Just went to go see a loan officer at my credit union, and as I was digging up paperwork so that I had all my financial info in place, I found an old prequalification notice for $560k.  Single, living on a decent income, but still, 560k??!  That’s oh, $3,600 per month.  Extend the 30% of my income rule, and that means I’m making $144k per year after taxes!  Wow, I can dream.

But then consider I left my job because I was really unhappy, and where would I be.  I’d be sitting in the same position as a lot of people today.  Sure that prequalification was really just to see what the maximum I could afford was…but wow!  I’m glad I didn’t go crazy.

Anyway, about the free credit monitoring…if you’re interested, check out www.listclassaction.com.  This was featured in Kiplinger’s, and is basically a settlement with Trans Union which can give you a minimum of 6 months of free credit monitoring.  If you had a credit/loan account from Jan 1, 1987 - May 28, 2008, you’re eligible.  This offer ends Sept 24, 2008.

What is the reason you ask?  Because if I thought prices were coming down, I wouldn’t be able to sell a house.  If the housing market entered a 2 or 3 year housing slump, I would be broke.

In the Sunday newspaper this weekend, in the homes section, the executive vice president of Prudential Locations LLC, Scott Higashi says, “There is no crash on the horizon,” he says.  “I think sales will continue to drop slowly, and prices will continue to appreciate slowly.  Median prices land around a 7- to 8-percent increase by the end of 2006.”

He says he “thinks” sales will continue to drop, but you can assume he also “knows” there is no crash.  Interesting.  I wonder where and how much he bought his crystal ball for.

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My Home: A series about the home buying process through the eyes of a first time home buyer.

If you recall, awhile back I posted that I my daily email updates on the Hawaii housing market was getting scarce…a few changes here and there, and then at the beginning of this week I received an update with 4 price changes…DOWN.  Well, yesterday I got another update…this time with 3 more price changes and one status change from ‘In Escrow’ to ‘Active’ meaning the sale didn’t go through.  One house was reduced 9.5% or $62,000!

I’m hoping this is just a blip, because I hope the slowdown is a gradual one…could this week just be an annomaly or a sign of what’s to come?  If the drop happens to quickly, our economy might take a major hit…

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My Home: A series about the home buying process through the eyes of a first time home buyer.

In the daily email update I receive, there were 5 houses mentioned…FOUR were price changes, and 1 had new photos added.   Lately the updates have contained maybe 1 or 2 listings, but I was kind of suprised to see 4 price changes in one update.  Keep in mind that these updates only come for areas I’ve selected, so it doesn’t represent the whole state.  That’s why four is kind of a lot for only about 5 neighborhoods on my update list.

 

Here are the four price changes:

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My Home: A series about the home buying process through the eyes of a first time home buyer.

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Being undisciplined at times with regards to my finances, I’ve thought about it.  I’m lucky to have a decent income and live with fairly low expenses.  So grudgingly, I admit, I can be a little “spoiled” at times, so the thought has come up in my head, “there’s a housing bubble?  Screw it, I’ll buy anyway!”  So I decided to put the arguments for buying “out there.  “Why buy now?   

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Yeah, of course not, freedumb you dummy.  In fact, most aren’t.  A lot of Realtors are professional, honest folks, and I think I’ve found one.  In my search to find a realtor, I’ve interviewed a few.  I decided to go with a Realtor that I’ve known for awhile, but never really got to know too well (classmate in a few college classes).  He’s actually younger than I am, by a year or two, but he’s a fulltime Realtor, and one I feel comfortable discussing my finances with, which is really important in my opinion.  It also means that I trust him.

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My Home: A series about the home buying process through the eyes of a first time home buyer.

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I’ve been receiving daily email updates on the housing market in Hawaii through a site called PrudentialLocations.com, and recently, I’ve noticed a sharp decline in the number of updates I’ve been receiving.  By sharp, I mean just last month I saw about 4 or 5 houses per daily update, this month it’s dropped to 1, if even that.  Some days I don’t even get an update.  These updates include changes in status (new to market, ACS, sold), price updates, etc.  I get notified on everything.  So it’s a good indication of activity in my local market.    

Here are some sample status updates in the past couple of weeks:

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Not sure if you’ve seen this before, but it’s been on the news a few times where I live. Free land in Kansas! Some restrictions, but for the most part, it’s free.

But to each his/her own…I choose to live here in Hawaii. I would consider moving, maybe, if my family and friends weren’t here…but I’m not sure I would be able to handle moving to the middle of Kansas. :/

My Home: A series about the home buying process through the eyes of a first time home buyer.

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Sometimes reality sucks doesn’t it? I’ve done some analysis on the real cost of ownership on my future home, and it hit me like a sledgehammer. Sorry Freedumb, try again. I got some great feedback (I was even told I’m “spoiled“). Before I go on, I’d like to refer to my post on why I want to live here in Hawaii. 

I realized I really needed to think about it again (an argument for blogging!). The most basic question I asked myself again, do I even really need to get a home right now? The answer? No. I’m not going to throw away my dreams of getting a home, rather I’m going to take a step back and change my requirements and my timeline. CityGirl has a great post about knowing thyself that would be worth checking out.

Originally, I was excited to get a home because, well, it’d be my own place, the American Dream, blah blah blah. My dog would have a yard to run around in. I’d have something to take care of and watch as my investment grows. Then reality hit, and I got great feedback. I realized how much it would really cost to own what I want. I don’t want to be living paycheck to paycheck, nor do I want to dig my own financial grave.

So, that being said, I’ve decided to put off my home purchase even beyond next summer for as long as I can wait. Why? Well, I’d like to save as much as I can to have a bigger down payment so that I don’t have to borrow too much. (Thanks NCN for making me think about credit a little more) I’d also like to observe the housing market longer.

I’ve decided to do a couple of things:
1. Create a designated “house fund” that will be for my down payment. This is so that I’ll have some extra cash for everything else. I can’t drop my whole savings into the house, that would be dumb. (Madame X made me think about this a little more)
2. Reduce my requirements for my house. See below.

Original requirements

My revised requirements:

~ 5000-10000 sqft lot size ~ 1200-1500 sqft living space - A decent sized yard, with a portion fenced off for Brownie to run around. - Early mail delivery. Yes, I like having my mail delivered early! - Hands free faucet in the kitchen. - Target price of around $500-650K - Off major streets - Level lot - 2 car garage - Fairly up to date electrical system, if not then the ability to upgrade easily. - 10′ ceilings - 4 Bedrooms (Maybe a split, two level house, so I can rent one and live in another) - Wired for CAT 6E. I’m pretty sure this is something I’ll have to setup myself. - I would like a location about 15 mins from town. - Friendly neighbors…who wouldn’t want that! - Decent amount of street parking - Breezy and cool location - Fairly close to freeway

~ 4000-6000 sqft lot size ~ 800-1200 sqft living space - Target price of around $450-600K - Off major streets - Level lot - 2 car garage - Fairly up to date electrical system, if not then the ability to upgrade easily. - 2 Bedrooms - I would like a location about 15 mins from town. - Decent amount of street parking - Breezy and cool location - Fairly close to freeway

Originally, I wrote:

So, my monthly mortgage? @ 6.85% 30 yr loan would be $2,621.00/month. Now, to estimate everything else. I’m going to estimate on the high side.

Home Owners Insurance - Assuming .5% per $100,000 in home value = $2,750.00/year

Property Taxes - Assuming 1% per $100,000 in home value = $5,500.00/year
Maintenance - Assuming larger than average maintenance costs for first year = $10,000 for 1st year, $5,000 there after. This includes a lawn that might need some care…or new flooring…things I think I’ll probably change out when I move in.

Utilities - Cable, Phone, Electricity, Water - Based on how much my friend pays - $3600/year.

Initial Purchases: Equipment, furniture, appliances - $5,000 for first year, $2,500 there after.

1st year total without mortgage = $26,850.00 (or $2,237.50 / month)
Thereafter = $19,350.00 (or $1,612.50 / month)
1st year monthly costs with mortgage = $4,858.50 per month
Monthly thereafter = $4,233.50 per month

I’m going to adjust costs to more realistic levels based on feedback received and comments from friends and family. With the same monthly mortgage @ 6.85% 30 yr loan = $2,621.00/month.

Home Owners Insurance = $2,750.00/year

Property Taxes = $5,500.00/year

Maintenance = $5,000 for 1st year, $2,500 there after.

Utilities = $3600/year.

Initial Purchases: Equipment, furniture, appliances - $2,5000 for first year, $1,000 there after.

1st year total without mortgage = $19,350.00 (or $ 1,612.50 / month)
Thereafter = $15,350.00 (or $ 1,279.17/ month)

By the way, I am considering once a year fees as part of my monthly expenses just for a better picture of my total expenses.

1st year monthly costs with mortgage = $ 4,233.50 / month
Monthly thereafter = $ 3,900.17 / month

Hmmm, still a little high, so I’ve increased my down payment to $200k, which would reduce my mortgage loan to $350k. My new monthly mortgage @ 6.85% would be $2,293.00 / month.

With the same other expenses I wrote about before:

1st year monthly costs with mortgage = $3,905.50 / month
Monthly thereafter = $ 3,572.17 / month

Better. Still high, but at least that’s manageable considering my current income. I’ll keep trying to save even more for a down payment. The more the better. The journey continues…

My Home: A series about the home buying process through the eyes of a first time home buyer.

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I’ve set my budget, but that was just for the price of the home. Just as important as figuring out how much of a house I can afford is figuring out how much I’ll need to do everything else associated with a house. Consider home owners insurance, maintenance, upgrades, taxes, etc. I’m going to try and estimate these costs to give me an idea of what it’ll really cost me to own a home, and how it’ll impact my everyday life. I don’t want to own a home but have no money left for food and other necessities. Not to mention, I don’t want more debt on top of my mortgage. So what should I expect to really spend per month to be a home owner? 

Well, let’s assume I bought a $550k house…I put $150k down, and financed $400k. Let’s also assume the closing costs, fees, etc. that are part of the home buying purchase were included in the loan.

So, my monthly mortgage? @ 6.85% 30 yr loan would be $2,621.00/month. Now, to estimate everything else. I’m going to estimate on the high side.

Home Owners Insurance - Assuming .5% per $100,000 in home value = $2,750.00/year

Property Taxes - Assuming 1% per $100,000 in home value = $5,500.00/year
Maintenance - Assuming larger than average maintenance costs for first year = $10,000 for 1st year, $5,000 there after. This includes a lawn that might need some care…or new flooring…things I think I’ll probably change out when I move in.

Utilities - Cable, Phone, Electricity, Water - Based on how much my friend pays - $3600/year.

Initial Purchases: Equipment, furniture, appliances - $5,000 for first year, $2,500 there after.

1st year total without mortgage = $26,850.00 (or $2,237.50 / month)
Thereafter = $19,350.00 (or $1,612.50 / month)

1st year monthly costs with mortgage = $4,858.50 per month
Monthly thereafter = $4,233.50 per month

WOW!

If my house were $650k, and I financed $500k. Mortgage would be $3,276.00. Tack on the additional costs, and my first year’s monthly costs would become $5,513.50, and $4,888.50 thereafter per month. WOW! Did I already say that? Am I missing something? I know I went high…but dang! Are my estimates way off the mark? So on my next post, I’ll tackle the question, can I really afford that?