Can I really afford a $250k house?

[z0mb13]

I wouldn't really call that "good" myself. It's a bit like saying it can be good when you're legs are blown off by a landmine because you'll save a bundle on shoes. 😛 I'd much prefer that the principle disappear faster and lose out on any deduction advantage.

The value of the mortgage tax deduction is completely overblown when you consider current tax rates, interest rates and housing prices and the value of the standard deduction.

Well the possibility is still better than nothing

 

[alkemyst]

Well the reason it's overblown is because too many are working with low cost homes and don't itemize to begin with. Once you are into your deductions being more than standard, anything that adds to them is a great benefit in shaving off what goes to Uncle Sam.

 

[EagleKeeper]

I would never agree to put 20% down until the bank married me. Before that, you never know when the bank is going to break up with you.

That 20% down is what is put in by you at closing.

What you choose to put up as earnest $$ can be from 0 to what ever.
Many places recommend no more than 5%; Usually 1-2% will suffice in a buyers market.

 

[alkemyst]

The only people putting 20% down in today's market are those with fucked up credit or buying jumbo loans with not wanting standard documetation.

Of course, you always get the guy bragging that bought a $20,000 double-wide that he insists everyone should have to put at least 20% down.

 

[pcgeek11]

does anyone even offer zero down anymore?

VA Loan for veterans.

 

[pontifex]

What I quoted:



Which part of that is making a statement? Sure as shit looks like you were asking a question, which is what was being responded to, so don't be a colossal assbag when you get the answer.

I was asking the OP, then I made a statement about my own situation.

you colossal assbag.

 

[vi edit]

The only people putting 20% down in today's market are those with fucked up credit or buying jumbo loans with not wanting standard documetation.

Of course, you always get the guy bragging that bought a $20,000 double-wide that he insists everyone should have to put at least 20% down.

I didn't do 20% down when I went to close on my construction loan. But it was close at about 85% LTV. I saved up cash over the next couple months and paid down the rest to get me under the 80% mark to get rid of PMI and also to dissolve my escrow account. Almost every single escrow account I've had fucked up the property tax payments. Sometimes they underestimated and double charged to make up ground. Other times they'd overestimate and cut a check back. It was impossible to plan around.

I'm in a new construction with a tax bill that's not fully assessed. Prior to dissolving the escrow my property tax was like $200 a year. They took out $20 a month. When I get fully assessed I'll be looking at a $10,000 a year tax bill. I don't even want to see how bad they'd hose that up and make my mortgage payments to catch up the account to cover the new assessment.

So I paid down to control my own payments. I just put away $1000 a month into an interest earning (for what pathetic amount that is now) account and then drive to a local bank that accepts property tax payments and write a check for the amount when assessments are mailed.

 

[GotIssues]

I was asking the OP, then I made a statement about my own situation.

you colossal assbag.

Oh, my mistake, you were merely saying what was said 400 times already, in a very retarded manner, to pretend that you have some sort of insight.

By the way, if you could only "afford" half of what the bank is approving you for, you are probably blowing A LOT of money on stupid shit. As much as conspiracy nuts want to believe, the bank doesn't want to foreclose your house.

 

[GotIssues]

As you mentioned, it depends on the tax bracket. For some people it certainly a huge savings. But everyone always talks about the tax deduction like its just a bunch of free money. But the truth is it isn't even 25% for most of the people that use it.

In order to deduct your mortgage interest you have to itemize and when you itemize you have to give up the standard deduction. So if you're a married couple its really "25% of your mortgage interest (and other itemizations) MINUS $11,600 (current standard deduction for married filing jointly couple)".

Say you just got a brand spanking new 200K mortgage in January this year and you put 20% down and have an interest rate of 4.25%. You pay ~$9100 in mortgage interest this year. It depends on your state income taxes and property taxes whether you'll even get over the standard deduction amount. Say you have $5500 property and incomes taxes. So that's (14600 - 11600) * 0.25 tax rate = $750. You get $750 for having that mortgage from the government. Whoopdee shit, time for a new flat screen. It isn't nothing but it isn't changing a family's lifestyle either.

Obviously, if you get ass reamed by state taxes (I do) or have a huge fucking loan its a bigger deal, but even then the amount of interest you pay goes down every year reducing the payout slowly over time....while the standard deduction amount grows every year. So chances are you'll end up taking the standard deduction again before the loan term is even up. Hell, if you bought a cheaper house and lived in a low tax area you might never even use itemize at all. So for your average middle income family it isn't doing shit anymore because interest rates are low as hell and property cost is extremely high, the opposite of the high inflation 70s and early 80s.

That's how it seems to work to me though. Am I missing something? I acknowledge the tax code isn't exactly easy to interpret.

True that.

I do sometimes forget about itemization, but while you aren't necessarily getting the whole benefit, the opportunity cost of having vs not having the money the money should be factored it.
#1) Security. What would worry you more: Owning your home, no/low savings, and losing your job or having a mortgage with $200k in savings and losing your job? You still have food, utilities, taxes, etc, etc to pay. $200k safety net will keep you just fine for a looong time
#2) Opportunity cost. A 30 year timeline (heck, even a 15 year timeline) is long enough to consider using the historical rate of return on the market, which last I checked a few months ago was in the neighborhood of 9%, which would make buying it straight up an extremely poor decision. Even a return of 6% should do the trick (not going to do the math on it right now).

Even though you wouldn't get the full benefit of the deduction, your opportunities elsewhere are sufficiently high as to be advantageous to have the loan, from both a long term financial standpoint and a short term financial standpoint.

I am not against outright home ownership or paying off the loan early, I plan on paying mine off early - it's just a very, very low priority. I'm saying that there are a lot of advantages and reasons to NOT pay off a mortgage early.

 

[alkemyst]

$750-1000 is a lot for many ppl to have extra per year.

 

[Golgatha]

The only people putting 20% down in today's market are those with fucked up credit or buying jumbo loans with not wanting standard documetation.

Of course, you always get the guy bragging that bought a $20,000 double-wide that he insists everyone should have to put at least 20% down.

Again, this stuff isn't rocket science...

My wife and I put down 21% ($28,000) on our first house, which my wife and I saved when she was working full time for 2.5 years and I was in graduate school working part time. We rented a duplex for $475/month at the time, we kept our expenses to absolute minimums (we still had plenty of fun during this time in my life as well), and we also managed to clear out my school loans (she had none due to academic scholarships). Also, graduate school was covered due to a teaching assistantship I took on top of working part time. My wife paid cash for her first "newer" car after she graduated with her undergrad, and I owned my car free and clear by the time we got married (we got married when she was done with school). Neither of us ran up credit cards when we were in college, and what credit cards we still had were paid off in full every month.

Fast forward 7 years to 2010...we now have two kids and an $850/month mortgage. We are also dependent on my income + her grandparents trust income for our finances. During the last 7 years I worked hard in the "real world", got raises, promotions, etc. We also saved up enough money to put roughly 31% (about $70,000 give or take $500) down on our current house, which we purchased in May of 2010. Guess what? Still no car payments or credit card debt. Amazing how that works! I'm not trying to be a braggart and I understand there can be extenuating circumstances (health, long term job loss, etc) which can delay your success with finances, but if my wife and I can do it, Lord knows anyone can.

 

[Golgatha]

$750-1000 is a lot for many ppl to have extra per year.

Completely false if you're above or below the poverty line. Anyone above the poverty line can afford to have a $2000 emergency fund and if you're below the poverty line, you'll get more than $1000 back as a tax refund at least once a year.

 

[96Firebird]

I'm not sure if I could save up 20% on a $150k house ($30k) while having $42k in student loans, girlfriend with probably around $25k in student loans, her $4k credit card, and paying rent every month. Its I either pay off my student loans early (avg. of ~6% interest), or save up for a house. I feel like I won't be getting a house until I'm close to 30 years old... :|

 

[Zargon]

I'm not sure if I could save up 20% on a $150k house ($30k) while having $42k in student loans, girlfriend with probably around $25k in student loans, her $4k credit card, and paying rent every month. Its I either pay off my student loans early (avg. of ~6% interest), or save up for a house. I feel like I won't be getting a house until I'm close to 30 years old... :|

no worries, bought mine a few weeks before my 28th birthday.....

 

[torpid]

WTF?! Your down payment immediately goes towards the price of the home and is immediately part of the equity you have in your home from day 1. The way you get your money back is to sell the damn house.

(facepalm)

Yeah, that's why I noted that my parody/analogy only sort of works. But, the thread I'm referencing didn't exactly have pristine logic either, so all is well...

 

[pontifex]

Oh, my mistake, you were merely saying what was said 400 times already, in a very retarded manner, to pretend that you have some sort of insight.

By the way, if you could only "afford" half of what the bank is approving you for, you are probably blowing A LOT of money on stupid shit. As much as conspiracy nuts want to believe, the bank doesn't want to foreclose your house.

wow, you know so much about me from 1 post...

not my fault you can't read. why the fuck would i need to pretend anything? what are you pretending to be or know?

 

[Golgatha]

I'm not sure if I could save up 20% on a $150k house ($30k) while having $42k in student loans, girlfriend with probably around $25k in student loans, her $4k credit card, and paying rent every month. Its I either pay off my student loans early (avg. of ~6% interest), or save up for a house. I feel like I won't be getting a house until I'm close to 30 years old... :|

I'd encourage your girlfriend to pay off that 4k credit card ASAP and you both should minimize expenses to get those student loans paid off before saving up for a house. Before saving for a home, I'd make sure to have a 2k emergency fund if you don't already have that much in savings, and then build up 6-12M worth of expenses in a liquid account of some kind. In this craptastic economy, I find my comfort level is 12M worth of expenses.

 

[spidey07]

I'd encourage your girlfriend to pay off that 4k credit card ASAP and you both should minimize expenses to get those student loans paid off before saving up for a house. Before saving for a home, I'd make sure to have a 2k emergency fund if you don't already have that much in savings, and then build up 6-12M worth of expenses in a liquid account of some kind. In this craptastic economy, I find my comfort level is 12M worth of expenses.

I don't get the attitude that folks should be able to afford a house right outta school. It takes YEARS to plan and save for it. It is supposed to anyway.

Most of my friends and my first house were 70k 2-3 bedroom fixer uppers.

 

[Golgatha]

I don't get the attitude that folks should be able to afford a house right outta school. It takes YEARS to plan and save for it. It is supposed to anyway.

Most of my friends and my first house were 70k 2-3 bedroom fixer uppers.

IMO, that's the American entitlement mindset. We think since we got an education, the world owes us a high paying job and the same or better house our parents have, even though they have 20+ years of wealth building already under their belts. My wife and I saved for the down payment on our first house very quickly (roughly 2.5-3 years), but we put back 40-50% of our income to do so over those years and sacrificed having lots of toys, trips, etc. There was certainly an opportunity cost doing all that saving. However, I've found it very rewarding and relaxing not being up to my eyeballs in debt, and am looking forward to having my house bought and paid for before I'm 50 years old.

 

[jhu]

I'm not sure if I could save up 20% on a $150k house ($30k) while having $42k in student loans, girlfriend with probably around $25k in student loans, her $4k credit card, and paying rent every month. Its I either pay off my student loans early (avg. of ~6% interest), or save up for a house. I feel like I won't be getting a house until I'm close to 30 years old... :|

Bought our first house when I was 33.

 

[Fingolfin269]

I don't think buying a house without 20% down is entitlement mindset at all. If a lender offers terms and you agree to said terms then that is just a contract. It requires two willing parties.

Now someone crying because they couldn't get a loan and think that isn't fair because everyone should be able to own a house? Yeah that's entitlement.

 

[CrazyAznDriver]

does anyone even offer zero down anymore?

We got a 0 down on our house 500k+, in 2010.

 

[GotIssues]

wow, you know so much about me from 1 post...

not my fault you can't read.

Not my fault you write like a 4th grader with downs.

why the fuck would i need to pretend anything?

The surest sign that someone doesn't know what the fuck they are talking about is when they try to rephrase a point that's been driven in to death, and do it in a half-retarded manner. This is exactly what you did.

what are you pretending to be or know?

QUICK! THEY ARE ON TO YOU! DEFLECT, DEFLECT!

Add something insightful or original to this thread or GTFO, dumbfuck.

 

[GotIssues]

I don't think buying a house without 20% down is entitlement mindset at all. If a lender offers terms and you agree to said terms then that is just a contract. It requires two willing parties.

Now someone crying because they couldn't get a loan and think that isn't fair because everyone should be able to own a house? Yeah that's entitlement.

I'd agree with this. Entitlement isn't WANTING things, it's thinking you DESERVE things. Going up to your eyeballs in debt to get all the stuff you want isn't entitlement, it's poor fiscal responsibility, which is also a problem among many Americans today.

We got a 0 down on our house 500k+, in 2010.

What possible advantages would buying a $500k house with 0 down give you that would bring you to do that? It seems like that's a bigger risk than it's worth.

 

[Hugo Drax]

A home is more then just about the money, its also about providing stability for your family.

To say "do not buy a home", is also saying "do not provide your family with a home".

As for me and mine, I want my kids to know they have a place to lay their heads at night.

We lived in rentals when we were kids, moving to where the jobs where. We turned out well.