Does it make sense to buy this house?

[ragesinggoddess]

Found a house on Zillow in the town my husband and I are thinking about moving to. It's a two-family which costs $129,000 and looks to be newly renovated. I'm really into the idea of buying a house that will reduce our housing costs by quite a bit, so I'm thinking that buying this house, living in one apartment, and renting out the other could be pretty advantageous. But I've never owned a house before, so I would love some help looking at the numbers!

Numbers:
> current rent: $800/mo, includes heat
> Zillow estimated payment: $709 (includes taxes and insurance, but I have no idea how accurate that is)
> average rent for a 1-bedroom in this town: $650-$700

Other considerations
> walkable to work for me, 20 min commute for my husband
> 2 minute walk to the grocery store
> 5 minute walk to downtown area with bars, restaurants, stores
> garage has storage above which looks like it could potentially be a third apartment (for us, because we like smaller spaces)

Our income is about 50K/yearly so by most traditional estimates this is affordable for us, BUT we don't have the cash for a 20% down payment, so that means either waiting to buy or higher monthly payments. I would appreciate advice on this as well.

What do you guys think?

[nereo]

how long do you anticipate being in the area? 
how handy are you and your spouse?  For example, can you fix a broken faucet or would you call a plumber?
Is it in good shape, energy efficient, etc?
do you want to live in this exact spot?  Any chance work will move?
what rate do you qualify for?
any HOA fees? 
Can you live someplace more cheaply (you said rentals go for $650, but could you find one for, say, $500?)

The numbers don't look bad at first glance, but there's more to the equation before you can make an informed decision.

[ragesinggoddess]

We will be here at least two or three more years. My family lives in the area so potentially we could pay them to take over property management if we really needed to move.

My husband is fairly handy, but we would probably need to call an expert on occasion.

It looks like it's in good shape and energy efficient windows have just been added--that's definitely a good question to ask the current owners!

My work is pretty secure, if husband's work moves it probably won't be far from his current work.

I'm not sure about the rate--we are first time home buyers. Is Zillow a reliable way to look this up? They said our rate would be ~$500.

No rentals are cheaper than $600 here except studios, which would not be workable for our "family" (two cats that do not make good sleeping companions).

[mozar]

I wouldn't depend too much on zillow. Depending on how fast things move in your area the house could already be sold. That's why it's helpful to have a buyers agent or a realtor. I used redfin.com to research houses. They are a broker so it is in their interest to be up to date.

But you should start with getting preapproved by a bank. You want them to do a credit check and look at your assets vs liabilities and give you an interest rate. You don't say if you have debt or not and banks are looking for a a certain debt to earnings ratio, 28% i think.
There are rent vs buy calculators out there. Mortgagecalculator.org is good for seeing monthly payments. Lots of threads in this forum about whether to buy or rent.

If you only want to stay 2 or 3 years than no, I don't think it's a good idea to invest. Five years is usually the break even point and longer is even better. You've got lots of googling to do!
It's hard to say how much you should put down. It depends on how much risk you want to take on and how fast your area is appreciating. I decided to put 10% down a year ago and decided to jump on it because I knew that if I waited another year to save I probably wouldn't find anything reasonable anymore. Last year houses were sitting on the market for months. Now they are sitting on the market for days before sold. Also do you have kids/ want kids? You don't want to get stuck in a bad public school system.

[nereo]

ok - I'd say your next step is to get your credit scores and then go to the lender and find out what rate you qualify for. 
Then you can calculate what your monthly payment would be, and break that up into principle, taxes, interest and HOA fees.
Remember that you will likely spend several thousand on closing fees, so it'll take a few years to recoup that.  That's a big reason why owning a home for less than 3 years (many will say 5 or 7) is generally a bad idea.  If you are fairly certain you will stay in the area for several years that is good. 

Zillow is just a way of getting a ballpark figure of what homes are worth, but it's not useful for knowing what your mortgage will be - only your lender can tell you that.  And Zillow is biased towards what "similar homes" have sold for in the area.  It doesn't estimate differences in fit & finish very well (for example, suppose there are two homes with the exact same floor plan on the same street, and one had a major renovation and meticulous owners, whereas the other hasn't been updated in 10 years.  if neither has been on the market Zillow often will list them at similar prices).