Congratulation in figuring out leveraged investments ! Higher reward, but higher risk.TheCutlery said:
Home buying thread
- Thread starter Tuco
- Start date
Average property tax around here is 10k ish. Bad areas will be 6k, nice areas easily 15k. My 8k estimate is probably on the low side.
Do any of you guys have any insight into the 1-2 year projection for the housing market in the US in general, and mortgage rates? I"m trying to get a feel for where things are trending to try to gauge my position relative to market.
Do any of you guys have any insight into the 1-2 year projection for the housing market in the US in general, and mortgage rates? I"m trying to get a feel for where things are trending to try to gauge my position relative to market.
Cutlery
Kill All the White People
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Why the fuck would anyone around here have insight? We"re all just armchair everythings.Chaotic said:
And I would expect everything to be about where it"s at now until things start improving. Just listen to the news, they"ll be sure to tell you when things are improving, or more likely just not be wasting so much time telling you how shitty things are.
Falstaff
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Here is on article for you, but I"m sure you can find half a dozen or more saying the exact opposite.
Home Prices Will Continue to Decline - Strategist
Home Prices Will Continue to Decline - Strategist
Eomer
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Answer: get a home equity line of credit instead of having $40k sitting in a GIC or savings account losing money after inflation.TheCutlery said:
Look at it this way for a house worth $245,000 and ignoring anything but the mortgage interest and principal:
3.5%/$8,500 down = 236,500 principal @ 20 years @ 4.5% = $1,545 a month and about 125.6k in total interest paid by the end of the mortgage
40k down = 205,000 principal @ 20 years @ 4.5% = $1,292 a month and about 105k in total interest paid by the end of the mortgage
So you would save 20k in interest over the full mortgage, which isn"t something to sneeze at. Granted, 50% return on investment over 20 years isn"t much at all, but that"s also using a somewhat low interest rate in historical terms (sure you might get cheaper now, but in 5 years interest rates in the US could be approaching double digits). I believe I"ve read that historically interest rates for mortgages average somewhere around 6-7%.
Eomer
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It would depend on your specific mortgage whether or not you can get a line of credit on your equity, so ask your bank or mortgage provider.
Yes, of course you pay interest on the line of credit when you withdraw money, but that shouldn"t be an issue as it should only be used for emergencies. And typically the interest rate is based upon prime rate. My LOC has had a lower interest rate than my actual mortgage for the past couple years, and the bank gave me a credit limit (for the mortage AND LOC combined) for the whole amount my place was assessed at when I bought it. So basically I could have drawn it down to zero equity if I wanted.
Yes, of course you pay interest on the line of credit when you withdraw money, but that shouldn"t be an issue as it should only be used for emergencies. And typically the interest rate is based upon prime rate. My LOC has had a lower interest rate than my actual mortgage for the past couple years, and the bank gave me a credit limit (for the mortage AND LOC combined) for the whole amount my place was assessed at when I bought it. So basically I could have drawn it down to zero equity if I wanted.
Cutlery
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Sure seems in my experience that you can"t get a HELOC unless you have more than 20-25% of your home paid off, in which case, putting 50k down just got you to the bare minimum required to obtain one (meaning you are now qualified to get one, but can only get one for 10 bucks until you build more equity), and wiped out your savings. So dropping the 50k means you now don"t have 40k in the bank and you still can"t get a HELOC.Eomer said:
Everywhere I look says that shit. Don"t forget that massive abuse of home equity loans contributed to the housing problems. Pretty unlikely to be able to draw down to 0 equity these days on a new loan.
Eomer
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You could well be right, I went through setting that stuff up 5 years ago and things have certainly changed since.
Regardless of it being home equity though, everyone should take the time to set up a line of credit for themselves even if they never use it and it"s only a couple thousand bucks, because they can come in extremely handy either in an emergency or even for "bridge financing" of a car or renovation or something for a couple months while waiting on a bonus or the old car to sell or whatever. Just don"t treat them like a piggy bank.
Regardless of it being home equity though, everyone should take the time to set up a line of credit for themselves even if they never use it and it"s only a couple thousand bucks, because they can come in extremely handy either in an emergency or even for "bridge financing" of a car or renovation or something for a couple months while waiting on a bonus or the old car to sell or whatever. Just don"t treat them like a piggy bank.
Ok, interesting update. This is where I could really use some insight, i"ll give some background.
I"m in a very upscale school district right now, in a moderate town mailing address. (Ie; school district A but mailing address of town B) this is huge around here with pretty shoddy districts all around. No one needs to be lectured on the value of a house in an excellent school district I"m sure.
So, get this. My parents home is worth about $400,000 down from $520,000 or so before the bust. I was bringing up some of this stuff that I was talking about here to my parents, and they had an "oh shit" moment. It was this;
The house next door to them is on sale and they are pretty desperate to sell, basically the owner died and daughter can"t afford payments. To start; the house is very poorly maintained and so is the yard. It"s a definite fixxer upper. It"s large, 4 bedroom, 2 bathroom with a full basement and a decent chunk of property. All the houses in this neighborhood are valued from 320k to about 415k.
She"s asking 230k, owes 190k (friend of family) and the house has been on the market for a bit. My mom said that I would be retarded not to try to jump into it.
To be honest, it does seem pretty perfect. I don"t need anything super nice, it"s a project - which is to be anticipated, plus would be kind of interesting. The big kicker here is that obviously, once the house is brought up to speed, the home value would positively sky rocket, and has staying power due to the school district. It"s something I could whittle away at as my salary increases. The bills would be , taking into account a measly down payment, a 1% higher then average interest rate and property taxes - about $1650 a month. In a month I will be making almost $3500 post tax with no OT (which will be abundant, but i don"t like to calculate that)
My two brothers would also move in with me, contributing whatever that may be, for arguments sake we would make it something small - say $1k with both combined, monthly (apartments here are more then that) which would take off some pressure as well.
The principle is quite small given the real estate market here in New York (200k might seem like alot for some out of states, but if you follow those links in my previous post you"ll see its considerably lower then the 25th percentile of sales) and given my future salary, almost trivial, especially with reliable renters like family (whom are responsible people) and knowing that whatever I throw into the house will be returned at least double over as the house begins to realize its true potential worth definitely gives me some added incentive.
What do you guys think? I actually kind of like what you said the Cutlery - maybe I"ll just keep what I have, say 20k and just get mortgage insurance or whatever, and keep that as a contingency (especially because some unforeseen things might come up with an unmaintained home)
I"m just mulling this over at the moment, seems like exactly the kind of situation I want to be in in terms of price, fixer upper, location, potential. I just feel it"s a bit too soon - but maybe , also, "now" is the time which is what alot of people have been telling me (in terms of market timing)
I"m in a very upscale school district right now, in a moderate town mailing address. (Ie; school district A but mailing address of town B) this is huge around here with pretty shoddy districts all around. No one needs to be lectured on the value of a house in an excellent school district I"m sure.
So, get this. My parents home is worth about $400,000 down from $520,000 or so before the bust. I was bringing up some of this stuff that I was talking about here to my parents, and they had an "oh shit" moment. It was this;
The house next door to them is on sale and they are pretty desperate to sell, basically the owner died and daughter can"t afford payments. To start; the house is very poorly maintained and so is the yard. It"s a definite fixxer upper. It"s large, 4 bedroom, 2 bathroom with a full basement and a decent chunk of property. All the houses in this neighborhood are valued from 320k to about 415k.
She"s asking 230k, owes 190k (friend of family) and the house has been on the market for a bit. My mom said that I would be retarded not to try to jump into it.
To be honest, it does seem pretty perfect. I don"t need anything super nice, it"s a project - which is to be anticipated, plus would be kind of interesting. The big kicker here is that obviously, once the house is brought up to speed, the home value would positively sky rocket, and has staying power due to the school district. It"s something I could whittle away at as my salary increases. The bills would be , taking into account a measly down payment, a 1% higher then average interest rate and property taxes - about $1650 a month. In a month I will be making almost $3500 post tax with no OT (which will be abundant, but i don"t like to calculate that)
My two brothers would also move in with me, contributing whatever that may be, for arguments sake we would make it something small - say $1k with both combined, monthly (apartments here are more then that) which would take off some pressure as well.
The principle is quite small given the real estate market here in New York (200k might seem like alot for some out of states, but if you follow those links in my previous post you"ll see its considerably lower then the 25th percentile of sales) and given my future salary, almost trivial, especially with reliable renters like family (whom are responsible people) and knowing that whatever I throw into the house will be returned at least double over as the house begins to realize its true potential worth definitely gives me some added incentive.
What do you guys think? I actually kind of like what you said the Cutlery - maybe I"ll just keep what I have, say 20k and just get mortgage insurance or whatever, and keep that as a contingency (especially because some unforeseen things might come up with an unmaintained home)
I"m just mulling this over at the moment, seems like exactly the kind of situation I want to be in in terms of price, fixer upper, location, potential. I just feel it"s a bit too soon - but maybe , also, "now" is the time which is what alot of people have been telling me (in terms of market timing)
Rushing is never a good idea and never buy based on future potential no matter how secured you believe it is.
Yea, I would hopefully try to do it at turn of the new year, say February which would put me in a more comfortable spot, but not where i"d want to be (the big thing there being a big raise) so it"s not a total rush, but def would be moving ahead of my hypothetical time line (however, at the same time pushing my house price down 100k.. at the expense of 30k less to put down, I don"t know really how this would play out in the long run)Sharmai said:
Maybe I didn"t communicate properly what I was attempting to say there - the traits of this house fit in with my goals.
Cheap, fixxer upper (I personally would rather - just arbitrary numbers here - Pay 300k for a house that needed 50k of work, and do that work according to my own desires - then 350k for a house that didn"t need anything and may not be precisely what i"m looking for) in a good area, close to family, very large which means I can move in with people.
The inevitable appreciation portion is just a large plus, not a reason for purchase. My first home I"m not viewing as an appreciating asset. Just, in my head if I were to buy a 200k house around here, it would be a shit house in a shit neighborhood. This is a shit house in an excellent neighborhood that doesn"t align with the areas property values - that"s just a trait that needs to be considered, specifically when the plan would be to get the house in order, which would (correct me if I"m wrong) invariably bring the house in line with the market.
How long have you been looking for a home? If the answer is less then one year then I"d say pass on this deal and keep looking at least for that long or close to it.
How many other homes (new or old construction) have you visited? If the answer is less then 5 then DEFINITELY do not make any decisions. By the time we bought our home we had seen somewhere between 20-30 homes and very much enjoyed the experience. We also learned a lot about what we wanted and what we needed to have.
What exactly does fixer upper mean and have you hired professionals to come take a look at what this fixing up would cost in their professional opinion? It might look cheap and it might sound cheap but there are things that can be hidden that could run you from a small $5,000 fix to a large $25,000 fix.
A good example of this is a women I work with who bought a house for an pretty good deal where the only thing that was wrong with it was a leak in the kitchen. The inspector she hired said it probably wouldn"t be to bad to fix and if it was bad it would probably only be a few thousand. It turned out it was a leak due to some bad piping installed under the foundation that had been getting worse and was covered up. The people that sold the house to my co-worker had hired a company to inspect a tiny crack in their kitchen and found out that the foundation was cracking all down one corner and was going to cause serious damage to the house in a few years. My co-worker found this out after living there a few years when a very large 6 foot crack suddenly appear in the kitchen during the winter and ended it up costing her a shitload more then $5000 to fix.
She was very fucking pissed.
Maybe it"s a good deal. Maybe you know these people. Maybe it really is a cheap fixer upper but this is a house you are buying and planning to live in for the next 10-30 years. Two words.Due. Diligence.
How many other homes (new or old construction) have you visited? If the answer is less then 5 then DEFINITELY do not make any decisions. By the time we bought our home we had seen somewhere between 20-30 homes and very much enjoyed the experience. We also learned a lot about what we wanted and what we needed to have.
What exactly does fixer upper mean and have you hired professionals to come take a look at what this fixing up would cost in their professional opinion? It might look cheap and it might sound cheap but there are things that can be hidden that could run you from a small $5,000 fix to a large $25,000 fix.
A good example of this is a women I work with who bought a house for an pretty good deal where the only thing that was wrong with it was a leak in the kitchen. The inspector she hired said it probably wouldn"t be to bad to fix and if it was bad it would probably only be a few thousand. It turned out it was a leak due to some bad piping installed under the foundation that had been getting worse and was covered up. The people that sold the house to my co-worker had hired a company to inspect a tiny crack in their kitchen and found out that the foundation was cracking all down one corner and was going to cause serious damage to the house in a few years. My co-worker found this out after living there a few years when a very large 6 foot crack suddenly appear in the kitchen during the winter and ended it up costing her a shitload more then $5000 to fix.
She was very fucking pissed.
Maybe it"s a good deal. Maybe you know these people. Maybe it really is a cheap fixer upper but this is a house you are buying and planning to live in for the next 10-30 years. Two words.Due. Diligence.
Ahh, havent been checking this thread lately. I"ll try to answer some of your more obscure questions as I don"t think anyone has yet....
Setting up your escrow account is normally calculated into the closing costs. The escrow account is basically a second account at your mortgage company that"s used to pay your taxes and homeowners insurance. They have calculations to figure out what it needs to start at based on estimated taxes, but we"ll say 2,000 is needed for the escrow.
For the rest of the closing costs we"ll figure it"s around 3,000.
Total closing costs: 5,000.
If you roll in the costs, then that 250k home is now 255k.
From there, to avoid PMI, you want to put 20% down. Your down payment would be $51,000.
If you don"t put down the 20%, you should expect an extra $150-$200 a month on your payments. Basically wasted money that does nothing.
Taxes around me are ~$8k for a $250k home, so seems like a good number.
If you"re looking into this "fixxer upper", the taxes may still reflect a $350k home. It depends on the assessment and property value etc. You might be looking at $10-15k in taxes for all we know... If it"s a good school district than taxes are usually very high.
A large house, and older houses, will typically have higher energy bills as well. You could spend as little as $75 a month on heat/electric for a smaller home or as much as $400-500 a month on a large 2-story home. Also depends how well you moderate the thermostat.
You utility bills (Water/Sewer), could be close to $750/year or more. It depends on your town.
A quick breakdown of what you"re looking at based on loose estimates:
$230,000 Home
$5,000 Closing
--------
$235,000 Total
$47,000 Down payment (20%)
$188,000 Mortgage
4.35% Interest Rate
935.89 Monthly Payment (Principle + Interest)
Taxes: $8k/yr
Homeowners Insurance: $600/yr
Total: $8,600.
Escrow Payment: $716.66/mo.
Total Monthly Payment: $1,652.56
Total Interest Paid after 30 Yrs: $148,919.02
==================================
With PMI:
$230,000 Home
$5,000 Closing
--------
$235,000 Total
$11,750 Down payment (5%)
$223,250 Mortgage
4.35% Interest Rate
$1,111.36 Mortgage Payment (Principle + Interest)
$150 Monthly PMI until 20% of home value has been paid.
Months of paying PMI: 96
Total Amount of PMI: $14,400
Taxes: $8k/yr
Homeowners Insurance: $600/yr
Total: $8,600.
Escrow Payment: $716.66/mo.
Total Monthly Payment (First 8 Years under PMI): $2,001.42
Total Monthly Payment (After 8 Years): $1,851.42
Total Interest Paid after 30 Yrs: $176,841.34
===============
Other Monthly expenses:
Association Fee
Water
Sewer
Electric
Gas
Phone
Alarm System
Cable/Satellite
Internet
Closing costs can be paid upfront or rolled in, most people tend to roll them in.Chaotic said:
Setting up your escrow account is normally calculated into the closing costs. The escrow account is basically a second account at your mortgage company that"s used to pay your taxes and homeowners insurance. They have calculations to figure out what it needs to start at based on estimated taxes, but we"ll say 2,000 is needed for the escrow.
For the rest of the closing costs we"ll figure it"s around 3,000.
Total closing costs: 5,000.
If you roll in the costs, then that 250k home is now 255k.
From there, to avoid PMI, you want to put 20% down. Your down payment would be $51,000.
If you don"t put down the 20%, you should expect an extra $150-$200 a month on your payments. Basically wasted money that does nothing.
Taxes around me are ~$8k for a $250k home, so seems like a good number.
If you"re looking into this "fixxer upper", the taxes may still reflect a $350k home. It depends on the assessment and property value etc. You might be looking at $10-15k in taxes for all we know... If it"s a good school district than taxes are usually very high.
A large house, and older houses, will typically have higher energy bills as well. You could spend as little as $75 a month on heat/electric for a smaller home or as much as $400-500 a month on a large 2-story home. Also depends how well you moderate the thermostat.
You utility bills (Water/Sewer), could be close to $750/year or more. It depends on your town.
A quick breakdown of what you"re looking at based on loose estimates:
$230,000 Home
$5,000 Closing
--------
$235,000 Total
$47,000 Down payment (20%)
$188,000 Mortgage
4.35% Interest Rate
935.89 Monthly Payment (Principle + Interest)
Taxes: $8k/yr
Homeowners Insurance: $600/yr
Total: $8,600.
Escrow Payment: $716.66/mo.
Total Monthly Payment: $1,652.56
Total Interest Paid after 30 Yrs: $148,919.02
==================================
With PMI:
$230,000 Home
$5,000 Closing
--------
$235,000 Total
$11,750 Down payment (5%)
$223,250 Mortgage
4.35% Interest Rate
$1,111.36 Mortgage Payment (Principle + Interest)
$150 Monthly PMI until 20% of home value has been paid.
Months of paying PMI: 96
Total Amount of PMI: $14,400
Taxes: $8k/yr
Homeowners Insurance: $600/yr
Total: $8,600.
Escrow Payment: $716.66/mo.
Total Monthly Payment (First 8 Years under PMI): $2,001.42
Total Monthly Payment (After 8 Years): $1,851.42
Total Interest Paid after 30 Yrs: $176,841.34
===============
Other Monthly expenses:
Association Fee
Water
Sewer
Electric
Gas
Phone
Alarm System
Cable/Satellite
Internet
Cutlery
Kill All the White People
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Make sure you can afford it on your own, Chaotic. You can"t rely on roommates to cover the cost. If they do, fantastic. But if they don"t, it"s your ass for the $1800 mortgage payment every month.
Rushing into things isn"t really the right way to do stuff, but you"ll basically know the right house when you see it. I put a bid on my house the same day I saw it.
That being said, there"s no fucking way in hell you could get me to live next door to my parents. Fuck. That.
Rushing into things isn"t really the right way to do stuff, but you"ll basically know the right house when you see it. I put a bid on my house the same day I saw it.
That being said, there"s no fucking way in hell you could get me to live next door to my parents. Fuck. That.
Fawy , that was a fucking excellent post. Thank you for that, cleared up some things for me. So escrow fundamentally is the other shit that gets thrown at you minus the mortgage / interest. Rolling closing costs is also interesting too, and my buddy was explaining to me about the PMI the other night (worked as some kind of mortgage person for seven years) because I was explaining to him what Cutlery had said about eating the PMI and having that same cash on hand. I felt that was particularly prevalent for me due to the nature of my salary curve right now - that maybe to cushion that first year or so while my salary goes up i"d like to have that cash on hand to shore up anything that is a "must fix" and in case of emergencies etc. He explained, what you did basically - that once you pay X amount you no longer need to pay the PMI.. that works for me.TheCutlery said:
As far as living next to my parents, I view it as a pretty big plus. I"ve been living in a full basement for about 3 years now ever since I moved back in after I finished school and everything - that don"t harass me in the least or really care about anything I do. I have a very big family, 2 brothers , 3 sisters, two dogs, cats etc. I don"t know, call me gay but I"d kind of like to stay close to them.
Rushing isn"t good, of course not - that"s why I"ve been planning all of this for quite some time (on paper at least) as my little things in this thread alone reflect. Unfortunately, no one has the ability to just make money appear - which is really the issue - but with careful planning and not being ignorant - which is why i"m trying to educate myself - you can not get yourself in a situation wherein you"re over your head.
As I said, soon i"ll be netting $3300 monthly. I get other checks and what not that would likely bring that around $3600, base pay. With OT and what not, thats *easy* $4,000-$5000 but I won"t even include that.
All bills put together are ,as calculated - less then $2000. By, say, February i"d have about $25k upfront. I wouldn"t even put that down I don"t think.
I understand that relying on renters is never a good idea, which is why as demonstrated I could afford things on my own, with $1500 at a bare minimum to spare monthly. (I have no car payment, insurance and phone are about it @ maybe $175 monthly total) with that 25k cushion..
Never mind the fact that if I did have a few people move in with me, which I would, that cushion would rise that much more.
To be honest I"m not sure what I want to do, I"ve spent the last few days scoping out the house. It"s really not too bad, just old fashioned. An old man lived there and it"s obvious. Due to the nature of my profession I have many, many hookups for all things related to the house in terms of anykind of work that would need to be done. I"m just weighing options and this seems like a great opportunity, if I approach it cautiously and do my research.
Also, and I know i"ll draw some flak with this - but try to hear me out. Many peoples arguments against this are what I saw here (and in my personal life as well) maybe not so much arguments, but words of caution - which is not so much the "be careful with what you"re getting into" which is absolutely right - but more the "you"re going to be living here!! don"t get into something you"re not absolutely sure of!!"
Frankly, I don"t view it like that.
1) I want to get my foot in the door while it"s a good time to get my foot in the door. Anytime in the last year, and probably the next year to year and a half to come would represent this window.
2) I view a house like I view my car, it serves a function - I don"t have a family right now, i"m a single guy. I want somewhere to live - the concept is cool to me, but I don"t "need" anything in particular. If it functions, that"s fine. If it"s a good deal and represents a reasonable investment - that"s what I"m looking for. I dont need a high ranch with a brick chimney and a two car garage with an extended porch and vinyl siding. I could care less. People can"t seem to understand this.
3) This house is going to be a temporary thing. My five year goal, after getting in my first home, will be to use it to leap frog to my "real" home. Hopefully at that time I will be looking to start a family , and the things I describe in 2 won"t apply anymore. I plan to either sell the home, or rent it depending on the market - and use that to jump into something hopefully, really nice which I will spent all kinds of crazy time looking around for (because, as I said, at that time I will *need* certain things which I don"t at all right now)
These things apply to any home, not even necessarily this fixxer upper I"m looking at, or even my original plan of a 300k 40th percentile home. It"s just how i"m viewing my adventures into the housing market right now. The reason I bring up the 200k home in a more serious way is it seems to sit with these goals.
I feel like I have valid points, which is partially while I"m posting this. A lot of you guys are much more seasoned then me in this stuff. I"m approaching it intellectually, but maybe I"m just ignorant. Or maybe I"m doing it right, I just appreciate any food for thought that"s thrown at me.
I think it"s a great idea to become a home owner as long as you have done the research and deem it a worthwhile investment and can afford it.
I think too many people expect to pay a mortgage their whole lives and don"t see it as an investment opportunity. I see my home as an investment which I hope someday will pay off.
The only downside is that you will be paying taxes/bills/interest that coulda just been saved and used for a bigger/better house sometime later, but if youve done your homework, perhaps renting or selling the home later will pay off several times greater.
I sorta have the same plan... I"ve been in my home 2 years now, just married, and hopefully can move into something better once wife"s career starts to pan out. I hope to rent out my current residence. Obviously selling it would allow me more cash for a down payment on my new home, but I feel like that just traps you into paying a mortgage the rest of your life. I"d rather have 2 homes at 200k than 1 home at 400k...
To each their own...
I think too many people expect to pay a mortgage their whole lives and don"t see it as an investment opportunity. I see my home as an investment which I hope someday will pay off.
The only downside is that you will be paying taxes/bills/interest that coulda just been saved and used for a bigger/better house sometime later, but if youve done your homework, perhaps renting or selling the home later will pay off several times greater.
I sorta have the same plan... I"ve been in my home 2 years now, just married, and hopefully can move into something better once wife"s career starts to pan out. I hope to rent out my current residence. Obviously selling it would allow me more cash for a down payment on my new home, but I feel like that just traps you into paying a mortgage the rest of your life. I"d rather have 2 homes at 200k than 1 home at 400k...
To each their own...
Where are you getting these massive tax numbers from? Most places are around 1.25-2.0%.Fawy said:
Do you live in NY, NJ?
In my area (columbus, oh) rent has been steadily increasing throughout the housing market crash and home prices have declined. Getting a similar square footage of living space seems to be almost cheaper then renting if not the same based on mortgagecalcular.com which includes pmi and property taxes.
Yes.Kaio said:
Would be nice if they were less, but it"s all relative to the area"s payscales anyway.
