Need advice...want to start house hunting.

Me and DH already own a 2BR co-op, but we really want to start looking for houses. We have the equity in the co-op, and we've saved about another $20K so far. We're having someone come do a competitive market analysis on our co-op so we can at least see what they think it's worth (we did a lot of work once we got in there).

I think we should have about $100K from the sale of the co-op, after we pay off the mortgage. I know we don't have that much "cash on hand" but do you think we're ready? Or do we need to save more?

I figured we'd use the cash we have for the deposit and maybe closing costs, then the proceeds of the sale as our down payment (and any other left over costs).

ETA: I should say we'd be looking at houses somewhere from $450-$550k...although the lower the better.

thanks!!

Message edited 8/3/2004 8:51:30 AM.

Re: Need advice...want to start house hunting.

Try using a mortgage calculator to see what your potential monthly mortgage payments would be (dont forget the taxes), using the high end of your price range. If after the down payment is applied, you can "comfortably" afford the payments, you are ready. (LOL shopping on LI, who the heck is comfortable with these prices??) But also draw up a list of other monthly expenses as well. Obviously there are some additional expenses with a house that you wouldnt have with a co-op so dont forget to include those and also play with the #'s a little. Maybe instead of applying $100K to the DP, you can apply $80K so you have $20K on hand. Sometimes the difference in the monthly payment is not so big and it's worth having the cash in a liquid form rather than to be "house poor"

A mortgage broker can help you with this as well. Good luck!

Re: Need advice...want to start house hunting.

We just started looking as well.
I think you have enough w/ $100K, but I totally agree w/ Elizabeth. I wouldn't put down the entire amount and leave yourself w/ nothing in the bank. It's nicer to put more down, but what if something happens? Boiler etc.?

We've worked out the math for a $400K house w/ taxes at $6K- putting 10% down, monthly mortgage payment + taxes + home insurance would be aprox. $2600- $2800 a month.

Happy house hunting..
hope that helped!

Re: Need advice...want to start house hunting.

November:

I do not know what kind of monthly household income you are pulling in... but your co-op situation, equity, and savings is pretty much a spitting image of the situation I am in right now. I will also be looking for a house in that price range as well.

The only difference is I wont be looking for a house for at least another year or two. I am pretty happy living in my co-op. I have a very low 5.25 percent mortgage. Its ultra convinient for me and work so it will be tough to give up. Plus I think I am going to put some work into it right after the wedding to bring up the value even more.

Also don't forget you want to make sure you have owned your place for at least TWO YEARS so you are exempt from capital gains taxes. If you sell in less than two years thats a BAD move.

But in the end... with close to 100k in equity... yeah you should be ready to buy. Just check the affordability calculator and your income to see how much you can buy.

Message edited 8/3/2004 11:42:15 AM.

Re: Need advice...want to start house hunting.

I thought it didn't matter when you sold for capital gains, just when you either re-invest the $$. If you don't buy something w/in a year of selling, that's when you get hit hard?

Re: Need advice...want to start house hunting.

No to avoid capital gains... you must have lived in the residence you are selling (must be your primary residence - can't be a vacation home) for two years or else you pay full capital gains tax.

Re: Need advice...want to start house hunting.

Thanks DjPiLL...I didn't know that. I found this online.

Ownership and Use Tests

To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least two years (the ownership test)
Lived in the home as your main home for at least two years (the use test)
Gain

If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

If you can exclude all of the gain, you do not need to report the sale on your tax return
If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040)
Loss

You cannot deduct a loss from the sale of your main home.