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I've got $90k in debt at ~3%, but I'd like to buy a home in the $150-200k range. Is it wise to pay off all debts, then buy the home? Either way I would be able to pay off the debts and down payment in a little less than 3 years. Thanks!
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Aug 16, 2011 04:39
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It is impossible to answer your question without knowing how much money you make. Your debt-to-income ratio is a key figure. That said, it sure sounds like maybe you've got kind of a shitload of debt, and regardless of the interest rate on it, taking on more debt might not be so wise. Unless, like, you make $400k a year, in which case, go for it man.
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Aug 16, 2011 05:01
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Oops, sorry, it's $115-$120k/yr.
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Aug 16, 2011 13:32
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Qaz Kwaz posted:Oops, sorry, it's $115-$120k/yr. Holy poo poo, unless the 90k was a typo, no no no no no. Edit: What is the term on the 90k loan? And how much accessible cash do you have? archangelwar fucked around with this message at 15:18 on Aug 16, 2011 |
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Aug 16, 2011 14:59
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Qaz Kwaz posted:I've got $90k in debt at ~3%, but I'd like to buy a home in the $150-200k range. Is it wise to pay off all debts, then buy the home? Either way I would be able to pay off the debts and down payment in a little less than 3 years. Is that student loans? Your DTI is figured on your monthly obligation, not your total debt owed. So if you've got 90K in student loans you're paying off over 20 years, the payment on that is around 700 a month. If you're monthly gross is 10K, than that 700 is only 7% of your gross and shouldn't affect your DTI ratios much at all.
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Aug 16, 2011 15:48
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skipdogg posted:Is that student loans? Yeah, I looked at the number and knee-jerked, but in light of the debt, there are a lot of questions that I think should be answered before an opinion could be made. 1) How old are you? 2) How long has your income been established? 3) What are your life circumstances? (married, kids, job security, etc.) 4) How long do you intend to be in the house? 5) How much money do you have for a down payment? 6) Do you have any other debt or fixed monthly expenses beyond the norm?
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Aug 16, 2011 16:26
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If I'm going to loan my sister money for a house, does anyone know what sort of letter I have to provide her for when she makes an offer? Can it be a simple:quote:I SocraticMoron agree to loan his sister $xxx,xxx for the purchase of a home in [location]. This agreement is valid through 12/31/11. Or does it need to be something fancier?
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Aug 16, 2011 18:09
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archangelwar posted:Yeah, I looked at the number and knee-jerked, but in light of the debt, there are a lot of questions that I think should be answered before an opinion could be made. 1. 29 2. Mine: 6 years, my wife's: just starting 3. Married, no kids, steady jobs 4. 5-7 years 5. 20% 6. No other debt
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Aug 16, 2011 18:18
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Socratic Moron posted:If I'm going to loan my sister money for a house I've always heard that this is a bad, bad idea. Prepare for the possibility that your relationship will be lost.
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Aug 16, 2011 18:19
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Qaz Kwaz posted:1. 29 Do you plan to have kids? What size house are you looking at?
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Aug 16, 2011 18:26
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Qaz Kwaz posted:2. Mine: 6 years, my wife's: just starting For the purposes of getting a loan, your wife's income won't be counted. At all. Banks want 2+ years at a job before they'll count the income. With that in mind, is most of the income you quoted yours, or is it more like 50/50?
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Aug 16, 2011 19:09
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Qaz Kwaz posted:1. 29 Careful, people here get mad when you say you only want to be in a house 5-7 years (see my posts on the last page). Basically that's around the time frame where less than that and renting is a better option. Also, when we applied for our loan, keep in mind that they also take the lower of the credit scores. So even if you make tons of money, if your wife doesn't and has a low credit score that could hurt. Luckily for us we were within 30 points of each other, but I wasn't aware of that rule and it was a surprise.
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Aug 16, 2011 19:24
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archangelwar posted:Do you plan to have kids? What size house are you looking at? We do, but our plan is to not start until 3 or so years from now. We are debating paying down the debt, then saving a bigger down payment for a longer term house that we could raise our kids in, instead of buying something smaller (3 bed) now, then moving when they start school. Leperflesh posted:For the purposes of getting a loan, your wife's income won't be counted. At all. Banks want 2+ years at a job before they'll count the income. Thanks, I didn't know that. The split is 65/35 for me. The Wormy Guy posted:So even if you make tons of money, if your wife doesn't and has a low credit score that could hurt. Also didn't know this! Fortunately she has a good credit score, too.
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Aug 16, 2011 22:01
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Leperflesh posted:For the purposes of getting a loan, your wife's income won't be counted. At all. Banks want 2+ years at a job before they'll count the income. This may or may not be true depending on the bank/broker. I'm going through the process of buying a house right now, and our lender was willing to count years in college as years employed. So 3 years in school made up for my only being with my employer for 1 year, and my income counts. But as always, YMMV
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Aug 16, 2011 23:38
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Leperflesh posted:For the purposes of getting a loan, your wife's income won't be counted. At all. Banks want 2+ years at a job before they'll count the income. This depends a lot on your lender, type of loan, and type of income. Conventionally, Fannie Mae will generally accept less than 2 year work history if there's a reasonable explanation why you weren't working prior to your current job. Depending on your Fannie Mae findings you might be just fine with a year to date pay stub. For self employed borrowers or people who need to use overtime, bonus, commission, etc. to qualify generally a 2 year history is required (though there may be some flexibility for 12-24 month history). Some lenders are stricter than the Fannie requirements of course, but many will only require what the investor does. FHA is probably an entirely different beast but I don't know enough about government loans to comment on that.
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Aug 17, 2011 03:12
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For the purposes of qualifying for our loan, my broker indicated that very few banks would consider my wife's income from two of her three jobs: one she's had for like 8 years, but only 1 day a week; the other two are much more recent. Fortunately my own income was more than sufficient to qualify for the size loan we were getting. I understand in some situations (like self-employed, or professions where shifting between employers is standard, or I guess college?) a lender may make an exception; but one shouldn't count on it. Especially if working with a broker who has to shop your loan around, rather than simply applying with a single bank who can give you the lowdown on their unique criteria. All that said: I think if you are making conservative estimates and being prudent, you shouldn't plan on being able to include the income from a brand new job. He said his wife is "just starting" so that's almost surely the case.
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Aug 17, 2011 03:24
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Leperflesh posted:For the purposes of qualifying for our loan, my broker indicated that very few banks would consider my wife's income from two of her three jobs: one she's had for like 8 years, but only 1 day a week; the other two are much more recent. Fortunately my own income was more than sufficient to qualify for the size loan we were getting. Ah, yeah that would explain it. Multi or part time job income is automatic 2 year history required. And if they can qualify without her income at all, even better. Saves your broker and underwriter a lot of hassle in verifying the additional income.
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Aug 17, 2011 03:51
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My husband and I were thinking of buying a house in San Francisco and wanted to get some advice as we progress beyond looking at house listings on trulia and zillow. We think we are in good financial situations, but since houses here are so expensive it will be bad if we have problems, so we just wanted to run this by the thread and be absolutely sure. Some facts: - 30, married, hoping to have kids - Stable jobs, 200k combined income, we started the jobs 4 years ago. Take home income ~9500/month. - No debts (car from 2007, and we mostly commute by bike/bus anyway). - Credit scores: 774 & 764. - 150k in savings. 40k in 401k & 403b. - Our work will likely always stay in the Bay Area. Although we can buy cheaper houses elsewhere in the Bay Area, we really like SF for its feel, ability to walk everywhere, convenience, access to food, etc. Some things to improve on: - We definitely can save more per month, right now it's only 30-40% of our take home. - I plan to look for an industry job later this year, just didn't want to leave my research team in a bind right now. - We could also start investing but we had thought saving up for a down payment at this time seemed to make more sense. Questions: Houses in SF average ~700k (for Inner Sunset neighborhood ~650-700 for 2 rooms, 700-800 for 3 rooms), we can pay the 20% down payment and fees from savings. I assume we should aim to get as small a mortgage as possible? I have some money in my parents' investment account (100k?) and my parents have also offered to help (probably 200-400k). Is it most ideal to buy the house outright, that I should sell my investments and get a large loan from my parents? We will leave our retirement plans alone since it's not worth that much money to take the tax. Of course, we would write up a loan document for my parents, but would it need to be an official contract in order to secure a house bid or if we opt to get a mortgage? Would there be any taxes for my parents if they loan us such a large sum? Rent vs. Buy: We currently rent a house with roommates, our portion is ~$1600/month. We could move out into our own rental house for 2500-3000, or if we buy a house with 550k mortgage pay 3700 a month (the roommates are interested in moving with us but I am not totally counting that into our decision since if we do have kids that would be quite a crazy house for our friends). It would be also reasonable to rent a house without roommates, as it would afford us independent living and not be tied down to a house, have a larger garage, move our savings into investment, have higher incomes later, etc. but I wasn't sure if it might be a big deal that we won't have such a significant chunk of cash in savings later, and will have to sell investments (and therefore be reliant on a market that may not be doing so well for us to sell)?
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Aug 17, 2011 06:10
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Tell me about refinancing. Specifically refinancing a home in CA with < 20% equity. According to Zillow we have maybe 10% equity, owing somewhere around 500k when Zillow says it's worth 553k. The lovely part is that the loan was jumbo when originated (3/07), so even though it would have been FHA friendly 6 months later (it was 560k originally), it seems to have the scarlet letter J stamped on it now. Our credit is more or less perfect (>790) and our incomes are such that we can afford the house as it is. But the loan is 6.25% and we want some of that sweet 4% action. What does one do in this non-sob-story situation? Is there no other course but to pony up the cash to bring the equity up to 20%?
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Aug 17, 2011 07:58
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If you're looking to go conventional, Fannie Mae's High Balance program allows for up to 90% loan to value on an owner occupied rate/term at the loan amount you're looking at for fixed terms. Freddie's analogous program allows for similar, but gently caress Freddie. Anything above 80% will require mortgage insurance which depending on the type of coverage has various effects on your payment as well as additional requirements related to your debt ratios, reserve requirements, FICO, etc. This is also subject to county loan amount limits which will be reduced in late September (and eligibility is based on the date of your note/loan funding). Did you have any specific questions about refinancing? Knowing property type is helpful as well - CA condos get the short end of the stick generally, not as bad as Florida but that's hardly a compliment.
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Aug 17, 2011 08:30
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Captain Windex posted:If you're looking to go conventional, Fannie Mae's High Balance program allows for up to 90% loan to value on an owner occupied rate/term at the loan amount you're looking at for fixed terms. Freddie's analogous program allows for similar, but gently caress Freddie. Anything above 80% will require mortgage insurance which depending on the type of coverage has various effects on your payment as well as additional requirements related to your debt ratios, reserve requirements, FICO, etc. This is also subject to county loan amount limits which will be reduced in late September (and eligibility is based on the date of your note/loan funding). Did you have any specific questions about refinancing? Knowing property type is helpful as well - CA condos get the short end of the stick generally, not as bad as Florida but that's hardly a compliment. We're 30y/fixed, owner occupied, single family detached, non-HOA, non flood zone. No mortgage insurance currently. Santa Clara county appears to have a 625k FHA high cost area limit. Again- our funding was March 2007, which was before the jumbo limit was raised (however I don't understand exactly how this interacts with the FHA numbers above). As for specific questions, no, I'm just looking for some info on where to start. We applied for a refi through a broker acquaintance, but when he heard we were originated as jumbo/non-FHA he said he basically couldn't help without us providing a dumptruck full of cash.
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Aug 17, 2011 09:35
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Qaz Kwaz posted:We do, but our plan is to not start until 3 or so years from now. We are debating paying down the debt, then saving a bigger down payment for a longer term house that we could raise our kids in, instead of buying something smaller (3 bed) now, then moving when they start school. I would say that if you plan to have kids, look at getting a house that accomodates that first, rather than attempting to "climb the housing ladder." If you only stay in a house for 5 years, you are just as likely to walk away from it with less money than you put into it (assuming no extra principle paymnets) than walking away with equity. My general advice is find a place you intend to live long term (7+ years) that accomodates the lifestyle you intend to have 4-7 years from now. Also, I personally dislike debt so I usually knock that out ASAP, but student loans are a bit easier to work into a budget than consumer debt.
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Aug 17, 2011 14:51
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jomiel posted:stuff At your level of wealth and assets, you are probably better off speaking with a professional financial adviser. You can absolutely afford the house of your dreams.
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Aug 17, 2011 16:49
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jomiel posted:- 150k in savings. 40k in 401k & 403b. quote:I have some money in my parents' investment account (100k?) quote:It would be also reasonable to rent a house without roommates, as it would afford us independent living and not be tied down to a house, have a larger garage, move our savings into investment, have higher incomes later, etc. but I wasn't sure if it might be a big deal that we won't have such a significant chunk of cash in savings later, and will have to sell investments (and therefore be reliant on a market that may not be doing so well for us to sell)? Also how do you save 30-40% of your takehome buy only have $40k in retirement accounts? You should be putting away almost that much each year (i.e., 33k, assuming no match). Other than New York, SF is one of the regions where the rent v buy calculus leans most towards rent. Why do you want to buy now? I stupidly bought when I was young, and am in a similar financial situation, but I am waiting to buy again until the whole kid situation is sorted out. archangelwar posted:At your level of wealth and assets, you are probably better off speaking with a professional financial adviser. You can absolutely afford the house of your dreams.
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Aug 17, 2011 22:07
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gvibes posted:I'm not sure $700k gets you anyone's dream house in SF. If their parents chip in $400k for a down payment as they mentioned, then with their take home pay, they can look to purchase in the $1.2mil range and STILL have more money left over at the end of the month than the majority of Americans earn in gross income per month. It all depends on how much they are willing to pay really. I would not do that, but it is certainly within the realm of realism for them, which is why I suggest that they use a professional financial planner to help them maximize the use of their income.
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Aug 18, 2011 00:10
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archangelwar posted:If their parents chip in $400k for a down payment as they mentioned, then with their take home pay, they can look to purchase in the $1.2mil range and STILL have more money left over at the end of the month than the majority of Americans earn in gross income per month. It all depends on how much they are willing to pay really. I would not do that, but it is certainly within the realm of realism for them, which is why I suggest that they use a professional financial planner to help them maximize the use of their income.
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Aug 18, 2011 02:31
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We feel pretty poor looking at SF houses  We really want to get a cheaper house and be able to maintain the mortgage payments in case one of us gets laid off, go into start-ups, or unforeseeable happens, etc.Our emergency fund is the pool of savings/checking accounts, which is 150k. I know I should be putting more into my 403b but there is no matching and the market has not been great. The amount I've contributed is about the same as its value right now, so I have been only contributing 5% and saving the rest of the money thinking I'd put it towards the down payment. It was probably stupid of me not to take advantage of the whole tax-free thing though. My family has given me some money from wills, etc. and my parents have been managing the account. This is separate from our savings. The money is all in mutual funds and stocks. I guess my questions are more like: 1) Is it almost always a better choice to put down as much money as possible into down payment so the mortgage can be smaller, and therefore have smaller monthly payments and less interest? 2) How do people usually handle loans from their parents? If we get a mortgage, would we have to have it in formal writing? 3) If I am planning to change jobs next year, should we settle the house stuff beforehand if banks do not like short employment histories? If I move to industry, I am likely to be hired as a contractor before they would consider a permanent position. 4) What are the trade-offs for buying this year vs. waiting longer (1, 2, 5, 10 years) beyond the obvious thing that we won't have our house? Because we have been projecting to buy a house this or next year, our main concern with waiting is that our 150k down payment is all liquid right now, and if we wait another year or longer, we will definitely put most of it into investment instead of having it sit around.
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Aug 18, 2011 06:09
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jomiel posted:2) How do people usually handle loans from their parents? If we get a mortgage, would we have to have it in formal writing? For conventional loans, unsecured personal loans are not an acceptable source of funds for down payment. If you're looking at a loan from the parents to help with the financing, you'll have to draw up a mortgage note secured against the property which will have to be subordinated to the bank's lien. The note would have to include the terms of the loan, monthly payment, etc and the amount of the subordinate financing will be included in your combined loan to value which can impact your eligibility. You'll also have to qualify with the payment as part of your debts. Finding a bank that would even go for it may be tough as well, I can't think of any specific guideline we have against loans from family members but that scenario just screams "bad idea" to me. Contract positions are generally considered to be self employment which then means 1-2 years of tax returns in that line of work in order to use the income to qualify. If you do switch to contract work you're probably going to be stuck waiting it out unless the company you contract with brings you on as a full time salaried/hourly employer and confirms the new arrangement in writing. YMMV of course, there is a bit of wiggle room in what has to be called "self employed" in that sort of situation, but I wouldn't rely on it.
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Aug 18, 2011 06:47
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jomiel posted:We feel pretty poor looking at SF houses The SF housing market is enough to make anyone feel poor, but with your combined income right now, you guys have a lot of options, which is why I suggested getting at least some advice from a financial planner. You do NOT have to buy right now if you are comfortable renting, and since you are capable kicking back large sums of your take home pay into savings/investment, you can continue to do this for years and let your wealth grow additional wealth. The market is crap right now, but there are still areas of growth, as well as foreign growth, so there are ways to grow. This is why I suggested you can afford the house of your dreams. With proper financial planning, you will be in a position to purchase whatever you want down the line (unless your dream house is some palatial estate; I am not a fan of wastefulness). quote:I know I should be putting more into my 403b but there is no matching and the market has not been great. The amount I've contributed is about the same as its value right now, so I have been only contributing 5% and saving the rest of the money thinking I'd put it towards the down payment. It was probably stupid of me not to take advantage of the whole tax-free thing though. This is fine. My suggestion is to look into options that allow you to grow your income through shorter term investment in addition to retirement investment. You already have more emergency funds than needed in a liquid account (3-6 months expenses). Buying cheaply will not affect this heavily, as you will not have a much greater monthly obligation, but buying at the top of your range now will definitely set you back (although your range will net you a nice 3 bedroom in a good location if you try hard enough). quote:1) Is it almost always a better choice to put down as much money as possible into down payment so the mortgage can be smaller, and therefore have smaller monthly payments and less interest? Almost always yes, if you are looking to build equity in your home, as long as it does not dip into you emergency savings. quote:2) How do people usually handle loans from their parents? If we get a mortgage, would we have to have it in formal writing? Most people handle them by yelling a whole lot and eventual disownment of the lendee. I assumed your parents would be providing a gift, not a loan. Loans among family members are generally bad voodoo, but they can work. However, as part of the house buying process, these types of loans muck things up as Captain Windex suggested. I would avoid them just to prevent any familial issues more than anything. quote:3) If I am planning to change jobs next year, should we settle the house stuff beforehand if banks do not like short employment histories? If I move to industry, I am likely to be hired as a contractor before they would consider a permanent position. This can affect the loan process, moreso with large banks than other lenders, who generally take a more detailed look. Be careful when making important long term decisions which you know you have such a period of potential volatility ahead. quote:4) What are the trade-offs for buying this year vs. waiting longer (1, 2, 5, 10 years) beyond the obvious thing that we won't have our house? Because we have been projecting to buy a house this or next year, our main concern with waiting is that our 150k down payment is all liquid right now, and if we wait another year or longer, we will definitely put most of it into investment instead of having it sit around. You might be looking at higher interest rates, but you also might be looking at lower prices. Highly inflated markets like San Fran weathered the housing crash well, but they are starting to feel additional pressure from the delayed effects of forclosures. Baby boomers aren't going to live forever, and falling wages indicates that demand should not keep up current prices. However, most of this is meaningless. If you want to buy a house and intend to live in it 10+ years, then feel free to buy whenever you feel comfortable doing so. A house is meant to be a place for you to live, not an investment, not a "ladder" for you to climb. My only real advice at that point is to put down more than 20% and buy in an area that is not in decline.
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Aug 18, 2011 15:02
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Socratic Moron posted:If I'm going to loan my sister money for a house, does anyone know what sort of letter I have to provide her for when she makes an offer? You don't need to provide her with any documentation at the offer-making stage.
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Aug 18, 2011 15:25
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I made extra payments to my mortgage (around $11k in the past couple months) and finally I owe less than 6 figures. I owe exactly $99,999.99 but dammit, it's not 6 figures.
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Aug 18, 2011 15:30
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Interest accrues daily. You'll owe 6 figures again tomorrow.
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Aug 18, 2011 15:35
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In the spirit of Do Never Buy: thanks to global warming depriving Texas of it's much needed rain, it's foundation repair time! Not only that, it's time for a $10,000-25,000 foundation repair! (If I do it properly, which I probably won't since that's nearly 1/3rd the cost of the house in the first place.) Now to find a man with some guys that have shovels to do it on the somewhat-cheaper.
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Aug 18, 2011 16:23
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I lock in a refinance at 4%, and what happens, they offer 3.875%, oh well.
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Aug 18, 2011 16:33
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MrEnigma posted:I lock in a refinance at 4%, and what happens, they offer 3.875%, oh well. I have an ARM that has adjusted down to 3 1/8. My Dad told me I was nuts not to get a fixed rate back when they were offering 6% for the 30 yr but I have saved a bundle. I think penfed is offering 3.5 on a 5/5.
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Aug 18, 2011 16:52
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archangelwar and Captain Windex, thanks for the answers. I hadn't thought of getting financial planning (it always seems like it's for people who have much more money) but I see now that it might be a great idea.
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Aug 18, 2011 18:28
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I've begun to get into the foreclosure purchase game so I can fix them up and rent them out for cash flow. The amount of fraud surrounding these foreclosures is STAGGERING. I'm finding listing agents who are working with investors where the agent works both sides of the deal and never submits higher offers they receive from other agents to the bank. I'm also finding payoffs (and requests for payoffs) for low BPOs. And I'm finding, "Pay me $2000 and you'll get first look before the house even is listed on MLS and I'll hold other offers" requests. I talked to one title company owner and she said one "foreclosure specialist" has somehow, just somehow managed to work both sides of the deal for her last eight sales. People are so greedy and lacking in ethics. It's amazing.
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Aug 18, 2011 18:34
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We're being offered a refinance at 4.5% by the broker that did the original loan, which seems high compared to the rates that are flying around here. Is there anything that controls those rates beyond lender and zip code? Wondering if equity, dti etc count for anything, it seems like they should. We are good on both, I've asked him to wait until something below 4.25 comes up.
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Aug 18, 2011 18:36
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Socratic Moron posted:I've begun to get into the foreclosure purchase game so I can fix them up and rent them out for cash flow. I made an all cash offer of $950k (no contingencies, close in 30 days) on a short sale and was told by the agent that I was outbid. It closed two months later significantly under my offer (more than $25k).
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Aug 18, 2011 18:37
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jomiel posted:archangelwar and Captain Windex, thanks for the answers. I hadn't thought of getting financial planning (it always seems like it's for people who have much more money) but I see now that it might be a great idea. I know it may not feel like it, but your combined income puts you in the top 3%-4% of US households. I believe you mentioned something about saving roughly 40% of your net monthly earnings. This is not something the vast majority of the Americans are capable of doing, no matter how frugal they are. I am not saying this to inflate your ego, or for any other reason than to show you that you have opportunity that is simply not available to the average American, and it is up to you whether you capitalize on it or not.
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Aug 18, 2011 18:39
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