hindsight is 20/20. Just don't cave to the pressure of government incentives and low housing prices for the wrong reasons.