purchasing home

[Zippyjuan]

I could, but I choose to have nicer things in the home I own versus one I would rent out. Most people would likely do the same, if they can afford it.

You have different incentives. As you say, you want to do nicer work in your own home and for a rental you probably want to do it at lowest cost. But lowest cost is not always lowest cost long term- lowest cost may not last as long and have to be redone more often. Either way, renting or buying, you pay the costs. You may end up replacing things like carpets and repainting much more often in a rental (depending on how renters treat it and how often they move). That may end up costing more over time than putting in a nice floor which will last decades. As an owner, you get to decide if you want to keep the upkeep expenses low or spend more. As a renter, you can be pretty sure you will get cheap work done.

I did my own work and replaced flooring in livingroom, dining room and kitchen and also replaced sink and fawcets and countertops and refaced cabinets and spend about $6000 on the entire thing (Pergo flooring and laminate instead of stone counter tops but looks great). I know others who spent $30,000 just on their bathroom.

As a percent of your costs (including the mortgage and property taxes), I find that maintainance costs are actually pretty low unless the property is in poor shape (have a house inspection prior to buying to alert you to possible problems and future expenses- some lenders require it anyways). That should not be a make or break factor. If that is enough to make you say yes or no to "Can I afford it" then you may be cutting it too close financially (you will need to have some flexiblity in case of emergency expenses).

 

[Schifference]

With a good credit score (above 700) you can get an FHA loan with as little as 3% down. But you would need to pay an upfront PMI expense and an additional monthly PMI fee. With as little as 5% down you can get a conventional loan and pay a one time upfront PMI with no additional monthly PMI. Interest rates hovering around 3.75%. Of course your debt to income ratio must be inline with preset standards and your income able to justify the mortgage. Inflation is a happening thing and mortgage rates will not go below 0 for home buyers. Biggest factors to consider are property taxes and the school system. I would put as little down as possible use my extra cash to buy gold and or silver and be happy moving into my new home. PM me if you want the name of a mortgage broker that can make things happen.

Something I forgot to mention is that you with 3 or 5% down you can negotiate with the seller and have them credit you up to 3% cash back at closing to go towards closing costs and/or prepaid expenses. In my opinion I would put as little out of pocket money in the home as possible and take any money you would have put as down and use it to invest or purchase precious metals. Foolish not to finance as much as possible with such cheap interest. Borrow that money for as long as possible. Instead of putting a large down or paying cash for house finance as much as possible. Don't spend or waste the rest. If times get bad cash in your investment or sell your precious metals and use the proceeds to make the payment. Northwest Territorial mint is great and will purchase back all the gold and or silver.

 

[PaulConventionWV]

If you have 30-40k down, now is a GREAT time for first-time homebuyers. I would have done it already, but I don't have enough credit built up. If at all possible, I would look for foreclosed rental property with multiple units. You can get them cheap and sometimes make over 25k/year from the rent alone.

 

[PaulConventionWV]

I only say that because if the bottom drops out of the economy, and income drops to zero, there's a chance at losing everything if you have a mortgage. Other than that, I do agree that rates are so insanely low right now that it absolutely makes sense to borrow. I'm not convinced that an ARM is a good choice, but since I believe that Carter-era double digit inflation is coming, you'd certainly be saving money if you borrowed money at 4% while inflation is churning along at 15 - 20%.

I think we're moving out of the era of private ownership, and into the era of a form of land barons. A rentership economy. If that happens, you're better off being on the ownership side of that deal.

I concur. Ownership is the best way to go if you can afford it.

 

[cbc58]

I would look for foreclosed rental property with multiple units. You can get them cheap and sometimes make over 25k/year from the rent alone.

I would caution anyone thinking it is this easy. I have seen many, many people get in over their heads on this type of thing. Tread carefully if wanting to do this.

 

[LBennett76]

The key is to buy something within your means. I bought a house that was for sale by owner. 4/5 years ago she wanted 80k for it. I bought it 2 years ago for 42k. It's a nice little older two bedroom home with 1/3 of an acre in a very quiet neighborhood. My mortgage+house insurance+property taxes in $300/month. I have a locked in interest rate of 4% and I paid virtually nothing down. Most of the stuff (heat, air, roof) were all 5 years old or less. It was a sweet deal. Look for deals because they are out there. Buy something that you can always afford and that you really like.

 

[Edmunster]

Thanks again to all that took the time to help me out with advice, it is really appreciated.

 

[EBounding]

With uncertainty in the near future would right now be a really bad time to purchase a home? The wife and I just got married and really would love to own our own place. I am interested in buying a ranch style property with about 1/2-1 acre lot. Its not huge but I plan to grow as much food as possible and possibly raise a couple of hens. I am renting a house right now and have about 30-40k for a down, what would you guys do?

Is that 40K ALL your cash, or just what you've set aside for a down payment? I would make sure to have 6 months worth of expenses set aside too.

I think the only other criteria I would consider is if you are nearly 100% certain you will be in that house in 10 years. If you don't know, don't buy a house and invest in something else.

Visit patrick.net too. It helped me avoid making a big mistake.

 

[PaulConventionWV]

I would caution anyone thinking it is this easy. I have seen many, many people get in over their heads on this type of thing. Tread carefully if wanting to do this.

There are concerns, since you don't know the actual condition of the place you are buying, and you often may jump into it without realizing how much time you have to spend to get ready to rent. But it really does help to know a contractor like I do. If you can move fairly quickly and you are fairly certain of the home's value and its condition, then there's no reason it can't be that easy, except the hypothetical scenario where the previous owner sues and gets his house back, but how many times has that ever happened?

A few other things to watch out for are pre-existing liens on foreclosures, and HOAs. Stay away from HOAs.

 

[cbc58]

Paul - how many units do you own now ?

There are concerns, since you don't know the actual condition of the place you are buying, and you often may jump into it without realizing how much time you have to spend to get ready to rent. But it really does help to know a contractor like I do. If you can move fairly quickly and you are fairly certain of the home's value and its condition, then there's no reason it can't be that easy, except the hypothetical scenario where the previous owner sues and gets his house back, but how many times has that ever happened?

A few other things to watch out for are pre-existing liens on foreclosures, and HOAs. Stay away from HOAs.

 

[brandon]

It depends on where you live. Interest rates are very low, but likely to go even lower or stay the same for quite some time. Home prices have pulled back since the peak, but more so in some areas than others. I feel that in my area (East coast suburb) they still have another 10% or so to drop before they become affordable to the average family. I'm looking to buy but I'm just building my downpayment while I wait for the right deal to come along. I'd like to hit 20% down but I'll do 10% if the right deal comes along first.

TL;DR: Now is not a bad time to buy, though I think there will be better times in the next year or two.