Yeah, why wait, money is stupid cheap these days.

Well ideally I would like to have atleast a twenty percent downpayment.

Do an Excel sheet on what your P&I payment will be now with an FHA loan and 5% down payment at current market rates vs. what it will be at current market rates +1% then +2 and then +3 in however many years it will take you to save up a 20% down payment.

Assuming home prices stay exactly the same between now and then and the mortgage interest deduction doesn't go away, your payment delta will be negligible. And I can't see how interest rates can stay this low much longer, with the bond and debt crisis we're about to go through. If it takes you three yrs. to save up 20% and rates have gone up another 2-3 points, you'll be right back to where you'd be today with 5% down.

It is totally up to the seller to deal with his listing agent. But a listing is a binding contract & depending upon the fine print, might outlast the listing under certain circumstances. i.e. buyer was shown house by listing agent

There is no reason for not making a low bid except possible rejection.

Ian

SM and Rick are offering some great advice, and I don't even have to run the numbers to proclaim...don't wait! You'll likely NEVER have this opportunity (RE bubble burst/forclosures abound/LOW rates) again...give it some thought!

$250k, 30 yr. amortization

5% down, 4% interest
P&I = $1134

20% down, 5% interest
P&I = $1074

20% down, 6% interest
P&I = $1199

20% down, 7% interest
P&I = $1331

If interest rates go up by much more than 1 point between now and when you have 20% saved up, your payment will be higher than with 5% down at current rates. If you're waiting around because of money, don't wait very long.

Who gives a flying fig about insulting them? Offer what you're willing to pay. If they get offended by it, boo-hoo. The worst that can happen is they'll reject the offer.

As a point of realism here, most of the properties you'll probably be looking at will be bank-owned anyway (at least that's the way it was for me and the place I bought this past February). If you're the least bit concerned about offending a bank, you're beyond hope. ;)

I'm sure you'll do fine.

Ok I will qualify what I wrote before: I am not saying you don't ever need a realtor but what I am saying is that you need to be independently savvy and armed with information. The realtor will just sell the house. If you find out in 6 months that you got a horrible deal the realtor won't be there to make you feel better. You are better off making a low-ball-ish offer that you are comfortable with than making an offer that ensures all involved parties are content with your business character. I don't know what the rules are but if you are comfortable just dealing with the selling agent you will usually get a better deal. I just don't know if you have to keep a realtor for a particular period of time or not? If not I *personally* and in my humble opinion would do my own research using available information and make the offer through the listing agent...its definitely not for everybody!

Rick, I have hardly looked into FHA loans before. Thank you for pointing me in that direction.

Here is an example of what I have in mind. A house has already been reduced a few times from $186,354 to it's current asking price of $149,000. It has been on the market for 101 days and is currently appraised at $126,000. If I offer 85%, I will be putting in a purchase agreement of roughly $127,000 thousand dollars. That still feels a little high, but compared to the original asking price it is insane.

Here is the listing in question:
24527 Spring Harbor, Spring, TX 77373 - HAR.com

Oh, I need to add that, with less than 20% down, you will be paying some kind of non-tax-deductible mortgage insurance. With FHA it's called MIP. Conventional is called PMI. But at the price range you're talking about, it's small dollars.

Like I said, money is stupid cheap these days.

And what's NOT in Ricks calculations are your non recoupable living expenses, rent, that you will be laying out while you save the 20%.

that house.....the garage door opens into the front garden. looks like a non functional garage?

Krystar I noticed that also. It was a model so that may tell you something. It is strange though.

Forget the original asking price. It does not matter. It could have been way out of line to begin with.

In the above scenario I'd be offering 110,000 maybe 115,000 and going from there.

The appraisal is an important number.

5% down a $126,000 house the bank will lend you ~$114,000.

Pay any more for it and you will need more down.

Hmm, that is most definitely a builders model.

Usually the sales office is in the garage.

When models are sold they are supposed to make it functional for you. Not your responsibility.

googlemaps shows the development ~80% complete. google is probably 2 years out of date so likely only one or two lots if any left to build at this point.

Models make a good deal, they are almost always upgraded to the hilt.

But a model also means you will be dealing with the builder. A bit tougher than a private sale.

I'd get myself pre approved for $125,000 and tell them straight up, it's what I've got, when can we close. If they say no keep looking.

Damn you guys are good.

Tom, you should know all this stuff before you get too deep in on your own. Or get a realtor you really trust. Won't cost you a dime and might save you thousands.

Tom,

You may need 20% down to get a mortgage, or at least the loan to value ratio needs to be 80%, so on a house appraised at 126K, you'll need $25.2 down or get the house for 80% of appraised value. Or some combination in between. Don't know what the lenders are doing down there, but it's pretty hard to get a mortgage these days without a lot down.

But I agree with buy now instead of renting. The mortgage on a 152K home is likely a lot less than your rent, and if the market improves 5 years from now, you'll have enough equity to buy yourself a much nicer home for you and the future wife and kids...with a spare bedroom for me to crash in when I'm in town :)

Never dealt with FHA...but hell, I bet your credit is pretty good, and you've been employed at the same place for a while now, so you might as well give it a try. If it doens't work...you just keep on trucking.

Would it hurt if applied for a loan application at my credit union for 126,000 with 5% down just to see if I can even be approved? I assume the loan application will be free.

Wouldn't hurt at all. You don't pay anything until you get to the appraisal. By that point you'll have a sales contract, a bank pre-approval and the appraisal gets rolled into the mortgage or closing cost.

If you have a good relationship at the CU go in and talk to a loan officer. Let them know what you are thinking and see how it goes.