Quote:
Originally Posted by Saul Good
Let's say you bring $3,000 to the table to buy a $100,000 house. That's 3% down. Then there's the closing costs. They could easily be $3,000. If you roll that into the loan, you're back to financing 100% which is the same as having no down payment, so you can't get most loans.
Even if you could, you'd have to pay private mortgage insurance (PMI) which will run you $100-$150 per month. Then, you're looking at $150 per month in property taxes. Then, you're looking at $100 per month for insurance. Then, you're looking at $250 per month in maintenance and repairs. Then, you're looking at purchasing things like lawnmowers, weed eaters, fertilizer, etc. for the lawn. There's $700-$800 in monthly costs before you even talk about the loan.
The loan, at around 5%, would run you another $500 or so per month. If it's your first house, you will probably live there no more than 5 years. Nearly 100% of the money you pay on your loan will go towards interest during that time. Even if the house goes up in value by 10% over that time, you're still going to have to pay a realtor 6% to sell your house so you really didn't make anything by the time you pay your capital gains tax.
That said, I love owning a home. Just don't fool yourself into thinking that renting is more expensive. It really isn't, especially when you finance the whole thing. Compare what you could rent for $1,200 to $1,300 per month (the cost of owning a $100,000 home in your situation), and I'll bet you find that it's a lot more impressive than a $100,000 house. For that price, you would probably have a pool, basketball courts, tennis courts, etc.
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There's some misinformation here.
1. You can't roll closing costs into a loan when buying a house period. You can have the seller pay them for you, but you can't add them to your loan. FHA requires a minimum down payment of 3.5%.
2. PMI on an FHA loan for $100,000 is $45.83/per month. However FHA has upfront mortgage insurance as well that is stacked onto your loan. On $100,000 the UFMI is an additional $1575. So you're actual loan amount would be - $98,075 (100,000 * 96.5 + 1575) on a $100,000 home.
3. Based on the above scenario and estimating for taxes and insurance using a rate of 5% you would be looking at a payment of roughly $757.32 per month. (Assuming $780 per year for homeowners insurance and $1440/yr for property taxes).
Where Saul is right is the added expenses associated with getting the home, (ie lawn mower, furniture, decor, etc). Most people don't account for that and end up charging up their cards to pay for these things which is a terrible idea.
That being said if you can muster up the down payment and closing costs on your own. You could wait for your $8,000 from the government and use that to make those purchases and I'm sure it would leave you with a little left over to start an emergency savings account.