Saving for one more year is possible but will not meaningfully change things since we can only save a max of $12k a year, so we would still have to use an FHA. I am also trying to time this with our lease ending. It’s possible we will end up renting for one or two more years if we absolutely have to, but I’m worried about getting priced out. I also strongly suspect that the market will be good for buyers when our lease is up and I’d like to take advantage of that if at all possible. Oh also, it’s not really NOW, our lease is up in July 2023 because I negotiated for a lower rate in exchange for a two year lease.
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Well, nicer too though in the sense that we were able to put in an induction stove (no apartments we saw had those and we love it). There’s a lot of customizations to be made to just really optimize it for YOU. That’s what I love most about owning.
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Oh that’s weird! I thought I just read that if it’s with an FHA you have to refinance. In that case that’s even more good news!
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I teared up a little, reading this.
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Oh. Maybe that’s not for FHA now I’m not sure! But quite often it’s worth refinancing a loan too.
ETA now I see that if you put 10% down you don’t have to refinance to remove it. Looks like it all depends on that.
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Really wondering if my landlord would be into this. I’m going to ask when our current lease is up in the summer.
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This looks right for conventional, but I think the rules for FHA loans changed 10ish years ago. I’m pretty sure at this point if you don’t put down at least 10% the only way out is to refinance. I can say that the rules were definitely different between when I bought my place (when FHA made sense) and when I refinanced (when the rules were different and conventional was a much better option).
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I’ve taught myself basically everything I know about money at this point, but the homebuying process feels so daunting. Especially in Chicago, although I’d really love to buy, I have no idea how to actually know if it’s a good long term investment. There are so many factors. How did you start the self-education process? Have you owned a home before?
ETA: I’ve tried out those mortgage calculators but even that info feels subjective or wiggly somehow?
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Ah ok, that makes sense! Unfortunately 10% is out of reach for us but at least refinancing is an option! Still good news IMO!
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@AllHat This wasn’t really the point of your post, but FHA does have fixed-rate loans: FHA Fixed-Rate Loans for Homebuyers and Homeowners
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So, I thought I had to get an FHA loan for my first house too, but there are conventional mortgages now with only 3% down. So if you have enough for an FHA loan you have enough for a conventional loan. People still do the FHA because they have lower credit score requirements. If your credit is good you can get a conventional loan and then you can remove the PMI once you hit 80% loan to value.
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Yeah we did a conventional loan and like 5% down.
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You all terrify me slightly (like vicariously, not like I’m scared for you).
I can’t imagine taking the risk of homeowning with less than 20% down. More so because reasonable homes around me are around the $1M mark…
All this reminds me that husband and I need to actually discuss our plan/goals re: housing.
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@noodle I have never owned property before! One of my interests/hobbies for many years has been tracking real estate prices. Over the years I have correctly predicted a lot of trends, and I feel really confident about identifying areas that are still affordable enough to get into but will appreciate rapidly. I am still learning and not an expert AT ALL on the actual buying or financing part!
I have an unfair advantage with research because I used to be a journalist, so researching big complex things I know nothing about was my job for a long time. Evaluating veracity and thinking of the right questions is relatively intuitive for me. I also have what I’d call an innate business sense, which I think is another unfair advantage (it runs in my family). I usually use a super low tech research method, gather URLs/other sources in a word doc then scan all of them quickly, delete the irrelevant keep the relevant, draw conclusions based on overlap or dissent between sources and other information I have at my disposal. Do additional research to answer questions. So I have a running list of questions about the home buying process which I’ll fire at the right person at the right time to get more specific answers. I’ll also verify what they say independently with either another professional or my own research.
Thank you for the information @Crow! I will look into that, I’m still building my reading/resource list so this is all great to know!
@Economista thank you! I didn’t know that. I had assumed since we couldn’t do 20% down we had to do an FHA. Clearly I have a lot more reading to do! We have fantastic credit so that’s fortunately not an issue.
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Why do you see it as a risk?
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I’m seriously curious. We could have afforded a lot more down, instead we opted to do over $30k in work in cash immediately. Mortgage rate was really good and I didn’t want leins from loans for work being done.
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It can be a lot less risky in high price/high appreciation markets. Putting less than 20% down can be risky because if your house drops in value and you only have say, 5% equity in the house you might end up underwater and then not be able to sell. However, when I bought my first house I put 5% down, paid PMI, but it appreciated enough that when I sold 2 years later I walked away with $40k (after initially putting $10k down). For my second house I put 5% down ($20k) and then sold 2 years later and walked away with $100k in proceeds. I rolled that forward to get to 20% down on the 3rd house and we don’t have PMI. But honestly, the PMI on my last house was like $70 per month, it wasn’t very much at all.
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Because I’m in earthquake/drought/fire country 
(Note: fire not an imminent threat but I think can dampen property values)
Because in the 2008 crisis, job loss and housing nosedive were concurrent.
Because an efund for 12 months or 5k mortgage payments is 60k.
Something like that. A house ties you down.
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Redfin estimates about 400-500 PMI on local homes. 70 I could stomach but 500 for time-line acceleration? It feels like CC interest…
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