First deal, advice greatly appreciated!

[Kelsey Schneider]

Hi everyone,

I have been lurking in the forums for a while now and enjoying all of the great questions and answers and information that you all provide. This is my first time posting though.

I am looking at doing our first deal and have some questions to ask you guys. This would be our first time buying a house and we would be the owner occupants. My husband and I and my parents all live together and currently share the rent where we are living. My husband and I would be the ones buying the house and we would share the monthly payments with my parents (they don't have credit and are not interested in buying a house themselves).

We live in an area with a very hot market in Maryland. We had $9000 gifted to us by my father-in-law to help with a down payment. We have a pretty low income. We went through the pre-approval process and were approved for an FHA loan of up to $160,000. We have been having trouble finding something in this price range that would qualify for an FHA loan. I recently found a HUD home and we went to look at it. It seems to be in surprisingly good shape. We would need a 203b loan or a 203k. The 203b is out of the question because we don't have the $15,000 in cash for the repair escrow. The closing costs for the 203k plus inspections would take up the $9000 that we have. We would end up saving maybe $200 a month total buying versus renting. However, with buying the house, if our bid was accepted, we would gain at least $50,000 in equity immediately after the $10,000 worth of repairs were done.

While that sounds great, I do have some reserves. We would be left with no money saved up to meet unexpected repairs and it would take about 6 months to save up a decent emergency fund. Has anyone had any experience with home warranties for unexpected repairs? Would that even be an option if something major like the septic system went out?

Another question that I had is in case we do decide to go ahead with it how soon could we refinance the loan? The interest is 4.7% on the 203k and I think we could get a lower interest if we refinance although I'm not sure if it is worth it with the closing costs. If we got equity out of it, we would like to put another bathroom in because 4 of us and only 1 bathroom is going to be a challenge.

Right now, my gut instinct is that this is too big of a risk because we don't have an emergency fund. But I wanted to ask you all's opinion since you are the pros and also get some answers to the questions I have.

Thank you very much for taking the time to read this long post! We appreciate any advice!