Laid down 1k earnest money today and signed the contract.
Now to find structural and home inspectors.
Now to find structural and home inspectors.
Home buying thread
- Thread starter Tuco
- Start date
OK my fellow FoH financiers, I"d like some input to double check my own work.
My wife and I are looking at buying our first home. We have enough cash in the bank to put 20% down -OR- to pay for my tuition in cash over the next 2.5 years.
Which option is the most financially advantageous, given a monthly take home of about 8k:
Assumptions: 5% mortgage rate, 8k yearly taxes, 600 yearly home insurance, PMI where applicable for 250-300/mo and 7% school loan rate.
1) Put down 20% on a 380-430k house...so 76k-86k + closing up front and then mortgage payments and taxes as usual. Take out federal student loans accumulating to ~75k at a rate of 10k every 4 months (for simplicity). Monthly total payment in the $2500 range all in + school loans.
2) Put down 5% on the same house with an FHA loan. Same as above except add in PMI and pay the additional 1% FHA closing cost. Pay tuition in cash. Monthly total payment of about $3200 all in.
My gut reaction is to pay the school loans in cash but the flat nature of the PMI throws a crimp in the classic "pay the debt with the highest interest rate" rule. I wouldn"t be paying 250-300 in monthly interest on the school loans until they reached the 40-50k range and then I could get down or even stay below that range fairly easily and quickly. The PMI would not drop off of the mortgage until we reached 22% LTV.
Lets see what people come up with...
My wife and I are looking at buying our first home. We have enough cash in the bank to put 20% down -OR- to pay for my tuition in cash over the next 2.5 years.
Which option is the most financially advantageous, given a monthly take home of about 8k:
Assumptions: 5% mortgage rate, 8k yearly taxes, 600 yearly home insurance, PMI where applicable for 250-300/mo and 7% school loan rate.
1) Put down 20% on a 380-430k house...so 76k-86k + closing up front and then mortgage payments and taxes as usual. Take out federal student loans accumulating to ~75k at a rate of 10k every 4 months (for simplicity). Monthly total payment in the $2500 range all in + school loans.
2) Put down 5% on the same house with an FHA loan. Same as above except add in PMI and pay the additional 1% FHA closing cost. Pay tuition in cash. Monthly total payment of about $3200 all in.
My gut reaction is to pay the school loans in cash but the flat nature of the PMI throws a crimp in the classic "pay the debt with the highest interest rate" rule. I wouldn"t be paying 250-300 in monthly interest on the school loans until they reached the 40-50k range and then I could get down or even stay below that range fairly easily and quickly. The PMI would not drop off of the mortgage until we reached 22% LTV.
Lets see what people come up with...
You will get an immediate and very large tax break if you buy a house while if you were to pay for your tuition you would get only the tax break that allows you claim what you pay in tution.
Now it may sound that they are somewhat even BUT they aren"t because if you were to buy a house you could still claim whatever you pay in tuition (assuming school loans) PLUS your home as a tax break. Also if you should start paying back some of your loans early you can claim that interest on top of what your tuition costs that were paid by your loans.
Oh an theres all kinds of programs for dealing with school loans once you get out of school. I"m in the process of consolidating about 60K in loans to a nice low monthly payment of $300. It will take forever to pay it off but it won"t break my back in the process either.
Also look into MCC and see if they have that where you are. It can pay off a large portion of your mortgage interest.
Lastly you don"t -need- to put 20% down. When you move in you are going to definitely want 5-10k on hand just to buy all the getting started stuff and minor repairs if you have any. It isn"t necessary but it damn sure makes life easier. (Fence, appliances, blinds, furniture, gardenware & tools, water softner, New 70 inch wall mount flat screen tv.... )
Now it may sound that they are somewhat even BUT they aren"t because if you were to buy a house you could still claim whatever you pay in tuition (assuming school loans) PLUS your home as a tax break. Also if you should start paying back some of your loans early you can claim that interest on top of what your tuition costs that were paid by your loans.
Oh an theres all kinds of programs for dealing with school loans once you get out of school. I"m in the process of consolidating about 60K in loans to a nice low monthly payment of $300. It will take forever to pay it off but it won"t break my back in the process either.
Also look into MCC and see if they have that where you are. It can pay off a large portion of your mortgage interest.
Lastly you don"t -need- to put 20% down. When you move in you are going to definitely want 5-10k on hand just to buy all the getting started stuff and minor repairs if you have any. It isn"t necessary but it damn sure makes life easier. (Fence, appliances, blinds, furniture, gardenware & tools, water softner, New 70 inch wall mount flat screen tv.... )
Here is a big question that applies to you and that might help. Since you are married do you plan on starting a family in the next 5 years? If it is even a realistic chance that you might be having kids in 5 years then think very hard about getting a house.
I"m not sure about how taxes and all that shit work but i will say i"ve run the numbers for my scenario and PMI is a *big* waste. Especially if you"re FHA and its mandatory 5 years (well it was for me for some damn reason).
In my case I could borrow the difference in the downpayment ($20k) and pay 12% on it and still pay less than PMI over 5 years. And in that case it will STILL be better to borrow it because that money would be going towards my principle and not up a wild hogs ass.
The numbers for the record were:
150k house
7.5k downpayment
100/mo mip (PMI)
1400 down for mip wrapped up into mortgage
and i had 129k principle in 5 years
total payment was ~950/mo
Other scenario
150k house
30k down payment
20k borrowed @ 3% (family member loan) paid off in 5 years
total payment was ~1100/mo
principle after 5 years was 108k
so for an extra 150 a month for 5 years (9k) i was ahead 21k on my principle. I paid less interest so i would have less write off i guess but i don"t think i could get any better than that.
In my case I could borrow the difference in the downpayment ($20k) and pay 12% on it and still pay less than PMI over 5 years. And in that case it will STILL be better to borrow it because that money would be going towards my principle and not up a wild hogs ass.
The numbers for the record were:
150k house
7.5k downpayment
100/mo mip (PMI)
1400 down for mip wrapped up into mortgage
and i had 129k principle in 5 years
total payment was ~950/mo
Other scenario
150k house
30k down payment
20k borrowed @ 3% (family member loan) paid off in 5 years
total payment was ~1100/mo
principle after 5 years was 108k
so for an extra 150 a month for 5 years (9k) i was ahead 21k on my principle. I paid less interest so i would have less write off i guess but i don"t think i could get any better than that.
Cutlery
Kill All the White People
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As Sharmai said, don"t spend it all, whatever you do.Tyreny said:
It"s not fucking hard at all to throw 10k into a house. You need shit you don"t even know you need right now, and it"s not a knock on anyone, it"s just the truth. I"m pretty sure I put 10k into the house within 4 months and I didn"t even buy a fixer upper.
And the other thing that I don"t see you considering is the interest you would be earning on your 75k cash that you have right now. You don"t need to pay for tuition all at once, right? That will surely generate some manner of sway in that direction, whether it"s enough to overcome PMI is for you to determine as I don"t know what your chosen investment vehicle is.
Sorta big development today,
Learned the sellers accepted my offer. We offered the full asking price, 115k(as they"ve canceled about 7 other lower offers their Realtor said, probably a lie....) However, dealing with the back we figured better safe then sorry, and with the house at 15k, with the neighborhood homes at 160k, we figured we would go for it.
However, we asked for 5k in closing cost paid for by the seller(probably the bank), for them to pay a current sewer assessment they owe, which the bank will have to pay when they take title, and a 1 year home warrenty(for shits & giggles.)
Now since I"ve been shopping, I got my closing cost down to 3k, so I have 2k to buy down my interest or hopefully sweep into tax escrow.... Figure I have at least 2 weeks of waiting. I think I can actually follow up with Bank of America now though myself to stay on top of their process....
Learned the sellers accepted my offer. We offered the full asking price, 115k(as they"ve canceled about 7 other lower offers their Realtor said, probably a lie....) However, dealing with the back we figured better safe then sorry, and with the house at 15k, with the neighborhood homes at 160k, we figured we would go for it.
However, we asked for 5k in closing cost paid for by the seller(probably the bank), for them to pay a current sewer assessment they owe, which the bank will have to pay when they take title, and a 1 year home warrenty(for shits & giggles.)
Now since I"ve been shopping, I got my closing cost down to 3k, so I have 2k to buy down my interest or hopefully sweep into tax escrow.... Figure I have at least 2 weeks of waiting. I think I can actually follow up with Bank of America now though myself to stay on top of their process....
Did the bank end up accepting it or kicking it back? I"m wondering, also if they accepted and moved forward, did you have to pay for the power to be turned on during the inspection, or will the bank pay for that little bit?
Cutlery
Kill All the White People
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Bank accepted the offer (and the rest is hearsay, i have no way to confirm this) on the rabid pressing of the bank"s realtor. The story is that the bank wanted to relist it after they obtained possession (the foreclosure period was up about 6 weeks after our bid and it officially was no longer a short sale). But the house had been on the market for 6 or 8 months already and had already dropped 70k in price, and we were the first bid. The bank"s realtor really forced it thru for us, sight unseen to us, because she thought it was the best offer they were going to get, and convinced them of that. Like I said, I have no way to prove that, but considering the horror stories I"ve heard from other people and their bank dealings, I believe it to be more truth than fiction.Wizarddeath said:
And yeah, they got the power turned on for us for the inspection. We did get forwarded a $300 water bill from the previous owners, however, which was fucking awesome. Last I heard, they applied it to our property tax (which jives, because mine just went up $300 for this 6 month period) because I refused to pay it and the realtor and the bank just sat around with their thumbs up their ass. City told us that the bill is assessed to the property, not the owners. I told the city to expect me 6 months delinquent when I sell the house in order to recoup my costs since that"s apparently the system they have in place.
Hmm I wonder if thats the 4300$ sewer assesment thats due on the home right now? Or maybe included in it...
Is the water bill the only bill you got like this? I may contact water resources just to follow up on that.
Is the water bill the only bill you got like this? I may contact water resources just to follow up on that.
Cutlery
Kill All the White People
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Yeah. Supposedly that shit is supposed to be accounted for at closing, with the current owner bringing all the city utilities up to date before the title is transferred to a new owner. I think the bitches ended up writing the check out wrong, because the numbers between the 2 parties didn"t match, and by the time I had gotten everyone involved in figuring out what the fuck was going on, they had already assessed it to my property tax at a city council meeting or something (we got first notice of the problem like 2 weeks before this was to happen, so it had already been past due for quite some time) and it was out of my control. City just kept telling me that the water bill was tied to the property, not the owner, and the bank"s realtor told me that all bills were paid and that it didn"t match her documents and that she"d "Look into it" and nothing ever came of it.Wizarddeath said:
I kind of feel bad about how poorly the housing market is for these people. I"m getting ready to bid 132k on a house built new in 2005 for 172k :/
Eomer
Trakanon Raider
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How do people generally calculate rents on investment properties? The backstory is that the suite beside me in my building has gone up for sale. I"ve often daydreamed of buying the suite beside mine and converting them in to a single larger suite, as well as moving some things around that I reasonably can (plumbing generally a no no since I"d have to screw around below). None of the walls are bearing in the building since it"s masonry and wood posts/beams, so other than the "wet" areas I"d have freedom to do something pretty cool. I"ve cleared it with the board so long as everything is done properly and there"s been combined suites in the building in the past (later separated for sale purposes).
I"m listed as an exception with the person"s listing, so we can avoid commission. I"ve spoken with them briefly and told them I"d get back to them about meeting them to take a look at the suite in person. They mentioned that they are selling the suite fully furnished. What I"m thinking of doing is buying the suite now while rates are still low (current place is paid off, I could likely put 25% or more down) and then renting it for a year or two before doing anything, so I can give it some good hard thought and also scrape up the change to do the reno proper justice.
Purchase price is likely: $375,000-400,000 (we didn"t have a crash, just a slight pause, nice condos in good areas go for $300-400/ft))
Condo fees (includes heat, water, sewer, power extra): ~$400 /month
Property taxes: ~$200 /month
Mortgage: ~$1,850 /month ($300k @ 4.39%, 5 year closed. Might be able to do a bit better)
Likely the best I could rent for is somewhere in the $1,250-$1,750 range. Rents are stupid cheap compared to what you pay to buy. I know that"s wide, but I don"t know much about the rental market, it"s a pretty unique place, and would actually make a really good place for a professional in town for 6-12 months to rent instead of at a suite hotel or something. Just a matter of finding the right renter looking for that kind of place. It"s almost literally within a 10 minute walk of every major law firm, bank, and large accountant in the city. It"ll also be less than 3 blocks from the new arena district that is 95% going ahead and should be at least partially complete in 2014, which will only help the value.
I dunno, given the carrying cost for a year or two, I wonder if I shouldn"t just wait and hope whoever buys it doesn"t hold on to it for long. But it"s the only suite that would make sense to combine with, and turnover in the building is generally quite low. Not to mention that the market here is probably going to at least moderately increase (3-5% at worst) over the next couple years, meaning that the increase in value would be offset by the mortgage costs if I did buy, and if I didn"t I"d have to pay the extra value that I"d have paid in interest anyway.
Thoughts?
I"m listed as an exception with the person"s listing, so we can avoid commission. I"ve spoken with them briefly and told them I"d get back to them about meeting them to take a look at the suite in person. They mentioned that they are selling the suite fully furnished. What I"m thinking of doing is buying the suite now while rates are still low (current place is paid off, I could likely put 25% or more down) and then renting it for a year or two before doing anything, so I can give it some good hard thought and also scrape up the change to do the reno proper justice.
Purchase price is likely: $375,000-400,000 (we didn"t have a crash, just a slight pause, nice condos in good areas go for $300-400/ft))
Condo fees (includes heat, water, sewer, power extra): ~$400 /month
Property taxes: ~$200 /month
Mortgage: ~$1,850 /month ($300k @ 4.39%, 5 year closed. Might be able to do a bit better)
Likely the best I could rent for is somewhere in the $1,250-$1,750 range. Rents are stupid cheap compared to what you pay to buy. I know that"s wide, but I don"t know much about the rental market, it"s a pretty unique place, and would actually make a really good place for a professional in town for 6-12 months to rent instead of at a suite hotel or something. Just a matter of finding the right renter looking for that kind of place. It"s almost literally within a 10 minute walk of every major law firm, bank, and large accountant in the city. It"ll also be less than 3 blocks from the new arena district that is 95% going ahead and should be at least partially complete in 2014, which will only help the value.
I dunno, given the carrying cost for a year or two, I wonder if I shouldn"t just wait and hope whoever buys it doesn"t hold on to it for long. But it"s the only suite that would make sense to combine with, and turnover in the building is generally quite low. Not to mention that the market here is probably going to at least moderately increase (3-5% at worst) over the next couple years, meaning that the increase in value would be offset by the mortgage costs if I did buy, and if I didn"t I"d have to pay the extra value that I"d have paid in interest anyway.
Thoughts?
Cutlery
Kill All the White People
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Yup, I got a house that was sold for 310k in 2006 for 240k in 2009.Tenks said:
I consider it my reward for 10 years of apartment living where every time we finally got enough ahead to start thinking about buying a house, prices went up just a little further, keeping it out of reach. The cocksuckers that inflated the market so much got their reward, and the honest folk get to reap the benefits now.
There"s no money so how can they build it? Also, that"s really not a bonus if you ask me, more a deterrant. I"ve lived near the Saddledome in Calgary and I absolutely did not like it because it becomes an angry swarm of people and cars every game night.Eomer said:
What"s the sq footage of this place? As someone that was looking to rent in Edm recently, that"s really high. The only place that came even close to that was 900$ (thus 1800$/month) to share with another person and it wasveryposh. And it was overpriced as well.
edit: It really makes zero sense to buy a property in Edm/Calgary. It"s way cheaper to rent. Having said that, if you want to push the suites together in the near future, then its probably a good idea to buy it no because you may not get the opportunity ever again.
Eomer
Trakanon Raider
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They"ve "found" about 75% of the money actually, whether from Katz, community revitalization levy, seat taxes/transfer fees, and so on. Basically there"s a 100 million dollar gap that will likely be filled by the provincial and federal government in one way or another, likely calling it "infrastructure funding" for LRT, road, or utility aspects.
As far as it being a detriment, I totally disagree. The whole idea of living in the central part of a city is for there to be people around, and yes, people can be loud from time to time.
Was thinking about it over the weekend and am kinda leaning away from it. I just paid off my mortgage on the first place last year and while I could easily carry one for the new place, but it seems like a lot of work for the extra space when I barely use the space I have as is. And maybe I will move in to a house in a few years instead of staying in a condo. That"s really the main thing, it"s only worthwhile to do if I plan on staying for 10 years.
Decisions decisions. At the very least I"m gonna meet with the owner this week and at least talk a bit about price. Depending on what they say I might gamble and let them have it on the market a month or two if they"re asking too much.
As far as it being a detriment, I totally disagree. The whole idea of living in the central part of a city is for there to be people around, and yes, people can be loud from time to time.
Was thinking about it over the weekend and am kinda leaning away from it. I just paid off my mortgage on the first place last year and while I could easily carry one for the new place, but it seems like a lot of work for the extra space when I barely use the space I have as is. And maybe I will move in to a house in a few years instead of staying in a condo. That"s really the main thing, it"s only worthwhile to do if I plan on staying for 10 years.
Decisions decisions. At the very least I"m gonna meet with the owner this week and at least talk a bit about price. Depending on what they say I might gamble and let them have it on the market a month or two if they"re asking too much.
Just placed a bid on a short sale home. The LP is 145k and my agent (whom is an expert in foreclosure/short properties) advised me it is probably worth about 143 and to place a bid of 138. The house sold for new for 191k back in 2006. So yeah, it sounds like a pretty good price.
Let us know what happens Tenks! My seller approved the offer on the 8th, and it was submitted to BoA on 8th/9th, but I haven"t heard anything back, and probably won"t until the end of the month at the earliest I"m guessing. I actually tried to call the BoA short sell department today to see if they would release any information to me, and of course they wouldn"t have to be the seller, or sellers agents.Tenks said:
That"s your prerogative, I"m just giving you my personal experience with it. It"s not just the loud people that are particularly annoying; it"s the vehicles that come with them too. It"s basically giant rush-hour traffic before and after the game. A 5 min trip to the Safeway suddenly takes 30 due to foot and car traffic that you have to drive through.Eomer said: