Washington DC/Baltimore

[CityLiving]

My husband and I make over $160,000 combined, have no debt (cars are paid off, no loans, no credit card debt) and b/c we took the time to be responsible and pay off all debt, we don't have enough for a 20% downpayment, so we have to go FHA... but now we have put in an offer on a great place and it is probably going to be rejected b/c they are concerned the FHA appraisal will be low. 

How is it that 2 proffessionals who are responsible, have no debt, and have money saved still cannot buy a house around here?  

Any advice on moving forward in this market with FHA?

Thanks

[Venturion]

Offer higher, that's one option.

Consider liquidating some of your assets for your down payment (downsize car, etc.).

Borrow from your 401?

I hear you and empathize, just offerring some alternatives, even though they may not be appealing.

My best advice is to wait 1-2 years... either you will easily have saved more (especially making $160K a year) and/or the market will improve for buyers (the latter is my personal forecast).

[bbub]

i had my car paid off like you did but when i needed the money to make 20% downpayment, i went to my bank (actually a credit union) and borrowed a 3 yr loan at 3% using the car as security/collateral.

[whirrrrp]

I agree with Venturion.  After the $8000 credit is gone the market won't be selling as swiftly as it is right now. You may be able to get a better deal then & in the distant future, when it comes time to sell your house, you won't have to come to the table with money to make up the difference based on 2009 prices, which I think, will still be deflating over the next few years.

[3wheelers]

Shop around lenders.  We had a similar problem but are working with BB&T and only need 10% downpayment instead of going with FHA  (which seems to be the most backwards method of "aid" to buying a home). There may be someone out there with an even better plan.

[PropertyHawk]

Dear CityLiving,

    You are missing the point.

    The FHA appraisal, indeed any appraisal, is there to protect you! (the bank is trying to make sure its end is protected, but that also protects your interests) If the appraisal comes out low, it means you overbid and the home-seller has their expectations too high. 

    If a bank does not see the value in the property, most likely you stand to lose money too. Offering higher won't solve this problem. Don't be tempted to "fix" this bubble with more cash, the property is over priced and you should skip it.

    It sounds like you tried very hard to pay off these past debt items, at the expense of your cash. You may, in fact, be cash poor to buy a house, but that is an issue that is separate from overbidding.

    Wait. The housing market has another leg down coming. There is a lot of pent up volume of units to move onto the market at significant discounts to what is going on now. If you overbid and somehow get something, you may regret it. Avoid getting emotional about any one property. If you are looking for a good deal you'll get a far better one in a little while than what you are seeing now.. (even though there has been a huge drop in values from their peak).

Hope that helps,

PropertyHawk

[whirrrrp]

I agree with Property Hawk as well.  You may miss out on teh $8000 credit, but in the long run, say 10 years from now if you want to sell, today's $8000 may be more like $8000 that you'll owe to close the deal.  I see houses on the high end just sitting there, that have been sitting there for well over two years. Eventually they'll have to sell for lower prices which will probably affect the houses bought for a lower price today.  You might be better off waiting for the market to stabilize before buying.

[MaggieSimpson]

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Message Edited by JimLamb on 08-25-2009 08:48 AM

[adobe]

CityLiving with the kind of money you are making and if you are frugal, and pay a resonable rent, I bet you guys could put away $40,000 a year so in 2.5 years you could have a nice down payment. I am not going to predict the housing market, but don't fall in the trap of thinking you have to buy this year. I am with the others when the $8000 rebate disappears you could see some $500k-$600k houses fall more than $8000.Wait for the right one.

[MaggieSimpson]

In 2.5 years at a rent of $1500/month, City Living will have paid $45,000 in rent.  In addition CL will have paid $30,000-$40,000 in taxes that they would not have had to pay if they owned their own home.  They will also have foregone the equity and appreciation that accrues to homeowners as they pay down their mortgage and as property values rise.  There are many neighborhoods in DC where prices have risen since 2004 - average price decreases for the city as a whole can be deceiving.  But if one must use averages, here's a fact: over the past 30 years, DC property values have appreciated over 6% a year on average.  If you bought in 2004, in some neighborhoods your property's value may have fallen - but it will come back.  Meantime, you're still gaining equity by paying your mortgage and you are avoiding having to pay thousands and thousands in income taxes. 

Bottom line: there are major "opportunity" costs involved in waiting to buy in hopes that house prices will fall significantly.  If interest rates increase over the next few years, those costs will be even greater.

<solicitation removed>

All the best,

Maggie Simpson

Licensed in DC, MD and VA

WC & AN Miller Realtors/ Long & Foster

Message Edited by JimLamb on 08-25-2009 08:47 AM