Finally, All CC's paid off

[Corporate Thug]

Yes I want to pay cash for my next car. If we fall on financial hard times, the last thing we want is recurring bills beyond what is necessary: mortgage, food, utilities...no contracts.

Again, it depends on the person and the financial situation. My car payment is $205/month. I don't see any scenario where I cannot continue to make my payments.

 

[Texashiker]

...and most of us don't want to live in a trailer.

I do not live in a trailer.

Hopefully by this time next year my backyard will be 10 acres.

Again, it depends on the person and the financial situation.

Agreed.

Some people would rather have a nice home, and no money in the bank.

Some people downsize.

It would be nice to be able to afford a nice home and have money in the bank.

 

[SunnyD]

I do not live in a trailer.

Hopefully by this time next year my backyard will be 10 acres.

Okay, so replace trailer with tent.

 

[Texashiker]

Okay, so replace trailer with tent.

I would rather live in a tent on property that I own, then live in a house that the bank owns.

 

[SunnyD]

the real American Dream now is to be able to pay next month's mortgage.

Wow, amazingly a nugget of wisdom out of SandEagle. And a quality one at that. /tipofthehat

 

[OILFIELDTRASH]

I would rather live in a tent on property that I own, then live in a house that the bank owns.

I only pay so much for my house because of the neighbors/neighborhood. Sure I'd rather pay cash for a dirt cheap house. Only problem is your neighbors end up being total garbage.

 

[Corporate Thug]

I do not live in a trailer.

Hopefully by this time next year my backyard will be 10 acres.




Agreed.

Some people would rather have a nice home, and no money in the bank.

Some people downsize.

It would be nice to be able to afford a nice home and have money in the bank.

Texas, that's my point on a small(er) down payment though. When I was applying for my mortgage, it was MANDATORY that I showed 6 months of reserves. This wasn't a "good idea" but a requirements.

Lets take the couple I mentioned earlier: they put 10% down on 440k like (about 45k)...this was HALF of their combined savings. That assured that they kept 50k in the bank for a rainy day (or rainy months). Shortly after, the GF was laid off. The money in the bank (+ her severance) assures them that they are in no real danger of missing the payments.

 

[SunnyD]

I would rather live in a tent on property that I own, then live in a house that the bank owns.

You realize you don't "own" property either, right? You lease it from the government.

At least with a house at some point you get to stop making payments on it once the debt obligation is satisfied. With property, pretty much no matter what you'll always owe MORE year-on-year. Stop paying the government for the "right" to use that land and see what happens.

 

[JoeyP]

Ok, what percent of homebuyers put 50% in cash? I'm willing to wager a small percentage. One of my buddies just bought his first home w/ his GF (soon to be fiance)...its a 1100 sq ft 2bd/2bath house in Sherman Oaks, CA (San Fernando Valley, Los Angeles - middle class). The purchase price was $440,000. Do you know a lot of first time homebuyers w/ $220k to put on a down payment?

Not for nothing, but when a basic house costs that much, then it is time to move. I'd much rather move someplace where housing is far less expensive, even if it means making a little less in salary and having to deal with imperfect weather.

 

[Texashiker]

You realize you don't "own" property either, right? You lease it from the government.

At least with a house at some point you get to stop making payments on it once the debt obligation is satisfied. With property, pretty much no matter what you'll always own MORE year-on-year. Stop paying the government for the "right" to use that land and see what happens.

My family lost 400 acres here in southeast Texas during the depression. They could not pay the property taxes, county took the property, auctioned it off to a timber company. Funny how that works out.

The timber company gave my family 40 acres to live on after the property was seized. Over the past 70 years the property was divided up, my cousin was willed 1.5 acres from our grandfather. I got 1.75 acres in another location.

The depression of the 1930s, and the current recession was probably the largest property grabs in US history, well, besides taking property from the native americans.

 

[ponyo]

I'm not even sure what that means. you mean non-homeowners? what about the rest?

Here is a recent(ish) article:

http://www.housingzone.com/industry...-top-5-lowest-mortgage-down-payments-us-state

The HIGHEST down payments are in the low teens (13%)

Free men are the people who own their home free and clear. ~33% of US homeowners own their house free and clear. These people could buy a house with cash.

 

[Corporate Thug]

Free men are the people who own their home free and clear. ~33% of US homeowners own their house free and clear. These people could buy a house with cash.

1. that's still the minority.
2. I would like to see the average age of "free men." I bet it's not late 20 - mid 30s.
3. I would like to see what cities comprise of the 33%.

Bottom line: it's highly unlikely that a first time homebuyer in his 20-30 can afford to buy a house in cash, esp living in a metropolitan area.

 

[Corporate Thug]

Not for nothing, but when a basic house costs that much, then it is time to move. I'd much rather move someplace where housing is far less expensive, even if it means making a little less in salary and having to deal with imperfect weather.

That's a decision for you to make and thus my whole point that credit is needed and used differently for people in varying financial conditions/situations. But those kinds of costs are the reality of a lot of metropolitan markets (LA, San Diego, parts of Orange County, most of the Bay Area, NY, Miami, Chicago, Boston, Philly, Seattle, Austin, etc.).

In my friend's case, he was born and raised in Los Angeles, his entire family is here. Same w/ the GF. He would rather pay more and live somewhere where he is happy and surrounded by his loved ones, esp. due to the fact that his father is in failing health. I'm in the same camp. What is the point of saving money on rent/mortgage if you aren't happy or don't like where you live?

My other buddies father on the other hand pick up and bought a very nice house somewhere in Texas (not sure where) in cash when he got divorced and nothing was keeping him in So Cal.

 

[JTsyo]

Cc done, cars done, house... looks at mortgage contract...

yea, have both cars paid off and was able to refinance to a 15yr mortgage when the rates dropped. But now I need a new car and will be taking out a loan for that.

 

[SandEagle]

Wow, amazingly a nugget of wisdom out of SandEagle. And a quality one at that. /tipofthehat

don't patronize me, little man. i don't take too kindly to compliments

 

[cronos]

a buddy of mine put in 40% when he bought his home during the frenzy. his home is worth less than he owes now. what a waste of money.

Wait, if he had put no money down wouldn't he be even more under the water now?
He would still owe the same amount (even more, because of interest) if he had taken a loan on the whole value of the house when he bought it.

The fact that he put 40% of that value as a down payment actually helped him in this case.

 

[JTsyo]

They can afford it just fine...that's why they got approved for the loan. They simply did not have 220k to put down (as most people don't) as a young couple (28/30 years old). It would probably take them another 10 years to save 50% down!

If it wasn't for their credit history, which they built mainly through the use of CCs, they would have never got the loan. That was my whole point - when used properly it's not only a benefit but often times an essential foundation to allow you to make the bigger financial commitments in life.

Many can't even produce the 20% needed to avoid PMI.

 

[JTsyo]

Wait, if he had put no money down wouldn't he be even more under the water now?
He would still owe the same amount (even more, because of interest) if he had taken a loan on the whole value of the house when he bought it.

The fact that he put 40% of that value as a down payment actually helped him in this case.

If he had put no money down he could walk away. Now he would lose 40% if he does.

 

[cronos]

If he had put no money down he could walk away. Now he would lose 40% if he does.

I'm obviously uneducated about these things, but how could he walk away? Like declaring bankruptcy?

 

[jagec]

Never seen that one before. Shame it's not an M3.

 

[AlienCraft]

Yeah buddy! good job.

 

[JTsyo]

I'm obviously uneducated about these things, but how could he walk away? Like declaring bankruptcy?

by not paying his mortgage and letting the bank foreclose on the property.

 

[cronos]

by not paying his mortgage and letting the bank foreclose on the property.

Again, I'm pleading ignorance here, but I thought foreclosure is a just a forced selling of a collateral (in this case the collateral is the same thing that he owes money for) by the lender, and he will still be on the hook for the rest of the money, if the current value of the house is less than the original. Unless he declared bankruptcy.

Otherwise, what stopped everyone from doing things like this all the time then? Just decide that you can't (or don't want to) pay and because you didn't put anything down you can just walk away.

It's almost like you're not really buying, just renting with an option of owning after a certain term.

 

[IronWing]

Again, I'm pleading ignorance here, but I thought foreclosure is a just a forced selling of a collateral (in this case the collateral is the same thing that he owes money for) by the lender, and he will still be on the hook for the rest of the money, if the current value of the house is less than the original. Unless he declared bankruptcy.

Otherwise, what stopped everyone from doing things like this all the time then? Just decide that you can't (or don't want to) pay and because you didn't put anything down you can just walk away.

It's almost like you're not really buying, just renting with an option of owning after a certain term.

It depends on state law. Some states are "recourse" states where the lender can go after the difference between the value of the loan and the value of the collateral. Other states are "no recourse" meaning that the lender cannot claim anything beyond the value of the collateral. Banks in recourse states generally charge higher interest rates to cover the added risks.

 

[JTsyo]

Again, I'm pleading ignorance here, but I thought foreclosure is a just a forced selling of a collateral (in this case the collateral is the same thing that he owes money for) by the lender, and he will still be on the hook for the rest of the money, if the current value of the house is less than the original. Unless he declared bankruptcy.

Otherwise, what stopped everyone from doing things like this all the time then? Just decide that you can't (or don't want to) pay and because you didn't put anything down you can just walk away.

It's almost like you're not really buying, just renting with an option of owning after a certain term.

You're thinking short sale. That's why 20% used to be required so that if you walk away you lose money.