About to buy a house

[ericd]

Hire a decent attorney and listen to their advice. If all goes well then you might feel you wasted some money. But if not...

[HDPM]

Ignore all the new fancy financing and advice to borrow a ton of money. If you can't put 20% down you cant afford the house. (Yes, I have violated this rule.) If you are going to move quickly it might be a problem. People underestimate how bad mortgage debt is and overestimate its benefits IMO. Think in terms of owning outright sooner rather than later. You may not be able to do it right now, but don't think you'll have a mortgage forever and don't think in terms of paying for 30 years IMO. (That doesn't mean don't get a 30 yr. mortgage tho.) I understand people are looking at 40 year mortgages now. that's nuts IMO. Most people carry too much debt, avoid that if you can.

[Cased Heel]

seems like you need to find out if borrowing the other 20% at a higher interest rate is better or worse than paying the PMI.

I wouldn't be surprised if it was worse.

[chaas4747]

Always worse. The PMI is not tax deductible. Also you are paying for insurance you will never use on your house unless you default. The 80/20 you are actually paying down the price of your home, at a higher interest rate that is tax deductible. You are still applying payments to 20% of the equity in you home in the second scenario.

[Cased Heel]

yeah me and my GF are moving into an apartment this weekend and her dad was going on and on and on about how we should buy a house and that we're "throwing money away" by renting. Blah blah blah.

I tried to explain to him that I'm not ready for a house yet, I don't want the responsibility, I don't have a down payment, I don't know where I'd want to live, and me and her aren't even MARRIED yet. lol.

He's like "buy a house--you're building equity". Well I ran the numbers and a $140,000 loan at 7% for 30 years yield about a $950/mo payment (of which only $120 goes to the principal. $830 to interest).

Yeah...nice "equity". We're moving into an apartment for $730/mo. right now which means we're paying $220/mo. less (of which will go to our future equity, as we are saving right now).

not to mention a large downpayment in the future will mean we pay less to the bank (AND if we wait 5 years it means we'll have a 5-year newer house than if we buy today).

This all coming from a guy who just invested thousands of dollars into remodelling his 30-year old home.

I wish I could tell him what I really think. But I just say "I'm not ready for the responsibility yet."

[HDPM]

Good thinking. A lot of people have done great buying houses for just a little down and then having prices skyrocket. If you can do this mortgage debt makes more sense obviously. But a lot of people haven't done as well. I know our first house didn't appreciate much. We came out OK, but I was surprised at how little equity we had after a 5% down payment and 5 years of payments, sometimes extra payments. I doubt our second house will appreciate a ton given the market we are in, but so what. A house is something to live in, and we aren't crippled by debt. Borrowing a ton for something that is more of a consumer purchase/lifestyle choice than a real investment doesn't make sense to me. If you can time your purchase and sale in a hot market and make a ton, well, then I am wrong. Your grandparents knew somethig when they put a bunch down and got it paid off.

[swolfe]

- don't get a 30 year fixed

- get interest only if possible; talk to a broker about it

- there are a lot of good mortgage programs for financing over 80% without having to pay PMI

- have the seller pay 3% of the price to closing costs. this will raise the purchase price and amount financed, but save you money out of pocket

- ignore the guy that said mortgage debt is bad

- think about how long you're going to be in the house when deciding on mortgage terms. less than 5 years? do a 5/1 ARM

- even if you will be in the house for a million years, you'll probably refinance every few years to shorten your term, get cash out, or take advantage of rate changes

- try not to use a realtor, you'll pay too much

- definitely get an inspection...walk around with the inspector while he looks

- my favorite loan program is the interest only 1st position HELOC from countrywide (FlexSaver). finance up to 95% with no PMI. interest only at prime rate.

i'm about to buy my 5th house. i have 3 rentals and the house that i live in, which will become a rental as soon as i close on the new place. my fiance has been a mortgage processor, underwriter, and loan officer.

[astroglide]

i think people that tell renters they're wasting money either got help with their down payment or bought before housing costs were so ridiculous. i own a condo, but i think that renting is fine and everybody who talks about how their "payments are the same" probably had their parents pay their down payment and aren't factoring taxes, repairs, etc.

[Jersey Nick]

[ QUOTE ]
Yeah...nice "equity". We're moving into an apartment for $730/mo. right now which means we're paying $220/mo. less (of which will go to our future equity, as we are saving right now).

[/ QUOTE ]
-You'll only save $13,200 in 5 years
-Historically 7% ain't a bad mortgage rate
-4% annual increase in your housing market means a $155,000 house will be worth >$181,000, or more than $26,000 in equity

Or the housing market could take a dive, the girl could dump you, and you could work 3 jobs trying to stay out of bankruptcy. [img]/images/graemlins/smile.gif[/img]

[adios]

A think alot of your numbers are fuzzy but your take that owning a home is usually a long term committment (if you were lucky enough to have a home skyrocket in value right away sell in two years, it's tax free gains basically) is right and that's probably as important as anything. I've done pretty well owning homes but I've owned for long stretches and the market has gone through some soft times.