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Author: EvanED Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127236  
Subject: Re: When can I qualify for a loan? Date: 4/23/2013 12:17 PM
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Since you are staying in the same line of work, you should be able to qualify almost immediately, based on your new salary.

Spiffy, thanks! That's what I wanted to hear, even if I'm a bit surprised that it's the case.

Congrats on what you've been able to achieve!

Thanks! I'm pretty proud of my parts toward it. I've been really lucky in a few really important respects though, e.g. one of my parents worked for my undergrad university so I got reduced tuition which, along with a partial scholarship, let them pay for it without me having to take out loans. And I'm also lucky enough to be interested in a field (computer science) that pays nicely.

Don't forget about closing costs. You may be able to get the seller to pay $3k - $5k, but if not, some of the 'down payment' money will need to be set aside for closing costs.

Right. OTOH, even after taking that into account, there's probably enough for 10% down for even a $200K house. 10% is sort of my goal.

Plus you will want to have some money for furnishings, repairs, upgrades, fixes, etc. And I would strongly suggest that you have at least a start on an emergency fund, since you never know what things might break or be damaged when you least expect it.

So in late 2008* I opened a Roth IRA with a couple different mutual funds, which I sort of view as simultaneously a retirement account and emergency fund (because you can withdraw your contributions penalty-free) until I can get a real cash emergency fund up, which I haven't been able to do so far. If something really goes south in the interim between when I close on the house and when I can get some cash lying around, I could tap that. (I've maxed my contribution each year including this (somehow, and just barely) so have $30.5K that I can access penalty free.) Obviously that'd suck because if I withdraw more than this year's contribution I can't put it back in, but it is there as a backup plan.

(* At almost exactly the right moment as it turned out -- another way in which I got lucky. Everyone else's unfortunate loss when the market crashed was my gain, because I started getting into it at the bottom. For a couple of months I actually thought I might have opened it the day of literally the lowest point of the DOW since the 90's, but it dropped below that for a while in early 2009.)

Anyway, my thinking is that my income is high enough that I should be able to build up an actual emergency fund pretty quickly, so I'm not too worried about it. My current rent is high enough that the actual mortgage payment (maybe even mortgage payment + PMI) may well be less than what I'm paying now, and I don't see non-housing-related costs going up too much in the near future aside from perhaps a small bit of "celebratory spending" at the beginning, so that means that a significant majority of the increase in my income will be able to go toward savings.

The other thing which enters into the picture is that the company I'm working for has an SEP instead of 401K for retirement; I'm not sure that's the relevant bit, but the important part is that the company makes a straight contribution without requiring matching dollars. The good part of that is that if I say "I want to focus full bore on saving for the downpayment" or "I want to focus on establishing an emergency fund" I don't lose out on a match. (The contribution is also a bit higher than the maximum match at even some top tech companies.) The downside is that less goes in total compared to maximizing the match, so I'll have to figure out the right vehicle to use for external retirement savings. (I'll be in the phase-out zone of the Roth...)

So if you can be happy with a lower price range house, you can use the difference to help make up for some of those lost earning years.

A lot depends on what's on the market, of course. I've spent some time looking around on Zillow, and there have been a couple houses I've seen that from the pictures (yeah yeah) look pretty good and are at the lower end (or even slightly below) that price range. But generally speaking that's fairly low for around here.

As for your later suggestion of renting a house, I did sort of think about that. But there are a few things I don't like about that idea, and I'm not sure it makes financial sense for me. From what I can figure and anticipate, I should be around here long enough for buying to make sense, but if I were to move into a rented house for, say, a year and a half or two years, and look to buy during the second year, then that question becomes a lot more dicey. To me the house purchase seems like it's trading a very short term time where I'm low (but not critically low) on cash for a better long-term stance.

Look at the bright side... I almost wound up in the SF Bay area, so at least I'm not asking "hey when can I afford a $600,000 starter house?" :-)
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