I don't know what to do, rent or buy?

Question

I am currently renting, but everyone keeps telling me that I am throwing my money away. I am a student, but hopefully within the next couple of years will be an R.N. My boyfriend thinks we should buy but I have had credit problems in the past (I do not owe anyone anymore). I just don't know where to start or who to talk to. We live in the Olympia, Wa area. Any suggestions would be great.

Answer 1

It's a bad idea to buy property with a friend because chances are, that "friend" will be gone within the first year or two, then you will have to find another roommate to live with in order to afford the payment. Also, as a student, you don't need to buy, wait until you have a stable income. And thirdly, if you have bad credit, it will take at least 3 yrs and a lot of on time payments to qualify as well as about 4000.00 in closing costs plus the downpayment. FHA loans require at least 3 % down, so unless you have a minimum of 10,000 saved, forget it. Wait until you have a job, a marriage and some money in the bank. Without those three things, you are asking for trouble and remember your credit follow you around everywhere today, jobs, cars, homes and even insurance rates are based on your FICO score.

Answer 2

It sounds like you've worked hard to improve your credit. Congrats. Now just sit back, keep paying your bills, and let "nature" take its course.

Your credit score had to have been low when you were in the middle of the credit issues. Now it's healing. Keep an eye on it. It should start rising every month. Check it every three.

When you hit 650, you're in a good position to purchase. If you wait for 680, you will qualify for any and every loan product. And at 700, banks will be tripping over your mailbox to lend you money. Purchasing if your score is below 620 will put you in the subprime market, which is expensive and hard to ever get out of.

Wait until your credit is where the banks want your loan. Do not purchase when you have to plead with the banks to lend you money.

And a good sign on that - as your credit improves, you will start to get credit card offers from companies like Household, Direct Merchants, Providian, Capital One, and the like. They go after people with just-above marginal credit. This is a good sign. But be patient. And pretty soon you'll start getting zero-percent interest credit card offers from Citi, Chase, B of A, and the like. They go after people with good credit. You'll know you've arrived!

Oh, and BTW, I have a friend who is selling a place he's been in two years, hoping to break even. If he does, then the mortgage payments he made the past two years would be "out the window" just like rent. If he doesn't break even, it will cost him more than if he had paid rent. And he's in a lower tax bracket, so he didn't get that much tax savings by paying the mortgage. So don't worry that you're throwing money out the window. Renting or owning for a couple years is probably a wash. Especially for a student who is probably not at the highest tax bracket.

Congrats again and good luck!

Answer 3

I think that you should buy, but only if you plan on staying there for a while, if you can borrow some money from family etc. for a downpayment of at least 25% I think, you will get a much lower interest rate. Also, you should get something flexible so that in a couple years you can increase the amount of money you pay every month/two weeks b/c the faster you pay it off, the less you end up paying. But of course you have to make sure that you are comitted to paying off such a large debt b/c you don't want to have credit problems forever, esp. if you go bankrupt. I'd recommend starting small, either a small house or a condo...with a house you'll have to pay property tax and with a condo you'll have to pay condo fees on top of the mortgage, so make sure you know what your'e getting into. Also, I agree with the person who said that you shouldn't buy with a boyfriend unless you can come up with some kind of written agreement re. who pays what and what to do if you break up.

Answer 4

One big factor depends on how much you're paying in rent. I'm a Realtor with Coldwell Banker in Atlanta, and I prefer renting purely because I don't have to worry about maintenance or a lawn. Then again, I'm living in one of the nicest communities in Atlanta. What you need to think about is the long-term picture. From personal feelings, I would not recommend purchasing a place with a boyfriend/girlfriend, because a boyfriend-girlfriend relationship isn't usually as strong as a husband-wife relationship, and it would be quite a messy breakup if you then had to deal with paying off the loan, "who gets what", etc. I personally think just from that end, you would be better of renting until the event that you get married. If you do end up deciding to purchase a place, let me know and I'll find you a great agent.

Answer 5

Buy if you're ready. The worst thing you can do is try to buy too soon. You can really screw yourself up if you aren't ready.

There's nothing wrong with renting until you are ready to buy.

Answer 6

I would not buy until you are out of school and have your job, then buy. Good luck

Answer 7

find a place you can buy than throwing your money away in that renting........

Answer 8

First you have to work on your credit - here is some helpfull information on credit and things to do. Than when you feel you are ready - to buy your home - there are other things to consider. One is job time, can you go off your boyfriends income and credit to buy a home. You may have a slightly higher interest rate, but you can refinance it after you get out of College (when you are making more)
You can also add alternative credit (cell phones, cable bills, auto insurance, auto payments, anything that you are paying on monthly or quarterly. This could be added to your credit as alternative credit. Some lenders will look at that - also Rental history is important, since a lender will verify a 2 year rental history. Most college students do not have that, since they may live in a dorm. You could have a co-signer (to get you into your home) than later refinance the home in just your name. These are just a few ideas.

If you are currently in excess debt, there are four ways to control it:
. If your credit is not in terrible shape, you can reduce your other expenses, even if it means making hard choices or changing your lifestyle to fit your income. Consider selling a second car, taking equity out of your home, applying for a non-secured signature loan, obtaining a loan from a relative, selling your home and paying off your debts with the proceeds and then renting, cashing out your 401K/retirement benefits or selling family heirlooms, jewelry, etc.
. If your credit is already damaged or one of the above isn't an option, go through Consumer Credit Counseling Services (CCCS). Check your yellow pages for the local number. CCCS may be able to help you pay off your debts as if you were in a Chapter 13 bankruptcy, but you don't actually file for bankruptcy. BUT MORTGAGE LENDERS LOOK AT A CCC AS A BANKRUPTCY.
. If CCCS won't take you, you may want to consider bankruptcy. Claiming Chapter 13 bankruptcy takes longer than a Chapter 7, but your credit will end up in a little better standing. Chapter 13 bankruptcy gives you up to 5 years to pay off your debts. The disadvantage is that you're in bankruptcy for up to 5 years plus your credit report shows your bankruptcy for 7 more years after you have finished paying off your debts.
. If you are so far in debt that you can never repay it, then the best solution may be a Chapter 7 bankruptcy. A Chapter 7 bankruptcy is the least desirable from a credit standpoint, but you are typically out of bankruptcy in 6 months and you don't have to repay any debt. The disadvantage is that this shows on your credit report for 10 years from the date of filing your bankruptcy. Creditors are starting to tighten their credit requirements, and you may have a tough time getting future financing.
If you're debts are under control now, but want to improve your credit history, the most important factor is to make your monthly payments on time. Use pre-addressed envelopes enclosed with your statements to mail your payments and call the company if you don't receive your usual statement. Also send your payment as early as possible if you carry a balance. Most companies calculate interest on a daily basis, so the sooner they receive your payment, the less interest you'll pay.
Don't procrastinate. It's the day your payment is received that counts, not the postmark date. Give the post office sufficient time (five business days is a good guideline) to deliver your mail. Late payments may mean late fees, higher interest, and/or a negative mark on your credit report.
Never send cash. Open a checking account if you don't have one, or spring for a money order and keep your receipt. Finally don't forget to tell your creditors your new address when you move.
If you are worried about making payments, make a list of your debts and when the payments are due. Contact your lenders immediately if you think you will have trouble meeting the monthly payments to arrange a payment schedule.
Taking money from your retirement account or tapping the cash value of your life insurance policy to pay bills or living expenses may have serious implications you haven't considered, so try to get advice from an expert before you take any major financial actions.
Credit cards can be invaluable in a crisis, since they allow you to charge items and pay them off over time. But they can also be dangerous if you aren't careful and charge more than you can afford. If you do use credit cards, choose those with the lowest interest rates and pay them back as soon as you can to cut your costs.



Credit Scoring - How it Works
. Credit scoring is a statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant. The score is a number that rates the likelihood you will pay back a loan. Scores range from 350 (high risk) to 950 (low risk). There are a few types of credit scores; the most widely used are FICO? scores, which were developed by Fair Isaac & Company, Inc. for each of the credit reporting agencies.
Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.
Different portions of your credit file are given different weights. They are:
35% - Previous credit performance (specific to your payment history)
30% - Current level of indebtedness (current balance compared to high credit)
15% - Time credit has been in use (opening date)
15% - Types of credit available (installment loans, revolving and debit accounts)
5% - Pursuit of new credit (number of inquiries)
The most important factor for a good credit score is paying your bills on time. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you may want to: keep balances low on credit cards and other "revolving credit;" apply for and open new credit accounts only as needed; and pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.
Recent changes minimize the negative effects that rate shopping can have on a mortgage applicant. If there is a consumer originated inquiry within the past 365 days from mortgage or auto related industries, these inquiries are ignored for scoring purposes for the first 30 calendar days; then, multiple inquiries within the next 14 days are counted as one. Each inquiry will still appear on the credit report.
Every score is accompanied by a maximum of four reason codes. Reason codes identify the most significant reason that you did not score higher. The reason codes can help a lender describe the reasons for higher than expected rates or loan denial. Scores are not part of the credit profile and are not covered by the Fair Credit Reporting Act.
Your credit report must contain at least one account which has been open for six months or greater, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

ADDITIONAL HELPFUL INFORMATION TO KNOW

Decide on how much you want to spend, if you want to escrow the taxes and insurance. Say the taxes are 1200 a YR and insurance 800 a year (just an estimate, ok) That is 2,000 a year divided by 12 = 166.66 If you paid 1,000 a month now - (166.66) your P/I Principle and Interest would be 833.34. Now you decided on the price range you are looking into. If you have great credit, a 1 loan at 130,000 at a rate of 7 percent over a 30 year time would be 864.89 - This is just a estimate - ok -

It greatly depends if you need help with closing cost, (The seller could do Seller Help toward your closing cost). If that is the case, I normally tell my clients NOT to hackle over the price, since you are asking for closing cost help - especially if the home is thru a realtor, and the seller has to pay the realtor their fee which runs from 2-6 percent of the selling price, and you ask for 4-5 percent toward closing cost -assistance) Follow me so far??

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down

Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). This will tell you the up-front closing cost (etc) associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

Lenders look at the middle score...of the 3 scores. If you only have 1 score or 2 scores (have seen it), it is still workable....but unless a lender sees the whole picture - credit - income - job time, etc - than you will not have a "true" picture of what you can afford - Hope this helps - There are also Government programs out there, but they too are looking for job time, etc.....They are not so much looking a credit - but the other factors are taken into consideration. With a government loan - collections and judgements will have to be paid (most ppl do not know that) but for FHA it is true.

Decided on the type of program (loan ) you are wanting. A 30 yr fix is still roughly at a 6.5 rate right now - but if you are needing a 90 percent ltv the rate is around 7 percent and a 95 ltv is 7.375 and a 100 percent rate is 7.5 ( This is a estimate only, since I do not know what your credit score's are....There are also, interest only loans - adjustable loans, option arms (where you pick the payment, from 4 payments, including interest only). Interest only are lower payments, but nothing is being paid on your home. Some self-employed ppl like the payment options, in a lean month when money is tight., they can pay a lesser amount.

Good Luck, and if I can help in any way check out my web site, for links to all the credit reporting agency’s and other useful information.