First-time home buyers jitters - seeking input

 My wife and I are considering buying a new house in Central CA. The
builder offers a $70k off the price of a $239,000 home (3bd/2ba, 1271
sq ft) as an incentive for using their preferred lender. We make $62K
before taxes; our FICO scores are 770 and 734. The lender offers
6.125% 30yr fx for an FHA loan where the builder will also pay the 3%
down ($5,000) through the Nehemiah non-profit program. I guess I don't
understand why a "preferred" lender. So far I looked at rates in
Bankrate and it looked about right for the type of loan in this
zipcode.

We have the first-time homebuyers jitters and can't decide whether
this is a good deal or not. This is for an inventory house, but we can
also have a new one built in 4 months when we are expecting a salary
increase. Should we take it or should we wait? Any input would be
greatly appreciated :-)

  Berimbauone says...

Did you look up their "preferred lender", though?  Not just the rates.

Maybe others here have gone for this kind of deal and would  have something
different to say, but personally I steer far far away from any of these kind of
deals.  A lot of not-great fees and features can get swept under the carpet of
complications.  I'd much rather arrange credit through my own sources.  A bank
or other institution that isnt so anxious to push a house on me in a bad market.
But, again, I defer to others who have bought form builders like this - I
haven't.


Why a new one?  Why do you think you can count on this salary increase?  Are you
listening to a real estate agent who is telling you what you supposedly can
qualify for?  Lots of people have real-estate-agent or bank-qualified themselves
straight into a gaping financial hole.  And I'm not talking just the last few
years.  Those guys and gals at the banks and the construction company's office
are  happy if you eat ramen noodles for a late dinner for five years sitting on
a borrowed rug in the middle of an unfurnished living room when you get back
from your second job, believe me.  No skin off their teeth.  Long as they get
their $$$.

Look at the mortgage + taxes + at least $3000.00/year for incidentals, *after*
downpayment, closing and moving costs are subtracted from your current assets,
THEN decide if you can afford it.

It sounds very much like you're listening to the construction company's
song-and-dance.  Find yourself an independant financial advisor.

Banty

 In article


THe preferred lender means that the building and the lender have
some kind of deal.  It could be any arrangement that you can
think of.  It might be that the builder has their loans with
this lender, the builder is otherwise about to go toes up, so
the lender is taking a share of the hit to get some houses sold.
Or it might be that the lender really wants to make some loans,
and they are kicking a commission back to the builder for steering
the loan in the right direction.  This is all perfectly normal.


It sounds like a good deal for California.  Have your real estate
agent or Realtor check comparables and prove that it is a good
deal.  If you don't have a real estate agent or Realtor, then
get some kind of representation so you don't get robbed in the
process.

If the economy perks up during the election, which is nearly
always does, this deal might not be there in 4 months.  If
you want a nice house, this may be your chance.

The only problem I see is that your income is a little light
for this type of high-end home.  Perhaps you ought to be
looking more in the $125K to $155K range.  FICO scores mean
nothing if you cannot buy food after paying for the mortgage.
And make sure you can pay that mortgage with only one income
since you are sure to lose one of those incomes for at least
some period of time during the next 30 years.

-john-

--
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John A. Weeks III           612-720-2854            john@johnweeks.com
Newave Communications                         http://www.johnweeks.com  
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$239k-$70k is $169k, which is only a little bit above the range you
recommended.

The location might be worrisome, though.  I was just reading an article
in the paper a couple days ago about housing prices in one Central CA
town, Merced.  It caught my interest because I lived in Merced from the
age of 8 until I left for college.

The article said that Merced had the highest rate of foreclosures in
California (or maybe the nation...I forget which).  It talked about new
housing developments where they have a few occupied houses, a few
finished houses that have been foreclosed, and partly finished houses
they aren't finishing.  The owners of the occupied houses are
complaining that the builders aren't finishing the communities--not
putting in parks, and things like that, that were part of the
development.

The fact that the builder is offering the original poster $70k off on a
$239k home already built, and that they also have the option of having a
new home built in a few months, makes it sound like the home may be in a
new development that is having trouble.  If so, they should investigate
carefully, or they may end up with a home in a community that will never
be finished.

Out of curiosity, I took a look online for houses in Merced, and also
Fresno, and it doesn't look like it would be hard to find a 3bd/2ba
1300-1500 sq ft home for under $155k, especially if you look at
foreclosures.  I think if I were looking to move to central CA, I'd look
for a place like that, in a good, complete, neighborhood, rather than
take a chance on a place in a partially-complete development.


Good advice.  Also, don't count on raises.  Things are not rosy with the
economy, and that raise they said they are expecting in 4 months could
evaporate.

One more thing for them to consider.  They didn't say why they are
looking for a house in Central CA.  There are a fair number of people
who work in Silicon Valley and live in Central CA, so they can have a
house rather than an apartment.  (Even when Central CA was at the peak
of the price boom, it was much cheaper than Silicon Valley--cheap enough
in comparison that many people would put up with the long commute).  If
they are indeed Silicon Valley commuters, they need to look very
carefully at commuting costs, and leave a big margin in their budget to
allow for more gas increases.  If gas goes up another couple bucks a
gallon, and you've got a 300 mile/day round trip commute at 30
miles/gallon, that's an extra $400/month.  It would be a shame to buy a
house near the top of your budget, and then find your commuting costs go
up $400/month over the next year.



--
--Tim Smith

 

I misread the original posting.  I thought $239K was the discounted
price.  At $169K, I'd suggest jumping on that deal unless there is
some red flag that was not mentioned.

-john-

--
======================================================================
John A. Weeks III           612-720-2854            john@johnweeks.com
Newave Communications                         http://www.johnweeks.com  
======================================================================