Posturing to Buy First Home/Townhome in 6 Months

snail415 · Joined: 27 Feb 2007 Posts: 1 Location: Yorktown, VA

Hello all,

This is my first post, and first want to say thanks for providing a lot of insight on many topics. I'll give you my situation first, and then ask that you determine if I'm thinking right or even asking myself the right questions...

I moved from San Antonio TX to Yorktown, VA 6 months ago for a great job opportunity. I'm 27, I've rented for the past 5 years, and have been married for one year. We have a 3 month-old son, and my wife stays at home. We rely on my sole income ($58k/yr). My credit score is right at 700, but after reviewing all 3 credit reports, I have many errors now under investigation (which when cleared should improve my score even more). I just paid off both our cars, and I have only $4500 in credit card debt. I'm claiming 4 dependents to maximize my bi-weekly income, yet I only have between $1-2K for emergency funds. Point being, I haven't been saving for a down payment.

Yorktown is not a cheap place to live, especially compared to San Antonio. I would like to purchase a home or townhome and hopefully sit on an investment for 3-5 years. The opportunity to move back to SA is in the future, and I'd like to make my time in YT spent less on rent...
To the point... I want to live in a safe, desirable area, but I don't know if I can approach a lender with the intent of putting ZERO down and qualifying for a $200k home. Nothing good is cheaper. Being a renter, I am comfortable with the affordable, low-maint lifestyle. But if I can get into a home soon, it would be a solid investment due to military base re-alignments in the area. So my intent is twofold- to get into a decent home and survive, but also to sell it within a realistic amount of time (3-5 yrs).

If I were confident that the property value were to increase over time, and it actually did, would I be 'right' to get into a home with little or no regard for how much I put to principal? I seem to have the idea in my mind that even if I'm paying all to interest to keep a lower payment, I'll still gain equity over time based upon the premise of 'hot property'. Is this completely foolish? Again, my first home will not be my last home...

I've had an interest in ARMs, but I've been raised to believe that anything other than a fixed 30-yr mortgage is evil. I don't believe that, but I have to take an educated risk since I'm the sole provider- I want a mortgage that allows me to handle a net payment of $1500/mo and still put food on the table. Are there any obvious considerations I might be overlooking regarding my financial situation and goals? I just want to make sure I'm not underestimating/overestimating the quality of home I can acquire.

This is probably a very general description of my situation, but I'll answer any questions you might have. I appreciate your time and attention.

Respectfully,
Justin

m2c · Joined: 03 Aug 2005 Posts: 937

You might want to make some inquires NOW. It’s nearly Spring and this is when the flubs distribute grant money and it runs out quickly – usually 2 or 3 months.

Not sure but VA likely is under the Atlanta Federal Home Loan Bank. All the flubs have some form of affordable housing program (they basically have to “give away” 10% of their profits) but I’m not sure of the details of the program in your jurisdiction. Around here it’s a $5,000 grant to cover down payment, closing costs, and prepaid expenses except for $500. We tie it to a MCM Fannie program which basically means lesser mortgage insurance coverage is required. Translation: lower monthly payment for you.

There are maximum income caps by county but $58K might work in VA. $200K sounds reasonable but I’m not sure of tax and insurance costs in VA. Count on keeping the property at least 5 years or possibly be subject to recapture of a portion of the grant.

The program is available towards the beginning of each year (3/15 appears to be kick off generally this year) and funds do run out. That’s why I suggest making inquiries now. Typically banks are the only ones permitted into the hollowed halls of flub membership but occasionally some of the unwashed are let in. I’d try asking smaller banks would be the place to start.

ARMs? I don’t think there’s enough bang for the buck right now, even for short-term ownership. Bet would have to be on a decrease in short term rates.