purchasing home

[cbc58]

If I were you, I'd get pre-approved for a loan (pre-approved not pre-qualified) and just wait until something
compelling comes along. Prices should go lower - especially once rates start to rise. Higher rates means reduced buying power. DO NOT buy into the Realtor hype. Watch out for taxes. I am guessing at least another 20% drop in values in many areas.

I've been in real estate for 26 years and never in my life did I ever think interest rates would go this low. It's an artificial market out there. Also - keep this in mind - if you can partner with other folks to buy 10 HUD homes, they will sell them to you at half price. Our tax dollars at work.

 

[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.

 

[Dianne]

I'd look for a foreclosure that you can pay cash for. House = good. Mortgage = bad.

Buying a foreclosure is the absolute worst idea... All foreclosures have been brought about by fraud. Even in corrupt North Carolina, the Register of Deeds has sued all the big banks for foreclosure fraud and clouding all land titles.

http://4closurefraud.org/2012/03/14...en-v-lender-processing-services-inc-docx-llc/

Promissory Notes are sold in the stock market as mortgage backed securities. As long as the banks can make a photo copy of your "Note", they can sell it over and over again. Page #1 of your Note, doesn't have your name on it... if it is Fannie Mae. It is like giving someone a check signed by you, but leaving the pay to the order of blank. The check can be cashed over and over and over again.

My advice is to keep renting, but take your money and buy something overseas... Don't buy anything in the U.S.

 

[Roy L]

Thanks for all the advice even though some of it is conflicting. While I wish i could move away from this area it is very hard. Job/business, ALL family, Wife's family, Great friends, & for what I am into (Concerts, offroad racing, snowboarding, boat/waverunner) quite possbily the best place to live. I might wait just a tad and see if prices keep dropping. But as soon as I see interests rates start rising I might have to take advantage of that. Any other advice is much welcomed..

CA is going to be risky long-term, but IMO that market has bottomed convincingly, and if you are planning a family, having a house on a big lot with some garden space and a chicken house could be really sweet. If you can get a long-term fixed-rate mortgage at less than 4%, do it. Inflation is coming. Think seriously about selling and leaving the state about 15 years down the road.

 

[Bman]

It currently is a buyers market. I'd keep in mind there is no telling when it may become a sellers market. If you are planning on buying for a long term, interest rates may not get any better. If you're planning on a short stay keep saving until you find the house you want to die in.

That's my advice if you don't have cash to throw around on what could be a seriously long term investment. It's real easy to get underwater in this market.

 

[CaptLouAlbano]

The first thing you want to do is remove from your mind the notion that your primary house is an asset. It's not, it's an expense. Real estate is an asset when you earn income from it on a monthly or annual basis (like a rental property).

I'll give you two personal examples to illustrate:

The first is the home my wife and I owned most of our lives. We bought in 1979 for $81K and sold in 2006 pretty much at the peak of the bubble for $425K (minus commissions we walked away with $400K. Now that might sound like a nice profit, but first you need to look at the value of the dollar over time. $81K (the 1979 purchase price) in 2006 dollars is roughly $255K, so the difference between the cost and the sell in constant dollars is actually $145K. Now take into consideration that over the 27 years we were in that home we did a lot of maintenance - a new roof, new HVAC system, a couple of hot water heaters, landscaping, new siding, numerous driveway coatings, we finished the basement, remodeled the kitchen to update it, paint, wallpaper, plumbing, fencing, a patio, etc, etc, etc. It's hard to add it all up, but over the years there we spent a lot of money maintaining and upgrading the home to our liking. So did we really profit from the home? Not at all - in fact over the 27 years we spent more money than we got out of it. It was an expense and a necessary one for sure.

Now my son and daughter-in-law bought their first home in 1997. It was a townhome and they paid $117K for it. They sold it in 2006 for $240K. But when you go over the same issues - money they put into the house versus what they got out of it, they weren't at a loss per se, but they certainly didn't profit $100K+. And of course, when they did outgrow the house and sold it, they bought another home at the height of the housing bubble - so they paid a lot more for that home than they would today.

So forget the notion that you are buying a house to make money off of it. You buy a home because you want to live in a home that you can cherish, as opposed to a rental that you are just there temporarily.

So the questions you want to ask yourself are as follows:

1) Do you plan on staying in the home for an extended period of time?
2) Do you wish to do improvements on the home for your own enjoyment - garden, outdoor living, pool, paint & decorate how you wish, etc (the things you typically cannot do with a rental)

If you answered yes, to both then buying is a good option for you. Taking on debt in any economy is not a good idea, so if you are able to pay cash for the home, then do so. If not then seek out the best financing options for you, and consider non-traditional options (borrowing from family for example).

Home prices right now are very favorable for the buyer in most markets, so you can get that home you have dreamed of for a much better price than in year's past, so now is a good time to buy provided that your reason for buying is because you want to own a home, plant some roots and make that home your own. If you want to buy solely with the notion that you can sell the house in a couple years and make money on it, I would say continue to rent and wait until you are truly ready to settle down before buying.

 

[angelatc]

Consider this: Obama will be re-elected. The housing market will continue to drop. Obama supports government money for people hurting based on a poor housing market.

So you have one group of people who will buy homes on credit, the price of their home will go down. They can either default on their home or get some sort of bailout. They end up with what they started with.

Then you have the people who pay for the house with cash and have no mortgage. The price of their home will go down. When they sell, they are out the amount that the value went down. They end up with a lot less than they started.

I bought my house for $300k. I put down $100k. My house is now worth $200k. I wish I had put down as little as possible.

But he's at the lower end of the market. If he pays $40k for a house, and the value drops by 30%, the damage is still much less. And the amount he didn't spend on interest equalizes that out in about 2 years.

If the government wanted to stimulate the economy, they'd just go ahead and forgive mortgage debt. If youbelieve that is likely to happen, then of course the best thing to do is to take out a HUGE mortgage.

 

[angelatc]

Buying a foreclosure is the absolute worst idea... All foreclosures have been brought about by fraud. Even in corrupt North Carolina, the Register of Deeds has sued all the big banks for foreclosure fraud and clouding all land titles.

http://4closurefraud.org/2012/03/14...en-v-lender-processing-services-inc-docx-llc/

Promissory Notes are sold in the stock market as mortgage backed securities. As long as the banks can make a photo copy of your "Note", they can sell it over and over again. Page #1 of your Note, doesn't have your name on it... if it is Fannie Mae. It is like giving someone a check signed by you, but leaving the pay to the order of blank. The check can be cashed over and over and over again.

My advice is to keep renting, but take your money and buy something overseas... Don't buy anything in the U.S.

Most of the houses on the markets are foreclosures right now. There's pretty much zero chance that people who lost a house because the didn't make their mortgage payments are ever going to get to reclaim to a house they actually never owned. In the rare event where they do, that's what title insurance is for.

 

[angelatc]

I

I've been in real estate for 26 years and never in my life did I ever think interest rates would go this low. It's an artificial market out there. Also - keep this in mind - if you can partner with other folks to buy 10 HUD homes, they will sell them to you at half price. Our tax dollars at work.

And it gets better / worse. After they're fixed up, they'll contact you to see if you're willing to rent them to Section 8 tenants. Both the landlord and the tenant on the government dole.

 

[DEGuy]

As one of the above posters mentioned, just think the house as more of a consumption good, and less like an asset. In most markets right now, you will still always be better off financially by renting as opposed to buying, once you take into account all the taxes and maintenance costs of a home. If there is a breakeven point, it might be 5-10 years out.

And ignore the advice about not taking out a mortgage. The government is artificially depressing interest rates, epecially for mortgages. The banks are taking advantage of the low interest rates, why shouldn't you? The good news is it'll probably last a few more years, but if you are trying to time the bottom exactly right, you'll have a tough time doing that. Housing values may continue dropping too, but the pumping of the market will eventually cause a boom in values, even if it isn't until 2020. Or massive inflation could happen.

I'm in my second house, and I'm in the midst of refinancing into a longer loan with a crazy low interest rate (on a 5/5 ARM). Why? So I can use my money to invest in PMs and other investments that I think will return 10%/year or more on average over the next decade. For me, I can sleep just fine at night, since a sub-3% mortgage isn't anything I'm in a rush to pay off.

 

[angelatc]

And ignore the advice about not taking out a mortgage. The government is artificially depressing interest rates, epecially for mortgages. The banks are taking advantage of the low interest rates, why shouldn't you?

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.

 

[brooks009]

Read CaptLouAlbano post carefully. Maintenance cost was about 3x what I thought it would be on our house.

Houses are money pits not investments.

I sure do love my money pit though

Also, the housing market is not the same everywhere. In most of Houston we did not lose much value. I bought 4 years ago and I could sale my house for about 5% more then I bought it for.

 

[angelatc]

Read CaptLouAlbano post carefully. Maintenance cost was about 3x what I thought it would be on our house.

Houses are money pits not investments.

I sure do love my money pit though

But the cost of maintaining the home doesn't vanish if you're a renter. Neither do taxes. They're simply incorporated into the amount you're paying in rent.

 

[DEGuy]

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.

If income drops to zero, you are still screwed if you don't have a mortgage and your only major source of weath is your home. Without income, you can't borrow against it. You could sell, but you might not get anything in an economy that is totally ruined. Anyhow, my view is that it's good to have a reasonable financial cushion (Hopefully in a mixed-bag of assets, not just USD) first, and only put out a down payment that is enough to avoid unfavorable rates or fees like PMI. It's just too risky to put all of the savings into the down payment and then risk losing all that if the economy goes south and you can't find a job for 6-12 months.

ARMs certainly aren't for everyone, and it's depends on your risk profile. But I just hear a lot of people who say, as a rule-of-thumb, to avoid ARMs. I think that is a knee-jerk reaction to the housing crisis, and leaves out an option worth considering. Especially for some of the more financially-literate here who can adequately way risk/rewards without help from Big Brother. I agree that we will probably be in a crazy inflation realm eventually. But there are some ARMs out there with maximum interest rate ceilings under 9 or 10%, so it's not nearly as risky as some might think.

Totally agree with the end of private ownership, wish I was in a position to buy up some more land now. Ironically enough, the Amish are buying up a lot of the best rural land in the area I live in.

 

[CaptLouAlbano]

But the cost of maintaining the home doesn't vanish if you're a renter. Neither do taxes. They're simply incorporated into the amount you're paying in rent.

True, but the costs of maintenance on a rental property are usually far less than in your own home. For example, I redid the kitchen flooring in both our home and in a multi family unit I owned. This was about 15 years ago, but I will use today's pricing for comparison. In the rentals I put in inexpensive vinyl at about $0.75/sq ft. In my own home I put in natural stone flooring at about $10/sq ft. You will spend a lot more on the home you live in, then the landlord will spend on a rental.

 

[angelatc]

True, but the costs of maintenance on a rental property are usually far less than in your own home. For example, I redid the kitchen flooring in both our home and in a multi family unit I owned. This was about 15 years ago, but I will use today's pricing for comparison. In the rentals I put in inexpensive vinyl at about $0.75/sq ft. In my own home I put in natural stone flooring at about $10/sq ft. You will spend a lot more on the home you live in, then the landlord will spend on a rental.

Of course, but that's a choice that you made, both as a landlord or a resident owner, because your objectives are different. There's no reason you couldn't put vinyl flooring in your residence, is there?

 

[CaptLouAlbano]

Of course, but that's a choice that you made, both as a landlord or a resident owner, because your objectives are different. There's no reason you couldn't put vinyl flooring in your residence, is there?

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.

 

[jbauer]

If income drops to zero, you are still screwed if you don't have a mortgage and your only major source of weath is your home. Without income, you can't borrow against it. You could sell, but you might not get anything in an economy that is totally ruined. Anyhow, my view is that it's good to have a reasonable financial cushion (Hopefully in a mixed-bag of assets, not just USD) first, and only put out a down payment that is enough to avoid unfavorable rates or fees like PMI. It's just too risky to put all of the savings into the down payment and then risk losing all that if the economy goes south and you can't find a job for 6-12 months.

ARMs certainly aren't for everyone, and it's depends on your risk profile. But I just hear a lot of people who say, as a rule-of-thumb, to avoid ARMs. I think that is a knee-jerk reaction to the housing crisis, and leaves out an option worth considering. Especially for some of the more financially-literate here who can adequately way risk/rewards without help from Big Brother. I agree that we will probably be in a crazy inflation realm eventually. But there are some ARMs out there with maximum interest rate ceilings under 9 or 10%, so it's not nearly as risky as some might think.

Totally agree with the end of private ownership, wish I was in a position to buy up some more land now. Ironically enough, the Amish are buying up a lot of the best rural land in the area I live in.

As to the ARM's why would you get an ARM loan when mortgage rates really can't go down anymore....unless they go negative. There is pretty much no upside to the borrower on an ARM right now. If we had 8% fixed and 5% ARMS you could make the argument, but 3.5% fixed 30 and 2.5% on a shorter ARM without the ability to pay it off would be stupid.

 

[WilliamShrugged]

Southern California, Riverside County

Da fuck??? Why stay there?

 

[presence]

Of course, but that's a choice that you made, both as a landlord or a resident owner, because your objectives are different. There's no reason you couldn't put vinyl flooring in your residence, is there?

Truly... you might have an extra rental thinking that way.

On my knee jerk ARM reaction:

I was stuck in ARM loans due to be renewed when the housing market collapsed. I was in ship shape with occupied, clean cut rental property. Unlike those who were stuck in upside down long term loans after the collapse, my notes were due and my assests were no longer "worth" the loan value (which was less than 25% of the insurance replacement value). Full value renewal was not on the table: Ante up 6 figures or lose your ass. Fresh out of college with an A in Managerial Finance 401 I lost my ass.

That's my experience with ARM loans. I don't recommend you go there. Do as you will. In my experience, ARM loans are an easy way to purchase a property you intend to improve, which does not have a Certificate of Occupancy.

presence