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bad news brown posted:This seems like the right place to ask this. I've got about $130k saved up and I have zero debt (student loans, credit cards, etc. all paid off). Would it be a better idea to buy a condo outright, make a large down payment on a house or condo, or just make a smaller (20-40%) down payment on a property? When you buy a property, you're on the hook for any deprecation (and get the benefits of any appreciation) regardless of whether you buy it outright or take out a mortgage. So, it seems to me that the real question is, how much is the interest you don't pay by buying outright, balanced by the ability to do something else with the extra cash you're not putting into the house? Or to put it another way; if you have $130k but will only have a positive cashflow of $20k a year, putting all of it into a house severely restricts your other investment (or spending) options, compared to a mortgage. If you put half of it into a down payment and then had payments you could afford every month, you'd still have the other half to diversify your investment portfolio with (being 100% committed to real estate is an 'all eggs-->one basket' situation), serve as an emergency fund, or do fun things with (cars, vacations, weddings, etc.). Further, the interest on a mortgage is tax-advantaged, somewhat (depends on your tax situation of course, and at best you are only reducing the total interest you're paying, you never actually 'net' positive). But... I still think most people will advise you to lean heavily towards buying outright. Houses are not very good investments, but by not paying any interest at all, you can make a reasonable return on a low rate of appreciation in the long term. Over the last century, houses in the US appreciated by something like 4% annually, or so I've heard. That does not compare well to even conservative options like bonds. But then again, you can't live your life inside a stack of bond certificates; so, a house is more than an investment, and you need to assess the non-financial aspects as well. So the real question is: what is your goal? Why do you want to buy? Is it to avoid 'wasting' money on rent? Do you think it's an investment for retirement? There are all sorts of other factors at stake; what are the chances you'll have a change of life (marriage, or kids, or a new career, say) that causes you to want to sell, or move? What is the future of your career like? Are you already at the top, or do you have the prospect of doubling your income in 10 years' time? Think about your long-term and medium-term goals, financially and otherwise, and that will help you decide whether it's a good idea to buy at all, and if so, whether it's a good idea to carry a mortgage and keep your cash free, or put it all into a house and have the security of no housing payments and no interest. Leperflesh fucked around with this message at 01:44 on Mar 3, 2010 |
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Mar 3, 2010 01:40
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PC LOAD LETTER posted:The bubbles take a long time to deflate. They start in the worst areas first and then they slowly work their way inward to the best places, running like a boom in reverse, it'll take years but they come down too. Prices like what you see in Manhattan are insane, even if you're rich (you'd have to make something like $230K a year to afford a $700K home for instance, maybe not rich by some standards but you're firmly in the top 5% wage earning percentile) you'd be foolish to pay that much. Cheaper/better to buy something out of the city and spend the money you save on a cab into the city for work or whatever if you can't be bothered to drive yourself. I don't disagree with you and I'd never move to Manhattan unless I became very wealthy.. I'm just saying Manhattan's real estate pricing has proven time and time again to not really be a bubble- yes it has swings, but it's nothing like the Bay area, or Phoenix, or Las Vegasm or.... Vancouver. Manhattan's extremely high real estate values are fundamental, not speculative. Maybe you're right though, it might fall out like it did on the West coast. greasyhands fucked around with this message at 11:27 on Mar 3, 2010 |
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Mar 3, 2010 11:20
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greasyhands posted:I don't disagree with you and I'd never move to Manhattan unless I became very wealthy.. I'm just saying Manhattan's real estate pricing has proven time and time again to not really be a bubble- yes it has swings, but it's nothing like the Bay area, or Phoenix, or Las Vegasm or.... Vancouver. Manhattan's extremely high real estate values are fundamental, not speculative. Maybe you're right though, it might fall out like it did on the West coast. To be fair though there has still been deflation, it's just when the $1.5m condo is now only $1.1m or $1m while that is a major price decrease it's still in the stratosphere.
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Mar 3, 2010 12:11
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greasyhands posted:I don't disagree with you and I'd never move to Manhattan unless I became very wealthy.. I'm just saying Manhattan's real estate pricing has proven time and time again to not really be a bubble- yes it has swings, but it's nothing like the Bay area, or Phoenix, or Las Vegasm or.... Vancouver. If I had the money to buy a place in Manhattan, I would just buy cheaper and commute. Daily limo service per month would be cheaper than the mortgage difference, poo poo. Even at a wage of $200 / hr it'd be much more worth it to live further out and to live closer to hipsters than to buy a stupid 1 bedroom in Manhattan. If I happened to get some $350k+ / yr job in Manhattan, I'd probably reject it anyway because both the wife and I hate the area. I'm hoping to buy a place in rural wherever really cheap that happens to have FIOS / U-Verse and fly out to clients once a month or so while making what I do. Easy retirement within 15 years, and I'll probably be healthier to boot.
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Mar 3, 2010 21:13
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necrobobsledder posted:The Bay Area has been expensive (exceeding affordability criteria based upon median income) for about 40+ years now, it's not about to go down to any real level of affordability unless you live out in East Bay, which results in a horrible commute if you work in Silicon Valley. I'm perfectly happy renting a great 2BR townhouse smack in the middle of the valley for $1900 / mo. It's easily affordable on just my base salary, and once the wife has a job we could probably put 100% down on a place even here in maybe 5 years. A modest lifestyle goes a long way when you make good money. Well, now we are into lifestyle choices. I won't derail the thread into one about whether city real estate prices are out of whack, but I will say that there a fuckton amount of people who fundemntally disagree with your priorites (namely, space for lack of city convieniance and commute time), including myself, and this is why Manhhattan prices are some of the most stable in the U.S. They are about down 15-25% from peak (which in Manhaattan was late 2007 or so) but took nowhere the beating of Florida or California for example. I am not saying they won't drop further, I have no clue one way or another, but for many reasons, inlcuding my lease being up, having excess cash that could go here or in the market, etc. it makes sense for me to buy. Should values drop 50%, it will suck, but I'll be fine.
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Mar 3, 2010 22:33
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greasyhands posted:I don't disagree with you and I'd never move to Manhattan unless I became very wealthy.. I'm just saying Manhattan's real estate pricing has proven time and time again to not really be a bubble- yes it has swings, but it's nothing like the Bay area, or Phoenix, or Las Vegasm or.... Vancouver. Manhattan's extremely high real estate values are fundamental, not speculative. Maybe you're right though, it might fall out like it did on the West coast. That is why bubbles/booms are so horrible and should be avoided at all cost, they always bust no matter what, you just never know quite when it'll happen. Anyways, we still have quite a bit more pain coming in the housing market. This is the updated version of that Credit Suisse chart:  Looking at that, it seems we'll get continued price declines all the way out til' late 2012, so you have to factor in at least 2 more years that'll be on par or worse than what you saw happen in 2009. Bear in mind that we had those declines even though the gov./various states have had multiple mortgage moratoriums, massive price propping programs like HAMP and HARP, and rates have been at historical lows. Depending on how things work out you may see price declines go on for much much longer, or have a steeper decline over a shorter period of time. PMI is usually for the length of the entire contract unless specified otherwise, which would be weird. Never heard of time/payment limited PMI. \/\/\/\/\/\/\/ PC LOAD LETTER fucked around with this message at 00:55 on Mar 4, 2010 |
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Mar 3, 2010 23:32
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Random question: is there a minimum amount of tiem you have to pay PMI for? So if we put 10% down on a house and a week later got enough to pay it up to the 20% mark would we have to keep paying it for a set ammount of time?
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Mar 4, 2010 00:50
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The FHA insurance (which replaces PMI) has a minimum of 5 years. I suspect PMI minimums are out there, but not that common. Worth asking the lender up-front.
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Mar 4, 2010 01:25
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Leperflesh posted:
Thanks, that really does give me a lot more to think about.
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Mar 4, 2010 02:22
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Backno posted:Random question: is there a minimum amount of tiem you have to pay PMI for? So if we put 10% down on a house and a week later got enough to pay it up to the 20% mark would we have to keep paying it for a set ammount of time? My lender completely hid this information from us, so definitely make sure you ask in the most straight-forward way possible.
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Mar 4, 2010 02:58
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Backno posted:Random question: is there a minimum amount of tiem you have to pay PMI for? So if we put 10% down on a house and a week later got enough to pay it up to the 20% mark would we have to keep paying it for a set ammount of time? 2 years is typical on a conforming loan. You'll have to ask your lender to be sure.
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Mar 4, 2010 05:24
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Backno posted:Random question: is there a minimum amount of tiem you have to pay PMI for? So if we put 10% down on a house and a week later got enough to pay it up to the 20% mark would we have to keep paying it for a set ammount of time? Mine is a 2 year minimum, once past that we can apply to have it removed. Mine also removes itself after 10 years, with a rate adjustment (lowering the amount of PMI) somewhere in the middle, don't remember the exact time.
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Mar 4, 2010 15:05
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emocrat posted:Mine is a 2 year minimum, once past that we can apply to have it removed. Mine also removes itself after 10 years, with a rate adjustment (lowering the amount of PMI) somewhere in the middle, don't remember the exact time. I believe that, with conventional financing, they are legally required to stop charging you PMI after you reach 22 percent equity - based on a state-certified appraisal. You can send them an appeal when you reach 20%. With FHA financing you do have to pay it for x years, along with an up-front payment. I wasn't aware that typical PMI policies had a minimum length - I thought it was just until 20-22% equity. If thats true, it's good to know. Also, the PMI rates should change at 5, 10, and 15% downpayment. If you pay 10% down, you should get a better PMI rate than if you only put down 5%. I'm not sure if this changes as you pay the house off, or only on the downpayment.
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Mar 4, 2010 17:03
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Does a late payment within the last 12 months on your current home completely bar you from getting a new mortgage on a different one? To explain the full situation, my wife and I have been busting our butts for the last 2 months to get every penny of debt other than our current home and car paid off. Success, we finally paid off the last bit this morning. We listed our home for sale 2 weeks ago and found a buyer within 3 days who was willing to pay our full asking price. We didn't expect to sell so quickly but we can't turn down an offer like that. I called the guy who we've been dealing with in prepping to get a loan and he drops the bombshell that he doesn't think we'll be able to get anything for another 6 months, since we had a late payment on our current house back in August. Needless to say this depressed the gently caress out of us and we're desperate to know if this guy is just jerking us around or if it is indeed impossible to get a new home loan with that late payment on there. Its too late tonight to start calling around to new loan people but I don't want to waste our time and get our hopes up if this is truly the deal breaker he made it out to be.
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Mar 5, 2010 03:42
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Is the guy a mortgage broker? If you were less than 30 days late on a single payment, he's probably jerking you around so you won't ask questions when he comes to you with a high rate later. You can get some no-commitment pricing info for your specific credit score here: http://mtgprofessor.com/A%20-%20UMLs/introducing_upfront_mortgage_lenders.htm stash posted:Also, the PMI rates should change at 5, 10, and 15% downpayment. If you pay 10% down, you should get a better PMI rate than if you only put down 5%. I'm not sure if this changes as you pay the house off, or only on the downpayment. Pretty sure it only depends on the down payment. Can you believe my PMI rate is actually less than what I was quoted... USAA 
slap me silly fucked around with this message at 04:27 on Mar 5, 2010 |
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Mar 5, 2010 04:24
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Last time I spoke to my mortgage guy, he said banks are trying to make a push to not allow appraisals or equity to be involved in PMI.. Only paying down the mortgage to 20% would allow PMI to be terminated. Likely due to how screwed banks got during the last crash as people with high equity had PMI disabled, only to have their home value plummet and forclose. Don't know if this ever happened though. stash posted:Also, the PMI rates should change at 5, 10, and 15% downpayment. If you pay 10% down, you should get a better PMI rate than if you only put down 5%. I'm not sure if this changes as you pay the house off, or only on the downpayment. This is correct. PMI will not change during the duration of the payments. The rate is determined at the time of the loan underwriting and stays until PMI is disabled. Also note, that 7% will not get you a rate between 5% and 10%, you MUST hit the full bracket to get a reduction. FidgetyRat fucked around with this message at 17:17 on Mar 5, 2010 |
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Mar 5, 2010 17:15
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Closing in 2 hours, just confirmed that the wire transfer is set up. Woooooo!
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Mar 5, 2010 20:18
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Reality check plz: MY GIRLFRIEND and I have a combined gross income of about $115k/yr. Our combined debt load is around $25k between car payments, credit cards, and my student loans. I've got about $5k in savings. We both want to get a house when our current lease is up in September. We're looking for a starter home in the Denver metro area. Buying a house in the $150-$175k price range in this situation would be: A) Financial suicide B) Something that should be put off until we can further reduce our debt and/or increase savings. C) An OK idea.
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Mar 5, 2010 22:11
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Verloc posted:Reality check plz: B. It shouldn't put you off too long, since your income is pretty high. Buying a house at this point would make you completely illiquid. I'd say bare minimum of 10% down, a grand or so for various closing costs, and 3 months emergency fund in place. Getting rid of your credit card debt and car note(s) would also give you more of a cushion.
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Mar 5, 2010 22:20
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Verloc posted:B) Something that should be put off until we can further reduce our debt and/or increase savings. You'd need to save $1000/mo until September just to manage a 5% down payment and closing costs, and more like $2500/mo to have a reasonable cash buffer after the purchase. You'd be paying substantial interest on that money because it won't be going toward your debt - in the case of the credit cards, possibly outrageous interest. I suggest you pay off the debts at maximum speed and reconsider this in a year.
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Mar 5, 2010 22:25
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I am in a similar situation as you are with about the same income, but with substantially more savings. For a 200k condo the bank wanted to see 20% down ($40k), closing costs, taxes, appraisal ($5-7k), and then 6-9 months worth of PITI ($6-9k). That would mean total cash on hand of about $55,000. I decided against it is as the rental market is do depressed it's just so cheap to rent right now. Maybe if I can find a two flat where the cash flow can justify purchase price...
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Mar 5, 2010 22:45
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Engineer Lenk posted:B. It shouldn't put you off too long, since your income is pretty high. Buying a house at this point would make you completely illiquid. I'd say bare minimum of 10% down, a grand or so for various closing costs, and 3 months emergency fund in place. Getting rid of your credit card debt and car note(s) would also give you more of a cushion. Get rid of the debt and get a real savings/emergency fund/down payment.
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Mar 5, 2010 22:55
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slap me silly posted:You'd need to save $1000/mo until September just to manage a 5% down payment and closing costs, and more like $2500/mo to have a reasonable cash buffer after the purchase. You'd be paying substantial interest on that money because it won't be going toward your debt - in the case of the credit cards, possibly outrageous interest. I suggest you pay off the debts at maximum speed and reconsider this in a year.  ) From what you guys are saying though, it sounds like I need to just turn off HGTV and put all thoughts of home ownership out of my head until my debt load's greatly reduced and my savings increased by at least fivefold.
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Mar 5, 2010 23:00
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That is good - your debt could be gone altogether in less than a year, and you're already on track to making it happen. You're lucky to have the income to recover so quickly. But in buying a house, you should plan to make a decent down payment plus have a stack of cash left over. Not only do you need the emergency fund, but you could easily spend $K on repairs, maintenance, lawn mowers, etc. Car payments and student loan payments aren't impossible with mortgages, and people do it. But the less of that you have the less you'll spend on interest and the more comfortable you'll be. And you have a great opportunity right now to put those loan payments behind you for good.
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Mar 5, 2010 23:19
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I'm less conservative than most of the BFC posters, so I'll go ahead and jump in with a different opinion. Assuming that you and your GF both have had your current jobs for 2+ years, and that you both have good credit scores (750+), you could easily qualify for an FHA 3.5% down loan. At the low end of what you quoted, $150k, you'd need: 4.5k down payment ~5k closing costs ~3k or so for other costs (inspections, etc.) and that'd be enough to cover the bare minimum possible. On top of that you'd certainly want more cash as a buffer/safety net. In my case, I have my 401k as a last-ditch emergency safety net, which I didn't include in my math, but it meant I was more comfortable doing the minimum-purchase with not much cash left over at the end. I also am married with no children and no prospects of children, so my wife and I are more tolerant of financial risk. Depending on your safety net (family, sellable assets such as a car, retirement accounts, etc.), the real questions you should ask are: -what's your level of risk tolerance? Do you have kids that rely on your financial solvency? What would be the worst-case scenario, and are you willing to risk that? -what's the housing market like in your area? Loads of foreclosures still? Are most properties selling within two or three weeks, or are most properties lingering on the market for months on end? (e.g., are there good odds it's still a plunging market, like most of the country, or is your area an exception and hitting bottom) -How awful would it be to wait another year? -How many years are you willing to stick with your purchase, especially if it loses value in the short term and it takes you 4-7 years to get back into the black on it? Basically what I'm getting at is, if you are pretty risk-tolerant, you've certainly got the income to support payments on a 150k house at basically any point. If your credit is reasonably good, and you can come up with at least $20k by september, you'll easily qualify for an FHA loan. You need to evaluate what the important factors are for you and your girlfriend, now vs. a year from now. A larger down payment will save you money and be much less risky; having more debt paid off will give you much more room in your budget after you buy; and waiting another year will give you a better chance of buying on the upswing of the market rather than on the downswing (according to majority opinion, anyway, which is the best you're ever going to get when it comes to forecasting the market). Leperflesh fucked around with this message at 03:05 on Mar 6, 2010 |
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Mar 6, 2010 03:02
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Leperflesh posted:
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Mar 6, 2010 18:25
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Verloc posted:Reality check plz: Don't do it. I wouldn't buy property with someone else unless I was married to them. If you guys break up, who gets the house? If you're dead set on the house, whoever makes the most money should be able to buy it themselves.
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Mar 6, 2010 19:01
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skipdogg posted:Don't do it. I wouldn't buy property with someone else unless I was married to them. If you guys break up, who gets the house? Please, for the love of all that is good and holy do not buy a house with someone unless you're already married or planning to marry. A real example: A friend of mine bought a house with his girlfriend about a year ago. Relationship seemed fine at the time and he really wanted to finally own a home but couldn't qualify on his own. So he spent about 12k paying off her bad debt and they got a pretty nice house that was big enough for them and her two kids. Giant loving mistake, chick turned out to be crazier than all hell. Hides her finances from him, assaults him physically when she gets angry enough, refuses to address any notion that she may need some form of medication to help her drastic mood swings etc... He's stuck with her and that house and can't walk away from it because his credit will be destroyed and he really cares about her kids and doesn't want them to lose the one bit of stability they've had in their life. He admits that he rushed into it and desperately wishes he could get out of the situation.
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Mar 6, 2010 20:01
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Safety Engineer posted:Please, for the love of all that is good and holy do not buy a house with someone unless you're already married or planning to marry. In deference to our moderator, domestic partnerships in some jurisdictions can provide similar benefits. At a bare minimum, draft a will when you buy property with someone.
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Mar 6, 2010 20:54
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Heterocentrism aside, I'll agree it's a good rule of thumb to follow. Everybody thinks they'll be the exception to the rule. Like long distance relationships, or wearing a fedora.
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Mar 6, 2010 23:23
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skipdogg posted:Don't do it. I wouldn't buy property with someone else unless I was married to them. If you guys break up, who gets the house?
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Mar 7, 2010 01:37
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Verloc posted:So in short, even if everything is perfect (and it's not, both our credit scores are hovering in the 700-720 range, we've both changed jobs in the past year, If your current job is less than two years old, few (if any) banks will consider that income at all. With both of you in that situation, you are probably incapable of getting a loan; at best, it'd be a terrible loan. With that detail alone, my advice changes to 'wait at least a year'. "My girlfriend" means different things to different people, so I'd ignore a lot of that stuff. My girlfriend was my "girlfriend" for 10 years before we got married, and we were in a committed long-term relationship after the first two. Your mileage may vary. I've met plenty of people who were married but had less of a commitment to each other (or understanding of each other) than my girlfriend and I did after two or three years. I wouldn't have kids with someone, or merge my finances with them, (or marry them) till I'd lived with them for at least a couple of years.
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Mar 7, 2010 07:39
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Leperflesh posted:"My girlfriend" means different things to different people, so I'd ignore a lot of that stuff. My girlfriend was my "girlfriend" for 10 years before we got married, and we were in a committed long-term relationship after the first two. Your mileage may vary. I've met plenty of people who were married but had less of a commitment to each other (or understanding of each other) than my girlfriend and I did after two or three years. I think you're conflating the legal ramifications of being married with the emotional commitment to the relationship. I don't care if you have the most solid of relationships, it's still a better idea to get married before you buy property together. I've had to deal with a lot of the crap head-on, because my partner and I can't get married and domestic partnerships only became an option after we already bought a condo together and merged our finances. But we sure as hell had a will and power of attorney set up before we went all-in.
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Mar 7, 2010 07:50
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There are seven or eight different ways to take title on a property. I'm surprised that none are suitable, but if that's true, my advice wouldn't be "don't do it!" but rather, "enter into a legally binding contract that clearly indicates how the property will be disposed of in the event of a separation". But it seemed that the focus was on "what happens when you break up? Disaster!" which is true for divorces as well as splitting couples that aren't married. In fact, divorces are much more likely to involve attorneys and financial hardships. In any case, I am 100% on board with the idea that a couple is well-advised to co-habitate for a couple of years before deciding they're ready to commit to a financial union that would be incredibly costly to sever.
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Mar 7, 2010 09:04
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Well, we agree that if you're going all-in, you need some legal protections in place. Marriage is a convenient shorthand that's supposed to ensure some form of equitable distribution if it dissolves (hence the need to involve the court), but a pre-nup would make that explicit.Leperflesh posted:In any case, I am 100% on board with the idea that a couple is well-advised to co-habitate for a couple of years before deciding they're ready to commit to a financial union that would be incredibly costly to sever. Whereas I am not. And the 2002 and 2010 CDC fact sheets on marriage show that it's basically a wash for whether a marriage will last, with a slight bias towards the non-cohabitating couples (likely not causal, merely an association). If you are the type of person who, for religious or whatever reason, feels ready to take that step without cohabitating, go for it.
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Mar 7, 2010 09:55
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skipdogg posted:Don't do it. I wouldn't buy property with someone else unless I was married to them. If you guys break up, who gets the house? Going to add into this as well, hell there is a poster here who is fight with his ex-fiance about a house they had together for a few years. Seriously do not get a house with a gf/bf, a group of buddies, etc unles you know you can cover the full mortgage payment your self.
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Mar 10, 2010 06:21
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Backno posted:Going to add into this as well, hell there is a poster here who is fight with his ex-fiance about a house they had together for a few years. Seriously do not get a house with a gf/bf, a group of buddies, etc unles you know you can cover the full mortgage payment your self. And even then, put it in your name only. If you can't get a loan in only your name, you probably can't cover the whole payment by yourself.
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Mar 10, 2010 07:11
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Backno posted:Going to add into this as well, hell there is a poster here who is fight with his ex-fiance about a house they had together for a few years. Seriously do not get a house with a gf/bf, a group of buddies, etc unles you know you can cover the full mortgage payment your self. http://forums.somethingawful.com/showthread.php?noseen=0&threadid=3277341&pagenumber=1#pti35 Thread Here
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Mar 10, 2010 20:46
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If anyone's wondering about their first time homebuyers credit, I mailed my taxes off Jan 30th right after I closed and it's scheduled for direct deposit on March 12th. Much faster than I anticipated.
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Mar 10, 2010 21:04
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FidgetyRat posted:http://forums.somethingawful.com/showthread.php?noseen=0&threadid=3277341&pagenumber=1#pti35 Thread Here thank you
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Mar 11, 2010 00:08
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