Buying a House

[intogamer]

Originally posted by: Martin
Payments might be cheaper these days. My mom recently started the second 5 year term and because of the low interest rates, the payments went down from $1000 to about $750 a month (this on around 140k).

So I say go for it. If money's tight just cut back on expenses (for example, flurecent bulbs, turn heater down a few °s and put on a sweater, etc) and learn how to do stuff around the house. Everything but the major renovations can be done by one knowledgeable person (ie unclogging, some basic electrical work etc)

I had nstar install 18 dollar bulbs that will last for 8 years.

 

[amoeba]

to the OP, a typical rule of thumb is not to buy a house thats more than 3 times your gross annual salary.

 

[Yax]

Originally posted by: amoeba

Originally posted by: bibbyking
what 22 year old has 20-30K lying around to throw on a down payment?

I did. 23 now. But I haven't found the right house.

BTW, you don't need that much to put down on a home to buy one. You can go 0% down.

 

[GasX]

If the value of the apartment you are renting goes up dramatically, you will not benefit...

 

[amoeba]

Originally posted by: Yax

Originally posted by: amoeba

Originally posted by: bibbyking
what 22 year old has 20-30K lying around to throw on a down payment?

I did. 23 now. But I haven't found the right house.

BTW, you don't need that much to put down on a home to buy one. You can go 0% down.

but you have to take out a special mortgage right?

 

[iamwiz82]

Originally posted by: amoeba

Originally posted by: Yax

Originally posted by: amoeba

Originally posted by: bibbyking
what 22 year old has 20-30K lying around to throw on a down payment?

I did. 23 now. But I haven't found the right house.

BTW, you don't need that much to put down on a home to buy one. You can go 0% down.

but you have to take out a special mortgage right?

Special as in not a vanilla 30 year fixed? Not necessarily. Our mortgage will be FHA, but we put 0 down. FHA requires 3% so the sellers are paying that. It's nothing special, though.

 

[edro]

Originally posted by: Mwilding
If the value of the apartment you are renting goes up dramatically, you will not benefit...

Huh?

 

[Vic]

The house payment is $650 per $100,000 is based on the old 7% interest rule, where the payment on a 30 year fixed mortgage at 7% is $665.30 per month.
As rates are currently below 6% (but rising fast in the short-term), figure about $600 per $100k.
But don't forget the cost of property taxes and homeowners insurance, which would be on top of that.

 

[DougK62]

Originally posted by: dullard
I'd like to modify your first pro. You MIGHT get tax benefits. A large amount of deductions are already assumed. You only get tax benefits if your interest payments exceed that already large amount. On a ~$100,000 house with todays low interest rates you very well might get no tax benefit at all. Thus your ~1/4 number has no basis at all.

Make special note of this, OP. If you're going to buy an inexpensive house in your area you likely will get very little tax benefits - if any. I bought a cheap house in the midwest last year and it's still better for me to just take the standard deduction. I just don't pay enough in interest to itemize.

 

[Vic]

Originally posted by: Mwilding
If the value of the apartment you are renting goes up dramatically, you will not benefit...

Home values going up dramatically is a double-edge sword. Sure, you could profit from the sale of your house, but your next house is going to cost that much more. And you have to live somewhere, right?
The same goes for lower interest rates. You can refinance to a lower rate and reduce your monthly payments, but then your interest tax deduction goes down...

 

[GasX]

Originally posted by: edro13

Originally posted by: Mwilding
If the value of the apartment you are renting goes up dramatically, you will not benefit...

Huh?

If your house appreciates, you get to benefit - not so if you are a renter...

 

[Vic]

Originally posted by: DougK62

Originally posted by: dullard
I'd like to modify your first pro. You MIGHT get tax benefits. A large amount of deductions are already assumed. You only get tax benefits if your interest payments exceed that already large amount. On a ~$100,000 house with todays low interest rates you very well might get no tax benefit at all. Thus your ~1/4 number has no basis at all.

Make special note of this, OP. If you're going to buy an inexpensive house in your area you likely will get very little tax benefits - if any. I bought a cheap house in the midwest last year and it's still better for me to just take the standard deduction. I just don't pay enough in interest to itemize.

Hmm... not even including your property taxes paid, state income taxes paid/withheld, and other possible deductions? Don't forget those. The idea of the mortgage interest deduction is just to use it as a springboard to get you above or near the standard deduction, and then begin adding on all the extras.

 

[DougK62]

Originally posted by: Vic

Originally posted by: DougK62

Originally posted by: dullard
I'd like to modify your first pro. You MIGHT get tax benefits. A large amount of deductions are already assumed. You only get tax benefits if your interest payments exceed that already large amount. On a ~$100,000 house with todays low interest rates you very well might get no tax benefit at all. Thus your ~1/4 number has no basis at all.

Make special note of this, OP. If you're going to buy an inexpensive house in your area you likely will get very little tax benefits - if any. I bought a cheap house in the midwest last year and it's still better for me to just take the standard deduction. I just don't pay enough in interest to itemize.

Hmm... not even including your property taxes paid, state income taxes paid/withheld, and other possible deductions? Don't forget those. The idea of the mortgage interest deduction is just to use it as a springboard to get you above or near the standard deduction, and then begin adding on all the extras.

Yep - even including all of those. I get close, but don't go over the standard deduction. I'll probably be able to itemize next year since I'll have a full year of mortgage interest stacked up. Last year I only had my house for about 9 of the months. Even then, I won't be so far over the standard deduction that it'll make a very noticeable difference in my return.

 

[Vic]

Wow... that sucks. I want your mortgage payment though. You can scarcely buy a shanty for less than $200k where I live now...

 

[DougK62]

Originally posted by: Vic
Wow... that sucks. I want your mortgage payment though. You can scarcely buy a shanty for less than $200k where I live now...

Yeah - I'm familiar with Portland.

I live by myself, and my house was ~$70k -- 1000ish sq.ft. and a 3 car garage. I got a decent deal, but you can even do better than this out here.

 

[classy]

Originally posted by: amoeba
to the OP, a typical rule of thumb is not to buy a house thats more than 3 times your gross annual salary.

I am a part-time licensed Real estate agent and I have never heard that one before.

 

[classy]

Originally posted by: spliffstar69

Originally posted by: classy

Originally posted by: spliffstar69
One con is
You can't get out of a House as easy as renting.

if you need to move/relocate you could be tired up with payments for Months

You can get out of house almost if not faster than renting. You can't break a lease very easy. But you can sell your house anytime you get ready. There are a lot of factors that go into a house payment. You have your mortage which is based on your interest rate, but then you have taxes, utilities, and insurance. The big thing with a house is the enormous tax savings. You could realistically recoupe 50% or more back in tax savings vs what you pay during the year.

that they key words right there becuase I have seen homes that just stay on the market for months even years so it all depends but you this maybe the case with more expensive homes im not to sure.

Your mixing apples and oranges. There are a dozens of reasons for those situations. The house may be damaged, bad neighborhood, old layout, seller is unreasonable, etc. Thats just a few. There are many more. And those reasons you mentioned are not reasons to not buy a house as compared to renting. Those concerns are the extreme exceptions, not the norm.

 

[Yax]

Originally posted by: amoeba

Originally posted by: Yax

Originally posted by: amoeba

Originally posted by: bibbyking
what 22 year old has 20-30K lying around to throw on a down payment?

I did. 23 now. But I haven't found the right house.

BTW, you don't need that much to put down on a home to buy one. You can go 0% down.

but you have to take out a special mortgage right?

Nothing special needed. You can do the standard 30 year fixed on the first and 15 year fixed on the second. My bro didn't have very good credit, he declared bankruptcy about 3-4 years back. He just bought a home with 0% down. Its going up in value like crazy so he's glad he bought it. I'm glad I kept pressuring him to buy before he's priced out of the market. His payments aren't much more than when he was renting too, but he was renting an apt. Now he owns a home.

 

[dullard]

Originally posted by: DougK62
Yep - even including all of those. I get close, but don't go over the standard deduction. I'll probably be able to itemize next year since I'll have a full year of mortgage interest stacked up. Last year I only had my house for about 9 of the months. Even then, I won't be so far over the standard deduction that it'll make a very noticeable difference in my return.

Ditto for me. I got a new house in May 2004 and I'm not over the standard deduction for my 2004 taxes. I might just barely surpass it for next year's taxes as I will have a full year of home ownership.

 

[overclock]

sorry i didn't post this before but it is a great read

http://www.satirewire.com/news/0106/dream.shtml

 

[bibbyking]

thats pretty funny :laugh:

 

[DT4K]

Originally posted by: classy

Originally posted by: amoeba
to the OP, a typical rule of thumb is not to buy a house thats more than 3 times your gross annual salary.

I am a part-time licensed Real estate agent and I have never heard that one before.

I've heard that stated numerous times. Obviously it's a huge oversimplification and everyone's situation is different. But for the majority of people, 3 to 4 times their income is probably about right as a VERY general estimate of what they can afford and get approved for.

And yes, you can buy a house with no money down and no money for closing costs. Whether you should or not is an entirely different question. We bought our house for 147k with an FHA loan. We took a slightly higher interest rate so we got a 4k cash rebate back that pretty much covered closing costs and we used a gifting program to basically eliminate any down payment. We ended up spending about $800 out of pocket. In our case, it was definitely a good move. In 2 years, the value has gone from 145k to around 240k.

It's true that the appreciation doesn't really buy us much because all the other houses in the area went up in value as well. But what it did buy us was our place in the market. If we hadn't bought then, there is no way we could afford to now. The housing prices have gone up like 60% while my pay has only gone up about 10%.

 

[SuperTool]

Originally posted by: edro13
I am currently paying ~$400 month in rent (my half) + half the bills...

My father is always pushing me to buy a house, and a coworker keeps telling me how easy it is and how beneficial and cheap it actually is.

Pros:
You get the tax money from your house payment back at tax time (~1/4 of your payment)
You gain equity in your house, so the amount going to principle is actually a savings account
You can rent a room out to a friend to help pay for it
You OWN A HOUSE!

Cons:
It costs a lot of money
It needs expensive repairs
You pay all bills and expenses on your own


The coworker says a house payment is generally ~$650 per $100,000. Since I am 22 and live in Ohio, houses are cheap in the burbs... for around ~$90,000-$125,000 or so.

I know I could afford it and all the bills, but I would be very very tight.

What are some other pros / cons I didn't list or might not be aware of?
How much money do you need a month to cover all expenses?

Thanks!

90K for a house? If it was that much in the bay area, I would buy one for cash

 

[FrustratedUser]

You forgot property tax that where I live can be as high as 1% of value of house a year.
Say $100 - $200 / month.

 

[JulesMaximus]

Originally posted by: jagec

Originally posted by: spliffstar69
One con is
You can't get out of a House as easy as renting.

if you need to move/relocate you could be tired up with payments for Months

1)start fires
2)try to collect insurance
3)firemarshal investigates
4)you go to federal pound me in the ass prision!

Fixed.