Home buying thread

Well, we were talking about people who can afford either. He was asking for opinions on both, and I did mention difference in monthly payments. And in my opinion if you can't afford a 15 year mortgage you can't afford that house, but that's another conversation

Unidin said:

You left out the payment amount.

The assuming 1% property taxes the 30 year w/PMI payment is $2,931.37.
The assuming 1% property taxes the 15 year w/PMI payment is $4,017.10.

To most people that extra $1100 a month is not something they can do.

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Thanks for sparing me the calculator!

Khane said:

Current 30 year rate: 3.156%

Cost of 450k home at term with 5% down, 0.5% PMI = $676,830.96


Current 15 year rate: 2.594%

Cost of 450k home at term with 5% down, 0.5% PMI = $522,384.38

Most Americans are not disciplined or savvy enough to take the monthly savings on a 30 year and invest it to beat the savings of a 15 year at term.

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Can't disagree with the overall savings, but yeah, you can overpay on a 30 year if you are disciplined, and isn't the average stay in a house like 7 years? Also I think your numbers might be figuring PMI for the life of the loan which can happen with FHA but people refinance out of that, don't they?

To me, 15 year definitely makes sense for a rental or for refinancing on a primary residence. But I'd want the 30 year flexibility to start with on a primary residence.

Refinancing costs money. You said you dont see the point in a 15 year mortgage. I was just making that point.

And you start a new term.

A refi is great if you have significantly improved your credit score or housing values have gone up enough that what you owe vs the current value would drop off PMI. Otherwise I don't know that I would. The housing rates have been pretty damn steady since the big bubble broke in 2008. And low as fuck. The math is pretty simple though. And you can set your new term to end on the same as your old one.

Just got asbestos abatement done on my old place. Just need to refinish and paint the ceilings, get new carpets, and touch up the sidings and finishes and I am go for selling.

Cathan said:

VA Funding Fee: 2023 Charts and Exemptions

The VA funding fee is a governmental fee required for many VA borrowers. Here we explore the ins and outs of the VA funding fee, current charts, who's exempt and a handful of unique scenarios.

www.veteransunited.com

Service	Down Payment	1st Use	After 1st Use
Regular Military	None	2.3%	3.6%
-	5% or more	1.65%	1.65%
-	10% or more	1.4%	1.4%

Yeah I was looking at this. I'd be a first time buyer and I can pull some cash out of my 401k to put down 10%. I'd have to run the numbers to see if I'm better off long term paying the 2.3% or putting 10% down to save .9%. As my 401k recovers the next year or 3 I expect the answer likely is to pay the 2.3%. I'm guessing a $500k home so 10%=$50k. $50k @ 6% will grow the total amount of my 401k more than $11.5K for the fee and the total $500k loan at 3.125%?

Got time to figure that out...

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Don't forget to calculate the 10% penalty for taking out 401k money before 59.5 and then taxes on top of that.

Burren said:

Don't forget to calculate the 10% penalty for taking out 401k money before 59.5 and then taxes on top of that.

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You can borrow against your 401(k) for a primary residence without taking any early withdrawal penalties. In fact you can borrow without those penalties for anything, the term is just longer (up to 30 years) for a primary residence.

I had to borrow against my 401(k) years ago for a failed retaining wall that caused a shitload of damage to my property and my basement. Term was 5 years at 4.5% but that interest went back into my 401(k) rather than a banks balance sheet.

Bandwagon said:

Alright, this has been a painfully long wait, but I've got all of my taxes current, debt paid off and a home we're interested in. Never bought a house before and zero idea how this process goes.

What do I need to do to get the ball rolling....just connect with a realtor and let them hold my hand through the process? We're not pre-approved for a loan or anything, so should that come first?

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There are a lot of ways to go with this but for a first-time purchase, I would interview a few realtors to be my Buyer's Agent. Choose one that seems competent and capable of representing you the way you want to be represented. Choose one who is patient enough to let you tour as many houses as you like so you can "research" locations and floor plans and quality and prices. You might have your heart set on a house already, but you really ought to see how it stacks up against several others before you make an offer.

Once you're under contract, you might be talking with your realtor every day for a month. So pick someone you like.

You can definitely get pre-approved with any lender you want, but a good agent will have some lender contacts that can get that part of the job done. Being salaried and not contract will help.

Khane said:

You can borrow against your 401(k) for a primary residence without taking any early withdrawal penalties. In fact you can borrow without those penalties for anything, the term is just longer (up to 30 years) for a primary residence.

I had to borrow against my 401(k) years ago for a failed retaining wall that caused a shitload of damage to my property and my basement. Term was 5 years at 4.5% but that interest went back into my 401(k) rather than a banks balance sheet.

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Good points. Not everyone pays it back (or knows they should).

I've been using a Redfin realtor for the past couple years that I've been pretty happy with. Any realtor could suck, but a couple things about using Redfin that are nice -
You get a little refund when purchasing, though this is a small benefit. 1-3k or so.
The agent doesn't receive a commission, they're on salary. So there is no benefit for them to push you into a purchase afaik. Bottom line is my realtor convinced me out of a purchase a couple years ago, didn't push me on a couple others last year, and we ended up making a purchase we are super happy with in November.

Khane said:

Current 30 year rate: 3.156%
Cost of 450k home at term with 5% down, 0.5% PMI = $676,830.96
Current 15 year rate: 2.594%
Cost of 450k home at term with 5% down, 0.5% PMI = $522,384.38
Most Americans are not disciplined or savvy enough to take the monthly savings on a 30 year and invest it to beat the savings of a 15 year at term.

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How can most Americans not be savvy enough to take the monthly savings and beat the $150k difference? I ran the numbers and it's 11.67 years to take the $1100/month and save the pure cash difference. Even if someone only saves half the mortgage difference that's 23.33 years and they broke even. I suppose what you're saying is we're too fucking lazy and stupid to save the money vs blowing it on bullshit - now that I can understand...

Burren said:

Don't forget to calculate the 10% penalty for taking out 401k money before 59.5 and then taxes on top of that.

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My 401k works the same. I'm a federal employee so it's called TSP but we can borrow against it and repay it at like a 1% interest rate that we pay back to ourselves - not to a bank. The downside is the money isn't "working for you" while it's loaned out to you. Say I had 200k in the TSP, borrow 100k and slowly repay it. Only the first 100k plus what I pay back are getting the market gains until I pay it all back. The 1% basically matches inflation is all. It's still better than a bank loan but long run it's not super great for your retirement.

Looks like I'm going to have to move out farther to get a decent house. Town houses in this area range from $480k to $572k. A 2000 sq ft 1950s built house on a half acre lot goes for $500k with ZERO fucking updated ANYTHING. That means super small rooms, super shitty kitchens and bathrooms and dogshit closets all of it just shit compared to anything modern. To get a stand alone house that's nice there's almost nothing between $600k and $800k where the transition switches between top of the line town houses with no fucking parking slammed together in the thousands of units next to each other, or a really nice stand alone house is $800k+ There are a few short of $800k but they aren't for sale.

I'm going to see what bumping my commute up another 20 to 30 minutes each way does. My understanding is once COVID ends that we're going to be looking at quite a bit more telework since everyone is saying we're still very productive. I hope that's true. We're at 40% telework now, 2 days at home each week before COVID (100% right now).

Long LONG term I'm hoping they realize I can do this job from anywhere so I can move back to the deep south.

Cathan said:

How can most Americans not be savvy enough to take the monthly savings and beat the $150k difference? I ran the numbers and it's 11.67 years to take the $1100/month and save the pure cash difference. Even if someone only saves half the mortgage difference that's 23.33 years and they broke even. I suppose what you're saying is we're too fucking lazy and stupid to save the money vs blowing it on bullshit - now that I can understand...

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You save ~1k in monthly payments for the first 15 years. And then you spend ~2k more in monthly payments in the final 15 years. You would have to take the money you saved in the first 15 and double it via investments over the same time period to "break even". With compounding returns it's more than possible, especially if you are of the mindset that 10 year bull runs like what we just came out of are the norm. But your number crunching is wrong.

The TOTAL cost of the mortgage is 150k more on the 30 year term. But you're acting like the total cost is the same for both terms and applying the difference to monthly payments.