Am I Ready To Buy? EQ 703 TU 683 EX ??

[Anonymous]

Hi all.   First time poster, long time lurker.

I presently am renting a large rowhome in Philadelphia, and I quite like it.   I have a rather unusual lease on this house (3 years).  I'm 18 months away from the lease expiring, so I'm only 1/2-way into the lease.   Breaking it means loss of about $4,000.

I got rid of my car because I use subways to get around and paired my expenses down a couple years ago to the point I have $12,500 in cash lying around right now.   This is downpayment money.

If I wait until the end of my lease, this pot will grow to about $33,000 according to my savings spreadsheet. 

Legwork:

I applied with Quicken Loans and they pre-qual'd me for a 30yr fixed and a 30yr FHA up to $380K.   I only did this so I could get a mortgage inquiry on my credit reports to see if any collections agencies would wake up and trash my reports, and none did. 

Credit:

I have several baddies remaining which are at the 6 year mark and a ton of other stuff that is now gone and or deleted.   I have 12 open tradelines all in good standing and only 2 of the open accounts have lates (which are old).

0 current DQs.  0 current lates. 

I hired a lawyer to sue one creditor who illegaly re-aged their tradeline and they deleted, which gave me a ~70 point increase in my FICOs.

All the bad accounts I have are paid+closed.   I have an auto tradeline which had lates on it, but it's also paid+closed and drops off in Jan 2011.

I have zero debt.   No present balance on any of my accounts and I PIF all my credit cards, always.

Income:

$110K gross  ~$77K take home after all deductions and savings are taken out.

Type of house:

 $130K - $300K price range.    I can afford more but I'd rather have a loan, at a fixed rate, with payments less than I am renting now.

Rent: $1,200

Since my scores are slowly creeping up to the "Magic 720" level... should I just wait until my lease expires and my DP is bigger? 

[Anonymous]

the 4K loss on the lease is a tough one.

That said, credit wise, you are fairly well qualified.  FHA loans have very competetive rates (not sure of loan limits in Philly) so the credit would be fine.  Conventional may be a tiny bit better, but I think you may have to hit around 740 or so to get those rates (and it isn't much better anyways).

I would say that if you could get in before the tax credit expires it might offset (actually more than offset) the loss on the rental money.  On top of that, you seem to have enough cash on hand. 

Lastly, if you are looking to keep your mortgage around the same as your rent, then you would be able to keep putting money aside and enjoy the tax benefits of home ownership.

One thing, I would say that if you buy now, make sure you buy a house you know you can stay in for awhile.  Especially having good income and savings, etc....  Now is not the time to buy something cheap that you are going to want to move out of in 2-3 years just to keep to an exact price (less than rent).  In thismaret there is no guarantee that you would be able to get out fo a house in les than 5 years.  I would spend enough to get a house you are happy with now, and see yourself in for awhile.  That doesn't mean overspend of course.  But I would not pass up a better house for a few more $ just to hti a number that you are obviously more than capable of paying.  Again, I am not saying to go out and drop 300K by any means.

[Anonymous]

Thank you for the answer, mickie.

I agree with your assessment.   I think right now things are just a bit too uncertain, especially here.    My neighborhood might be directly impacted by a large layoff by the City of Philadelphia (estimated it might be 3,000 people).   With 700-900 cops that might lose their jobs, many who live in my section of the city, this neighborhood could go downhill quick and I'd be wanting to cut my lease anyway because of the expected increase in crime.

That being said, lawyer layoffs have also impacted us as the legal industry here in the city has gone downhill, and that means some neighborhoods that are nice that I couldn't afford previously are now filled with some desperate homeowners.

My father is more sadistic than I am.   He thinks I should wait until enough people crash and burn that the bottom falls out in the better areas of town and only start shopping when that happens. 

[Jazzzy]

Curious...with 18 mos left on your lease, you are still able to get out with only a $4K loss? That sounds cheap.

There are so many factors to consider...

Will there be more foreclosures, short sales, etc. coming in our future? I think so.

Will interest rates rise due to inflation? I think so.

I would also encourage you to buy as much house as you are comfortable with. I also agree that you need to pick one you are able to stay in for a number of years. No job change on the horizon, is there? Personal life changes?

Both of my daughters bought houses in this past year. Very satisfied.

[Anonymous]

oops meant to post to another thread