Should I go through with buying this house?

Deal Score0

My fiance and I have been looking to buy a house soon. We were thinking to take the next year to save up as much as possible. Then, a family friend came along and they are selling their property. They were going to put the property up for 130k, but if we are interested and willing they are willing to sell it to us for the 130k but then turn around and give us 10k back to put towards the down payment. We were thinking of a FHA loan (we are qualified for it), which means we would still be required to come up with 3.5% ourselves, which we can do easily because our tax return. The house has a roof that was new within the past 5 years, a new paint job outside, new water heater, nice hardware floors, brand new paint inside and on the one car garage, brand new kitchen tile floor, brand new sidewalks outside, newer flat wooden deck outside and comes with all appliances. This is an area we will be staying in indefinitely and right now our rent is 1100. We make almost 60k before taxes with about $ 490 debt/month (cards, student loans). He wants to sell as soon as possible (it was a family members house who passed away). We can come up with the 3.5% we need to put down but I am unsure about the closing costs, etc. What other fees would I have to pay on top of that 3.5% and about how much would I have to come up with. If we do go with the FHA loan the closing costs cannot be rolled into the mortgage.

  1. Reply
    May 19, 2011 at 1:29 am

    Talk to a lender to see if you qualify. The lender can give you a detailed look at closing costs. You will also need an appraisal because you want to know if the $ 130k is market value or just somebodies wish. Too often people arrive at a price for a property without any comparisons or any real rationale. If may be worth $ 90K and if that is the case he can keep his $ 10k.

    By the way don’t buy the house together if you are not married. Too many issues to go into for this space but it is always a bad idea to buy real estate with a boyfriend or a girlfriend. I know you said “fiance” but do you have a wedding date?

  2. Reply
    May 19, 2011 at 2:24 am

    In an FHA purchase transaction the seller is allowed to contribute up to 6% of the purchase price to use toward your closing costs and prepaid taxes, insurance and interest up to the actual amount of those costs. You must come up with the 3.5% down payment yourselves which you should be able to do with your tax refund. A gift may be used for the down payment, but it must come from a family member.
    With this purchase amount, 3-4% of the purchase price should cover all of your costs except for the down payment. You will likely have a new house payment a bit less than the rent you pay now, and a debt ratio around 30% which is well within guidelines. It appears you have a deal.

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