I'm looking to buy a new condo in the Greater Chicago area over the next 2 or 3 months....any advice at all? In terms of financing, what will help me lock up a good rate? I have a decent amount of cash saved up, and have excellent credit, have just paid off my car in full and am 24 and single. I have no debt whatsoever, but my only worry is I carry a decent balance (around $2,000 every month) on my credit card (I pay it off in full every month), and my total limit on credit cards is about $12K between three different cards. Should I go ahead and cancel one of the cards (with a 4K limit) or does it not matter? I'd be happy to hear about any past experiences......what would be the upsides/downsides to owning a fairly new condo, in a happening part of town (right by the lake).....rent would run around a grand a month, whereas the condo is going for a little north of 150k.....the way i see it is, even though i'm moving to a new city, I'm living there a minimum of 12 months, that's a good ~8% ($12,000+) that I could of used to pay off the condo, even if I do decide to move and sell it (hoping it appreciates)....

 

Sounds like you are in a good place.

First off DO NOT cancel the cards, it will mess up your credit because you will kill off the credit history you build through them.

Secondly, owning is a good way to go, the only thing you have to consider is that right now, most of the country is at the top of the market, pricewise. Might not be true for your area however. If you plan to stay there short term only and property goes down in value short term, you might be out some money, the likelyhood of that is low because economy is picking up.

However, if it's a popular area, 150 seems like a decent price. I would go for it without too much doubt.

 

Lost Boy,

Here is some advice:

1) 12K in totol credit card availability is excessive. Having this much availability lowers your FICO score. Cancel one or more of your credit cards and reduce your overall exposure to about $5-$6K and your credit score will increase. Your credit score will largely determine how good of a rate you can get when you apply for a loan.

2) Why run such a high balance of $2K per month on credit cards. Even if you can pay it off every month, try to cut back on unnecessary purchases to improve your discretionary monthly cash flow.

3) Buying property especially at your age, is a good investment in your future. With each passing monthly mortgage payment, you build more equity. And the interest payments you make on the loan is tax deductable. Property values always go up over time because there is a limited supply so get in while you can.

4) If you plan to live at the condo for only a few years, I recommend an adjustable rate mortgage such as a 5/1 ARM (fixed principal and interest payments for the first 5 years then an adjustable rate based on an index thereafter). ARM rates are lower ( and sometimes much lower) than fixed rates so your mortgage payments will be lower. Then, you have the option of re-financing or selling the condo most likely at a higher price than what you paid.

Thats it for now, if you have any questions, just let me know.

 

Quick ? on cancelling credit cards. I read somewhere that you should cancel a credit card six months in advance of buying a condo/home....since I am planning on buying in the next 2 to 3 months, is it pointless to cancel the card at this point? (The card I will be cancelling is one I hardly ever use)

 

Agree on the last two points. And damn 150k is a nice price.

 

Sorry just one more....with interest rates still at such lows right now, would it make sense to lock up a low interest rate for the long term instead of opting for an 5/1ARM?

 

5/1 would be a better choice because you end up paying less interest and you will sell the property anyway. A first time home buyer stays in the property typically 3-5 yrs, thus really no need to lock up something longer unless you intend to keep the property as a rental afterwards.

 

How long you planning on being there? As this is just a condo do you really see yourself being there longer than 5 years or 7.

An arm will save you some serious cash in the short term and unless you are planning on being here longer than 7 years it is a great way to go. they have a lot of different arms (3/1, 5/1, 7/1, 10/1) so they should be able to set you up. But always ask them to runa 30 or 15year fixed as well. It may be close enough that you will feel the peace of mind is worth the few extra bones.

Good luck

 

95Gt:

1) Okay, I understand your point, but here is my concern taken directly from your article:


Even card customers that pay off their card balances each month may want to think twice about accepting every credit line increase that comes their way. The reason?

Lenders view all open credit lines as potential debt. Too much unused credit may affect your ability to qualify for a home or a car loan.

"Lenders are cash-flow bankers," says Paul Richard, executive director of the Institute of Consumer Financial Education in San Diego. "And no lender is going to make you a deal when you have all that credit available and not consider what you might do with it."

So folks with six or more credit cards and no debt may want to trim back their credit lines before applying for a home or car loan. Cutting back your credit lines won't boost your credit score, but it may make a lender feel more comfortable about approving you for the big secured loan that you really want.



Your FICO score is a large part of the loan approval process (but not the only part) , part of the underwriting process also looks at the amount of potential debt that you have. So, even if you have a good credit score, the higher open lines you have puts your at a higher risk according to Bank underwriting standards. By cancelling or reducing his limits he stands to get a better rate from the Bank being that his cash flow would improve. Even if his FICO score reduces slightly or not change at all, He will look more favorable to the Bank that gives him a loan.

2) Just want him to save more money since he will have a mortgage payment to make. Thats all.

Why do I know this and am making this recommendation, because I am lender and go through this every day for commercial, residential, and business lines of credt.

 

I Agree

 

understood.

1. Yeah I saw that but also saw that they were talking abuot people with 5 or 6 cards. That is quite a bit different than 3 cards Would I recommend he get another card? No should he cancel... At this point in time right before he is going to buy a house = hell no. After he buys the house = maybe.

2. That is of course true but if he is just putting all his normal monthly bills on a card there is nothing wrong with that. Should he be cutting back to save money (don't really know his situation so can't answer that).


Of course I have always hated the banks way of looking at people with large amounts of open credit and counting that against them. It always seemed a bit unfair to me for them to count your good credit (assuming you have gotton a lot of credit because of your good past histort) against you. Pet peeve

 

Ha Ha Ha......Lets just wish Lostboy the best of luck!!!

 

I guess i'm going to leave my credit card situation how it is...just checked my credit score and its over 750.....i would hope that would set me up for a good rate

 

That's a dam good score for your age. Dude, keep your card, because the credit history is much more important than the temporary score boost canceling a card would give. History is the single largest factor in determining your score.

 

A 750 is good (tier 1). Now go find a good rate and get pre-approved!!!!!

 

If you need help with a pre-approval, I can help you out. I have worked with several guys on ACL.