Is it time to Buy Your First Seattle Home?

Is it time to Buy Your First Seattle Home?

10th March

2009

written by robgraham

Over the past few days I have had a great e-mail exchange with a reader of this blog who is considering a first home purchase for her family. Many of the questions she raised are excellent ones and no doubt on other peoples minds. A asked her permission to post the exchange so that others who are in similar situations can see what I suggested to her and also maybe offer their own thoughts on the various topics discussed.

PS – I have removed only the sections that contain identifiable information as I promised the reader that her anonymity would be protected.

Hello.
My family and I are longstanding renters, but perhaps it’s time for that to change. We’re quite clueless about the process, but have already learned a great deal from your excellent website. Thank you!

There’s a lovely-looking place just up the street from us (property address and MLS # removed); what I’m trying to determine is whether it’s even feasible to contemplate buying it or any similar property, for
that matter.

Our finances are very tight, but will be far less so in a few years. Right now, our family of 4 is living on my (job position removed) salary (salary removed), but a few years from now, I’ll be an (job position removed) and making quite a bit more. Credit is fine, last time I checked.

We can come up with 10-15% down payment. Also, I’ve heard that, because we make less than 80% of the Seattle median income, we’re eligible for first-time buyer assistance programs.

So perhaps the next step is to talk to lenders? Anyone you would recommend? Will they provide information about low-income first-time buyers programs, or is that a separate conversation?

Thanks so much for any help you can give me, and thanks again for your website!

Here was my response.

Thanks for contacting me. I appreciate the trust. I had a chance today to do some poking around on the house you mentioned in your e-mail. I apologize in advance for the length of this e-mail, but I would rather give you too much info then too little.

The house itself is great . Plenty of charm built in 1926, hardwood floors, gas heat, vintage style. Because of the year it was built, it has smaller rooms and is somewhat limited on storage space, but that is what you get for homes built in that era. My only other caution about the home is that is runs next to 11th which gets some decent street noise. Not sure how you feel about that but I wanted to mention it.

I attached the Seller’s disclosure and the tax records for the house. They indicate that the owners are relocating, probably due to work. They purchased the home in June of 2005 and paid $440K for it then. They financed $392,000 at the time and have not refinanced it since. What that means is that they have some room to negotiate lower then the listing price.

The seller’s disclosure is pretty clean. It does mention getting some water in the basement in November of 2007 during a particularly heavy storm, but other then that no major concerns.

As far as your finances and if now is the right time to buy, that is a bigger question to answer. Here is what I recommend. Sit down with the decision makers in the family. Decide what you think you would be comfortable paying monthly for a home. Take into consideration what you are currently paying and
how much more you think you can do. Then test your theory. Starting next month put away whatever the difference is between what you are currently paying in rent and what you think you can pay into a savings account. This will do two things. First, it will show you quickly what it will take to make the
additional payment and also start to create a pool of money to pay for all the miscellaneous things that come up when you purchase a home. (ie. Furniture, paint, carpet, etc.) Adjust that number up and down for the next few months until you arrive at a monthly payment you are comfortable with.

Once you arrive at a number, go to a bank or lender (and yes I can recommend someone to you when you are ready) and say that you are only willing to pay $X per month all inclusive and what does that translate as a purchase price for a home.

In the mean time it doesn’t’t hurt to have me set you up with an automatic search that will e-mail you daily when homes come on the market that fit your criteria. The criteria will evolve over time but the more homes you look at the more familiar you get with what pushes your own emotional buttons and what does not. Let me know if you would like me to do so. I would be happy to set it up.

10-15% to put down on a home is nice, but be careful. There are always miscellaneous things that you will want to pay for when you move in. As I mentioned above, new furniture, carpet, paint, etc. starts to add up. You don’t want to empty the bank account now and leave nothing to customize the
house to your taste. I would suggest you go conservative on that number and put down 5-10% on the home. Yes this will increase your PMI on the loan (I can explain that if you want) but it will be a safer investment for you and your family for the next few years. If your income changes you can always pay down your loan at a later time and lower your PMI. But for now it is always best to play it safe.

Yes there are a number of first time home buyer assistance programs available. It is in your best interest to do some investigating to see what ones you might qualify for and who is offering them. There are too many to mention here but they are definitely worth the research. Again, sorry for the length of this e-mail. Hope the information helps. Please keep me posted on your progress and don’t hesitate to ask if and when more questions come up.

One more thought. As a first time home buyer, you qualify for a tax credit of $8,000 if you purchase before 2010. One more added bonus for first time home buyer’s this year.

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I hope more of you continue to contact me with your questions I’ll do my best to answer them. I understand many of you have more questions then answers about the home buying process. Just like in elementary school there are no stupid questions. I hope to hear from more of you.

Let me know what I can do to help.