First time buyer.. HELP!!

NEW -> Contingent Buyer Assistance Program
[quote author="SoCal78" date=1240192026]The more you put down, the less likely you will fall into the two-income-trap of requiring both your incomes to get by (what happens if one loses their job? Gets sick? Or wants to stay home with future children? </blockquote>


I always thought having 2 incomes was much better than having 1 person working, 1 income is not more stable than 2.

If anything I thought it was worse since you are dependent on that one person not being laid off or getting sick. If this happened in a 2 income household then there is still some money still coming in.
 
[quote author="New Buyer" date=1240183169]My fiance and I are trying to buy our first home. We have a combined income of $150,000 and have about $50,000 for a down payment. We both have zero debt and were looking for houses in the $450,000-500,000 range. We both have excellent credit, but do not have 20% to put down. We are both young and new to this and not sure who to trust. We would both greatly appreciate it If someone can help us with a few questions.



1. Are we looking at houses out of our price range?

2. Are we crazy to think we are going to get a loan with only 8-10% down even though we have excellent credit?

3. If yes for #1 and #2, Is it possible to find homes in Irvine for $450,000-500,000?



Thank you.

Looking for a Realtor :)</blockquote>


Dial back the clock a few years and I was in a VERY similar situation to yours. The numbers are almost the same, too. After ALL expenses it turned out that for a house at the top of our range (and everything lower than that was terrible and I didn't want to live there), one of our take-home incomes was going to just the house. Everything else would come out of the other person's income. Since everything we had would be going towards DP and closing costs, and now our cost of living was higher, it was going to take quite some time (and a lot of adjusting of lifestyle) to build up an emergency fund. No more theater tickets. No more Disneyland APs. No more weekends in Vegas with our friends. Less eating out. You get the picture.



We both had very steady jobs, so losing an income wasn't a terrible concern. I was worried about an accident occuring such that one of us couldn't work. That would be bad. We would probably lose the house if it happened before we could shore up our savings again.



One day it occured to me that 3 months of maternity leave is just enough time to get a NOD. I wasn't planning on getting pregnant anytime soon, but life happens sometimes. Disability covers some of the lost income, but it was a mathematical certainty that a pregnancy would put us in danger of losing any house (or crappy condo) we would buy. I thought about where the money for daycare would come from. I thought about having to make heart-wrenching choices. I stared down the barrel of the "abortion or foreclosure" gun and said "oh, hell no!" I'm still happily renting a townhouse.



After all that, my point is to look at the numbers AND the what-ifs. Be realistic. And don't settle.
 
[quote author="halfnote19" date=1240270491][quote author="SoCal78" date=1240192026]The more you put down, the less likely you will fall into the two-income-trap of requiring both your incomes to get by (what happens if one loses their job? Gets sick? Or wants to stay home with future children? </blockquote>


I always thought having 2 incomes was much better than having 1 person working, 1 income is not more stable than 2.

If anything I thought it was worse since you are dependent on that one person not being laid off or getting sick. If this happened in a 2 income household then there is still some money still coming in.</blockquote>


The two income trap refers to a household where the dual incomes are required to keep up with the expenses. If one person becomes out of work, the finances are in automatic jeopardy. If the household's expenses are covered by one income and the bread-winner can not work - the other person can jump in and bring home the bacon. If that household has two incomes but expenses are covered by one, then the other is gravy, nothing wrong with that. In the context of the OP's scenario, it looks as if they would require both incomes to qualify for their loan and meet their payments. There you have your trap. (There was actually a book written about this topic, by the same name,<a href="http://www.amazon.com/Two-Income-Trap-Middle-Class-Mothers/dp/0465090826"> "The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke"</a> which discusses how when women in this country began entering the work force - families did not have it easier. Just the opposite. Expenses increased. It just set the bar higher for what each family must earn to obtain the things they want to buy ... education, cars, homes, whatever.)
 
I'm in a similar situation... refer to my post... which i posted 2 weeks ago..

<a href="http://www.irvinehousingblog.com/forums/viewthread/4904/">Link</a>
 
If you want to buy and you found and can afford that "perfect" home, then buy. Don't listen to those who are waiting for housing prices to drop because they sold their home and are waiting for prices to drop further.



If you are buying because of pressure from family or friends, then wait. There is no hurry. You don't want to rush yourself into a lifetime agreement if the circumstances are wrong.
 
[quote author="usctrojanman29" date=1240236209][quote author="FutureIrvineResident" date=1240235825]does anyone's opinion change at all if he and his wife both have very secure jobs?



is it just me, or with 150k income and 50k down on a 500k house... you're looking at a DTI of around 28%. Isn't that the ideal situation? Sure prices on housing may continue to fall, but are you all saying that with his financial situation he can't afford a 500k house?</blockquote>
please define what a very secure job is in today's economy?</blockquote>


Judges?

<A href="http://www.fjc.gov/federal/courts.nsf/autoframe!openform&nav=menu1&page;=/federal/courts.nsf/page/183">http://www.fjc.gov/federal/courts.nsf/autoframe!openform&nav=menu1&page;=/federal/courts.nsf/page/183</A>

Federal judges appointed under Article III of the Constitution are guaranteed what amounts to life tenure and unreduced salary
 
Graphix - Exactly! It is amazing to me how anyone can think they are getting a good deal when purchasing a $500k "sh*t box" that sold for <$200k less than a decade ago. What a waste of financial resources! My wife and I rent a single family cottage in CDM for just a little over $2k per month. (not a duplex...single family w/ 2 car garage) I am perfectly content waiting the downturn out and putting money elsewhere until there is an actual catalyst to push residential prices higher. It is funny to listen to the people that say, "but you are wasting so much money renting.....". Run the numbers fools and look how much you are "wasting" on even as "little" as a $500k mortgage. (i.e. mortgage interest, property taxes, hoa, melo roos, mortgage ins., hazard ins., maintenance/repairs, etc!!!) I rent a place for $2,250/mo that even today would sell for over $1M. People need to wise up and realize $500k for a "sh*tbox" is too much!!! If they don't wise up on their own they will have to learn the hard way!





[quote author="graphrix" date=1240240784][quote author="FutureIrvineResident" date=1240236170][quote author="roundcorners" date=1240185612]What is up with all the newbies itching to buy this week?





Welcome NB; I can probably tell you haven?t started looking; you can?t get a SFR for $500k in Irvine, well nothing newer at least. At that price point, you are probably looking at a town home. Yes you are crazy and are not ready to buy. With your income you will probably spend at least 50% of you income on your house alone. I come up with a total monthly of about $3,800, with the little down you have. I?m not sure how tough it is to get a loan now, but I?m sure the seller will pick someone else with more down. Credit is a start, keep it up, save some more, start researching and looking, go to open houses and really know what you like and don?t like. Try again next year, at least!</blockquote>


how did you come to spending 50% of his income on the house alone? not including tax adjusted i would say it's about $3500. after it being tax adjusted it'd be about $2900.



and here's a $500k 3bd-3ba SFR in the middle of Irvine. wouldn't say it's the newest house at 1965 but it's not that old.



http://www.redfin.com/CA/Irvine/6-Iron-Bark-Way-92612/home/4699140</blockquote>


It's because the last time this sh*t box sold in 1999, it sold for $194k. His/her inflation adjusted income would be $9500 a month, and the down payment would be adjusted to $38k. Taking the FNMA 6.75% interest rate from 1999, and factoring in .50% adjustment for not having full 20% down, even though it is pretty close... the rate of 7.25% would make his/her DTI a measly 15%. Keep in mind 1999 was not the bottom, it was on the way up. These sh*t boxes sold for less than $100k in 95 and 96, and I bet you could find sales in 96 for $50k. So why in the f'ing world would someone with a $150k income settle for a sh*t box like this, when history shows us they deserves so much better? It's about income and historical values. In fact, IIRC one of these sh*t boxes went back to the bank this week for around $200k.



We are only in the first stage of the downturn in housing. This recession is worse than I expected, and it is worse than the 90s recession. The recovery did not happen until four years after OC saw job growth in the 90s, we saw job growth in 93, 94, 95, and 96, but declines in housing for each of those years. So far we are still on the downside of job growth. This optimism reminds me of 93 when the FED lowered rates, and promoted short term ARMs, and this bubble is twice as worse as the 90s bubble. It was great, because in 95 and 96 the foreclosure purge happened, just like it will in the coming years. Anyone who settles for buying a sh*tty condo on a six figure income now or in the next few years will miss out on the opportunity to buy a great SFR a few years later. Mark my words, a six figure income will get you a SFR in the coming years, and I will be happy to show you my awesome SFR for 20% of my income.</blockquote>
 
There are just too few houses in OC are considered one of a kind. If you do find a house that fits that description then go for it now. The chances are in your price range you will be looking at a cookie cutter home with many exact copies in the resale market. So there is really no hurry and time is in your favor. If you missed a good one there will likely be another dozen of the same house in the market very soon.



Realtor will do any thing to complete a deal and collect his commission. Their opinions are bias. IR on the other hand is the expert in 6 pack of both beers and detached condos.



I recommend a detached condos at your price range 450k in Irvine. Wisteria plan 3 or 4 is a realistic target.



Believe it or not a house in Floral Park was sold not long ago for 550k. on a 8k lot.
 
I'd wait until you get divorced and have kids, that way you'll know how much you can afford after alimony and child support payments. Only half kidding :)
 
[quote author="graphrix" date=1240240784][quote author="FutureIrvineResident" date=1240236170][quote author="roundcorners" date=1240185612]What is up with all the newbies itching to buy this week?





Welcome NB; I can probably tell you haven?t started looking; you can?t get a SFR for $500k in Irvine, well nothing newer at least. At that price point, you are probably looking at a town home. Yes you are crazy and are not ready to buy. With your income you will probably spend at least 50% of you income on your house alone. I come up with a total monthly of about $3,800, with the little down you have. I?m not sure how tough it is to get a loan now, but I?m sure the seller will pick someone else with more down. Credit is a start, keep it up, save some more, start researching and looking, go to open houses and really know what you like and don?t like. Try again next year, at least!</blockquote>


how did you come to spending 50% of his income on the house alone? not including tax adjusted i would say it's about $3500. after it being tax adjusted it'd be about $2900.



and here's a $500k 3bd-3ba SFR in the middle of Irvine. wouldn't say it's the newest house at 1965 but it's not that old.



http://www.redfin.com/CA/Irvine/6-Iron-Bark-Way-92612/home/4699140</blockquote>


It's because the last time this sh*t box sold in 1999, it sold for $194k. His/her inflation adjusted income would be $9500 a month, and the down payment would be adjusted to $38k. Taking the FNMA 6.75% interest rate from 1999, and factoring in .50% adjustment for not having full 20% down, even though it is pretty close... the rate of 7.25% would make his/her DTI a measly 15%. Keep in mind 1999 was not the bottom, it was on the way up. These sh*t boxes sold for less than $100k in 95 and 96, and I bet you could find sales in 96 for $50k. So why in the f'ing world would someone with a $150k income settle for a sh*t box like this, when history shows us they deserves so much better? It's about income and historical values. In fact, IIRC one of these sh*t boxes went back to the bank this week for around $200k.



We are only in the first stage of the downturn in housing. This recession is worse than I expected, and it is worse than the 90s recession. The recovery did not happen until four years after OC saw job growth in the 90s, we saw job growth in 93, 94, 95, and 96, but declines in housing for each of those years. So far we are still on the downside of job growth. This optimism reminds me of 93 when the FED lowered rates, and promoted short term ARMs, and this bubble is twice as worse as the 90s bubble. It was great, because in 95 and 96 the foreclosure purge happened, just like it will in the coming years. Anyone who settles for buying a sh*tty condo on a six figure income now or in the next few years will miss out on the opportunity to buy a great SFR a few years later. Mark my words, a six figure income will get you a SFR in the coming years, and I will be happy to show you my awesome SFR for 20% of my income.</blockquote>




interesting perspective and worthwhile thinking about. i guess ultimately i was just arguing that prices of homes aside these days, do you all really think that a family making 150k/yr with a 50k down can't afford a 500k house? regardless of the type of house, just based on financials is it really not feasible?
 
[quote author="usctrojanman29" date=1240236209][quote author="FutureIrvineResident" date=1240235825]does anyone's opinion change at all if he and his wife both have very secure jobs?



is it just me, or with 150k income and 50k down on a 500k house... you're looking at a DTI of around 28%. Isn't that the ideal situation? Sure prices on housing may continue to fall, but are you all saying that with his financial situation he can't afford a 500k house?</blockquote>
please define what a very secure job is in today's economy?</blockquote>


there are plenty of secure jobs these days, just depends on the industry and company. healthcare for example, yes overall it's not as healthy as it once was, but dependent on where you work in the healthcare industry it can be very stable.
 
[quote author="FutureIrvineResident" date=1240322074][quote author="usctrojanman29" date=1240236209][quote author="FutureIrvineResident" date=1240235825]does anyone's opinion change at all if he and his wife both have very secure jobs?



is it just me, or with 150k income and 50k down on a 500k house... you're looking at a DTI of around 28%. Isn't that the ideal situation? Sure prices on housing may continue to fall, but are you all saying that with his financial situation he can't afford a 500k house?</blockquote>
please define what a very secure job is in today's economy?</blockquote>


there are plenty of secure jobs these days, just depends on the industry and company. healthcare for example, yes overall it's not as healthy as it once was, but dependent on where you work in the healthcare industry it can be very stable.</blockquote>


Last time I checked, nurses were in high demand. Couple that with over time, and this would amount to some decent coin for a clock-in/clock-out type job. And I don't believe MDs are getting laid off in droves (like lawyers).
 
Regarding a secure job. I'd have to agree with nursing, a friend's wife just became a nurse last year, she has received two pay increases in one year and already does not have to work nights. My husband and I are both teachers with over 10 years experience, feeling pretty secure here.
 
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