10% Downpayment on a house? - The Finance Forums: Financial planning, debt help, loans, mortgages, retirement and 401k, investment, and general finance discussion forums

dmoore01 · #1 (**permalink**) 04-23-2008, 03:17 PM

I found a foreclosed property for $64000. I love the house and want to live in it, but I'm in another state. Since I have no income in the house's state, I can only finance the it as an investment property, requiring 10% downpayment.

I have $7000 in an emergency fund and $6000 in a retirement account, which I'll be emptying since I plan to leave my job within a few months. The monthly mortgage will be between $550 - $620. I currently make $2400/month (net income) and plan to make $1600/month (net income) once I move. I have no car payment, student loan debt, or credit card debt. I am 25 years old.

The house was purchased for $105,000 in 2005 and a house two doors down is on the market for $214,000. I really do love the house but don't know if I should clean out my savings for it. Advice? Please!

AllThingsPersonalFinance · #2 (**permalink**) 04-24-2008, 02:12 AM

Quote:

Originally Posted by dmoore01

I found a foreclosed property for $64000. I love the house and want to live in it, but I'm in another state. Since I have no income in the house's state, I can only finance the it as an investment property, requiring 10% downpayment.

I have $7000 in an emergency fund and $6000 in a retirement account, which I'll be emptying since I plan to leave my job within a few months. The monthly mortgage will be between $550 - $620. I currently make $2400/month (net income) and plan to make $1600/month (net income) once I move. I have no car payment, student loan debt, or credit card debt. I am 25 years old.

The house was purchased for $105,000 in 2005 and a house two doors down is on the market for $214,000. I really do love the house but don't know if I should clean out my savings for it. Advice? Please!

Buying this house is not an "emergency."

Do not cash out your retirement plan. You will tax yourself at about a 40% rate.

Rent when you move.

Do not spend your emergency fund all at once. Your new boss might fire you two weeks after you begin work.

You are moving and expecting a net income decrease of $800?

At a net of $1600/month, your likely income is not sufficient to cover the house, taxes, insurance, and unexpected expenses - HVAC, roof, plumbing, etc.

If you get the house, you would be leaving yourself way overexposed to risk.

I would not do it.

Contact an investor club in the area where the home is located. If it is a good deal for you, it would be a good deal for someone else too. Work out an arrangement to get a finder's fee for connecting this house to someone who could afford it.

Personal_Financial_Adviso · #3 (**permalink**) 05-04-2008, 01:19 AM

It sounds like a good deal to me, if its really worth a lot more than $64,000.

The question is, can you replenish your emergency savings account within 2-3 months?

choicearizona · #4 (**permalink**) 05-06-2008, 03:33 PM

Quote:

Originally Posted by dmoore01

I found a foreclosed property for $64000. I love the house and want to live in it, but I'm in another state. Since I have no income in the house's state, I can only finance the it as an investment property, requiring 10% downpayment.

I have $7000 in an emergency fund and $6000 in a retirement account, which I'll be emptying since I plan to leave my job within a few months. The monthly mortgage will be between $550 - $620. I currently make $2400/month (net income) and plan to make $1600/month (net income) once I move. I have no car payment, student loan debt, or credit card debt. I am 25 years old.

The house was purchased for $105,000 in 2005 and a house two doors down is on the market for $214,000. I really do love the house but don't know if I should clean out my savings for it. Advice? Please!

If you can afford the monthly payments IF the house sits empty, consider it.