Home Buying in Nutley>Question Details

Yapri, Home Buyer in 07058

Should I buy a place or pay off loans..?

Asked by Yapri, 07058 Mon Dec 14, 2009

This is our situation.Wife and Husband employed..
Annual Gross -- 160K
Savings -- 25K cash
Debts: Credit cards -- 6K
Installment loans -- 24K
1. Given the above scenario should we buy a place or pay off the loans
2. We really want to buy ASAP so we can avail the First time home buyer rebate
Based on the current situation what do you guys think we should go for as the max price?
Also, I am worried that our savings may not be enough to cover the 20% down.. Any alternatives??
3. We are looking for either a town home or Single Family house near Nutley NJ and surrounding towns like Fair field, Montclair... upto Livingston.. Considering the fact that we will have additions to the family in future.. should we consider a TH or SFH?? Is it too soon to worry about good school districts etc?
4. Also, in long term.. is it good to buy a Town home or SFH?
5. We have Credit scores of 720 and 690.. Are these scores enough to get approved for a loan with decent interest rate?

Help the community by answering this question:


Al Akerman’s answer
Yapri, based on the information you provided, you seem to be fine. There is nothing wrong with 24k in installment loans (assuming they are the typical car or student loans) or 6k in credit card debt with your combined income.

If you'd have said you have 24k in credit card debt, or "unhealthy debt", that would be more of a concern. It also depends if you are experiencing an increase or decrease in debt.

Feel free to contact me at 908-415-3958 if you'd like to dicuss this further.

Dan, that formula of 3 X yearly income is a vintage formula (quoted by financial experts the world over for as long as I can remember), and I totally agree with it (unless interest rates are extremely high). In fact, that is what I base my reccomend trying to keep total housing expense (mortgage, car payments, etc.,) to under 30% if possible.

Also, you are correct that on a 100k 30 year mortgage after seven years about 12k of principal will have been paid off, but that is only true if the interest rate is approximately 5%. The higher the rate, the longer it takes to build up equity in the home. Thanks for the links. Good stuff.
1 vote Thank Flag Link Mon Dec 14, 2009
Ian is correct. You can put down as little as 3.5%. The seller can also pay your closing costs so you won't have to come up with that money out of pocket.

Your credit scores are very good and not at all a concern.

It is generally not wise to spend more than 30% of your income on your total monthly expenses-if you can help it-even though you would qualify for a mortgage of over 50% of you monthly income.

Based on your income, I would say that $30,000 is not alot of debt considering that only $6,000 is credit card debt. From a mortgage standpoint that isn't a concern. The monthly payments on your current debt is probably significantly less than 10% of your income, which is alot better than what I generally see from clients in today's market.

If you would like to figure out how much of a home you can afford feel free to contact me anytime at 908-415-3958.
1 vote Thank Flag Link Mon Dec 14, 2009
Depends on your reasons and objective but I think this question is better suited for your financial adviser. If I were you, I'd probably first pay down some of that debt and go into home ownership debt free. Why max yourself out when you don't need to.
0 votes Thank Flag Link Sun Jul 18, 2010
Hi Yapri
I already responded once to this thread, and wasn't planning on responding again, but I want to clairfy something that was said.

Ini regard to townhome complexes, I would respectfully disagree with the generalization that was made that: "townhouse complexes are not meant for young families with kids and are not kid friendly. They are mostly for older people or young single people"...................maybe that's the case with townhomes in Nutley, but once you leave that area....In areas such as - Livingston, W Orange & Roseland, which have a large number of complexes to choose from - they are heavily populated with young couples and families - many of the pool areas even have play equipment for children.......many young couples like starting out in a newer townhome, and not have the responsibility of exterior maintenance required in a single family house.

I wouldn't want you to eliminate a townhome simply because you thought it was "mostly for old people". I just sold a beautiful townhome in Roseland to a young couple (moving from Hoboken) with a 1 month old baby - they chose their complex due to other young couples they knew who were already living there.

You have a lot of options.
Al, who commented below, is a great mortgage rep - he can help you determine a comfortable monthly amount and advise you in regard to a mortgage. He is also the one most qualified here to discuss the GFE (good faith estimate) and how you might want to structure an offer with closing costs included, as a seller's concession.

One other comment I'd like to make is that agents can not or should not discuss or list... " the areas with better school districts also are the better real estate areas".
There are links I can give you if you have questions regarding any school districts.

You need to sit with someone who can discuss your options as far as the actual home goes. Single family - or townhome...you will know what is right for you once you have all the information in front of you, and you get out there and see what your choices look like in person.

As I said in my eariler post - your lifestyle will factor in to what you ultimately decide to buy....and when.

Good luck, and if I can be of help, please contact me....
All the best,
0 votes Thank Flag Link Thu Jan 7, 2010
Since Trulia deleted my answer for some reason or another--again consider these factors as well-- What lenders don’t know are borrowers’ non-debt spending habits, present and anticipated. You, the borrower, need to consider the economic factors of your lifestyle that would impact on your individual comfort level of affordability. A mortgage outside your budgetary constraints can dramatically alter your overall living conditions. So, be sure to factor micro and macro economic concerns into your mortgage amount deliberations.
0 votes Thank Flag Link Wed Dec 16, 2009

Your question would best be directed at a financial advisor as most Realtors will tell u "now is a good tme to buy" because that is our business (and the current interest rates support this ascertain) . . . . getting u to buy.

Here are a few of my contacts:

Eric Larsen, eric.larsen@mortgagefamily.com; or

Dawn Benedickson, dbenedickson@auroralending.com

In full disclosure, I do not cover the Nutley area (though this is where the bulk of my family lives).

These guys will help or be happy to refer u to others.

Good Luck!

Francesca Patrizio, ePro, SRES
732.606.2941 (DIRECT 24/7)
Coldwell Banker Residential Mortgage
Web Reference: http://www.PatrizioRE.com
0 votes Thank Flag Link Tue Dec 15, 2009

I say be conversative and look for a home in the price range of $240,000 up to $330, 000 even though you may be able to afford so much more. One of the reasons I say this is because if you plan to have additions to the family it would be nice for your wife to stay home for a couple of years and be there for the children. (My personal opinion as a woman- I dream about time with my little ones-I don't have little one, but if I did, this is what I would want).

This market allows you to be conservative. You can buy a decent home at an affordable price. Plan to be in this home 7-10 years. When I first started real estate in 2005, so many first time home buyers were priced out of the market and it was hard to get into a decent town in the single family category. Then we had people who were buying above their heads and forgot about quality of life.

Fortunately for you you're in the market where everything favors you: low interests rate, reduced prices, lots of inventory, tax credit. . .

If I were you, I would look for a 3 bedroom home with 1-1.5 baths-possibly a Cape with a tall basement for a family room (Belleville, Bloomfield are towns that some to mind, but not sure how you feel about them). I would also look to be under contract by April 30th and closed by June 30, 2009.

Your tax credit could easily pay off your credit cards. You can look into the Live Where You Work Program as the name suggest though, you may or may not want to do just that depending on where you work as well as you would also have to meet certain income qualifications.

I agree with Dan about taking a closer look at where your money goes to each month and think about retirement savings, investments, saving for your future kid's college education, vacations, etc.

I included a link to a personal budget worksheet to help you with your budget in 2010.

Hope all is well and if you have any questions about specific properties, let me know via email or phone.
aperez@weichert.com or 973-715-6210
0 votes Thank Flag Link Mon Dec 14, 2009
Debbie rose gave some good answers while I was looking up references. She usually does. I would expect she could help you.

Generally speaking a house loan should not be more than 3x your income. $160k x 3 = $480k.
(taxes & insurance go up every year)

That does not mean you should spend every penny you can borrow. It means you should not borrow more than that amount. There is no reason to buy the most expensive house you can. I would start on the low side and look at places with the prices going up with every place I look at. That is always how I look at properties for sale. Cheapest first, most expensive last. I figure on offering less than asked.

Long term, think of a 3 bedroom house (or whatever). When your children arrive you do not want to have to move just because you bought someting to small. That will cost you realtors fees and worse, lost time, and aggravation. Can you imagine needing to move because of a child and not being able to sell for 9 months or longer? Buying once based on your long term needs means you will have what you would need when the time comes that you need the room. It will not put you in a place that makes you move when you least want to. That includes buying according to the school system today for a child that may not get into a school for 8 more years.

I saw one broker say that after 7 years paying on a $100k mortgage (30 year?) you would have built up about $12k in equity. That is not much. So buy right to start, and stay there as long as possible.

The federal reserve is planning to stop buying mortgage backed securities about march. When that happens interest rates are very likely to rise. Just another piece to add to the puzzle.

I wrote a blog about what to look at when buying 1 land and 2 a house. Separate categories with separate questions. Most people would say it is to much. But if you look at it you can find some potential problems that you might avoid by asking the right questions. Some you have to find yourself. Some the seller or agent can help with.
(the title) Questions I would ask when purchasing any property.
0 votes Thank Flag Link Mon Dec 14, 2009
The numbers you gave confuse me. with $160k a year in you should have a lot more saved.

Look at your budget. Where does your money really go?
Are you eating out a lot? Seeing lots of movies? Starbucks taking your coffee money?

I ask for a reason. I do not see money as something that comes in and goes out as quickly. I see money as something that can be saved for future needs. Once you determine that you want to meet a specific goal (like a house) can you cut back on most of your unnecessary expenses to save money for that goal? Once you decide to cut back you will find the savings come easily.

Long term, I see a single family house as best. The reason is simple. No HOA telling you what to do. No problems from the other half house owner who will not fix their leaky roof.

Looking at house location by 1 taxes and 2 sex offenders in the area and 3 school systems makes sense from the beginning. No matter what you buy you may want to sell it some day. You want plusses and not minusses when you sell so get them when you buy.

look below. CLick on your state.
look below for the 3rd quarter 2009 results of foreclosures. It is nationwide,see how your area stacks up.
Foreclosures: 'Worst three months of all time' (Oct 15 2009)

Do more reseearch. See what is ggoin on in your area and with the foreclosures. It can only inform you. If you decide to wait it will give you the chance to lower your lifestyle for a time and have a much better down payment when you do buy.
0 votes Thank Flag Link Mon Dec 14, 2009
Hi Yapri
Let me start with the easy answer. To purchase in the various towns you mentioned, you will not have enough to put 20% down......as you would have to pay no more than 125,000, and that isn't realistic in this area.
So - that leaves you with putting down less than 20% - ok, that's fine..... you can put down as little as 3.5% with an FHA loan. And, yes, your credit scores are high enough to get approved for a loan.
Whether you should buy a townhome or single fam. home is not the question at this point, as what you buy will be a function of what you can afford.
For the long run, however, you're probably be better off, imo, starting with a small SFH.............. since you are planning to have "additions to the family" the future, you will already have a backyard and the potential to enlarge a home down the road - a townhome can't be enlarged.

Now we get to the more difficult part of your questions....and the most important part - how much CAN you afford, and SHOULD you buy at this time.........

Your questions are great....but the answers are really too detailed to be properly covered in an internet forum.

I commend you for thinking this through, and even coming up with this list.
I can sense your enthusiasm and desire to jump into the market because of the 1st time buyer's credit. But you have to make sure it is the right time for you to jump in.

I strongly urge you to sit down with a lender, and go over ALL the possibilities and scenarios. You also need to take into consideration what your lifestyle needs are - do you eat out a lot, take vacations....are you saving as much as you can.......or do you spend more than you should (hence, the credit card debt)?

These are all questions you need to answer to help put the parts of this real estate puzzle together.

I would be more than happy to arrange for you to speak with a mortgage rep. to get you started - I would also be happy to go over figures associated with owning a home. I am not trying to put off answering your questions, but they are multi-layered, and require more indepth discussion and more information.

To be honest, my gut reaction to your questions is to advise you to pay off your debt before taking on more debt, and also to try and save more money as a cushion.

That's just my gut reaction, as I tend to advise people on the conservative side.
My opinion might change, if I were to meet with you, sit down, and work through the numbers - integrating them into your personal needs and wants.

I have a son and daughter-in-law who will be looking to buy a hone in the coming year, and they have the same kind of questions you have. I have been slowly trying to educate them as to what is involved in a home purchase.
It would be my pleasure to do the same for you! This can all be quite overwhelming, especially for a first time buyer.

Please don't hesitate to contact me at your convenience!

Best wishes.......
Debbie Rose
Prudential NJ Properties
email: Debbie.Rose@PrudentialNewJersey.com
cell (973) 715-3131

0 votes Thank Flag Link Mon Dec 14, 2009

I can help you with some good advise.
Just a little too much detail for the forum

Give me a Call, I am local mortgage broker.

Tom Altieri
New Jersey Mortgage Services
Face to Face personalized Service

0 votes Thank Flag Link Mon Dec 14, 2009
Buy or not - work out the numbers with someone! What do you spend in rent, add in maintenance and replacement issues, utilities, insurance, property taxes etc? Other questions - in most cases a single family home will be an easier resale. Never too early to look for a good school district , again better for a resale.
Web Reference: http://topbrainerdagent.com
0 votes Thank Flag Link Mon Dec 14, 2009
Wow. A lot of good questions. Here;s the long and short of it. You really need to talk to a lender to understand accurate answers to most of your questions. A lender will be able to show you the dynamics of buying vs paying off your dept and how that will impact your monthly payments. If you need a recommendation, let me know. You also can put as little as 3.5 % down, so depending on loan programs etc. 20% down may not be necessary. Personally, as someone who owns multiple pieces of Real Estate I would suggest that now is an excellent time to buy real estate. The down markets are a great opportunity to capture future equity growth. I also believe single family homes tend to retain value better than a condo, however it will depend on location, demand, make up, and preference. I actually live in a townhome, because I like maintenance free living. However, I feel I have taken a bigger hit in value as opposed to single families in my area. Interest rates in general are quite good right now, but again your best route is to talk to a good lender. Hope that helps.
0 votes Thank Flag Link Mon Dec 14, 2009
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