I have $10,000 and want to save for a house. ADVICE

[nvmyz71]

I just built / bought my first house in April of this year. Make sure you have at least a downpayment of 20%, if that's possible for you. If not you'll be paying / wasting about $100 a month in mortgage insurance (PMI) until you have paid down 20% of the principle.

Unlike a lot of people, I lived at home with the parents through college, so this was my first experience living on my own. That said, I hadn't aquired any of the things necessary for living on your own, kitchen stuff, bedding, furniture, etc. If you have to furnish your house, that's going to take even more money.

If you spend, let's say 150 grand on a house, it would be "nice" to have at least 40 - 50 grand in the bank before you dive in, especially if you're starting out with virtually nothing. Keep in mind that's buying new furniture, a big screen tv and all the essentials. Then try to plan at the end of the day to still have at least 10 grand in the bank... having that extra padding is good for peace of mind.

 

[Squisher]

Presitential has a checking account that's paying 3.50% APY if you get $200/mo. in direct deposits.

Not FDIC insured, but GMAC Demand Notes are paying 4.00% APY and GMAC is uber stable.

 

[Scarpozzi]

Originally posted by: nvmyz71
I just built / bought my first house in April of this year. Make sure you have at least a downpayment of 20%, if that's possible for you. If not you'll be paying / wasting about $100 a month in mortgage insurance (PMI) until you have paid down 20% of the principle.

Unlike a lot of people, I lived at home with the parents through college, so this was my first experience living on my own. That said, I hadn't aquired any of the things necessary for living on your own, kitchen stuff, bedding, furniture, etc. If you have to furnish your house, that's going to take even more money.

If you spend, let's say 150 grand on a house, it would be "nice" to have at least 40 - 50 grand in the bank before you dive in, especially if you're starting out with virtually nothing. Keep in mind that's buying new furniture, a big screen tv and all the essentials. Then try to plan at the end of the day to still have at least 10 grand in the bank... having that extra padding is good for peace of mind.

Yep....you definitely want to put 20% down to get rid of that rip off they call mortgage insurance or "hazard" insurance. It's basically how the bank makes extra money off you... Of course, with $10k you could buy a nice $50k house now and rent it out, fix it up, etc over the next few years and then sell it. In many ways, you'll get a lot more returns on that than you would if you were going to put your money in some sort of account. I'm not saying you should risk anything with the real estate bubble because you're so far on one end that you shouldn't be affected...the over-inflated properties are the ones that are going to burn people.

 

[Kenazo]

Originally posted by: Squisher
Presitential has a checking account that's paying 3.50% APY if you get $200/mo. in direct deposits.

Not FDIC insured, but GMAC Demand Notes are paying 4.00% APY and GMAC is uber stable.

Poor GM. They have taken such a dive lately.

And as for needing $50k in the bank before buying a $150,000 house, that's crazy talk. You don't need to have a fully furnished house within a year of buying. There's nothing
wrong w/ using a second hand couch for a few years. You don't need to live like a king.

keep in mind that us Canucks might think a little differently than you guys. Also, we don't have to pay $100/mth for mortgage insurance. We had 5% down on a $120k mortgage and we ended up paying a one time insurance fee of $3200 or so, which is a lot, but it's over a 20 yr mtg.

 

[vi edit]

Yep....you definitely want to put 20% down to get rid of that rip off they call mortgage insurance or "hazard" insurance. It's basically how the bank makes extra money off you...

Or just do what most people do anymore and take out a second smaller mortgage. It's typically a % or two above your first mortgage rate, but it's still a lot less than what PMI would gig you and it's tax deductable, unlike PMI.

 

[geecee]

Originally posted by: Kenazo
Poor GM. They have taken such a dive lately.

And as for needing $50k in the bank before buying a $150,000 house, that's crazy talk. You don't need to have a fully furnished house within a year of buying. There's nothing wrong w/ using a second hand couch for a few years. You don't need to live like a king.

This is sound advice and I couldn't agree more. Check out some garage sales in some nicer neighbohoods. You would not believe some of the stuff people will get rid of for $20-30. When you're making more and are more financially stable, then look into upgrading your furniture and beautifying and improving your home.

EDIT: Don't fall victim to the "instant gratification" craze that strikes many new homeowners. Buy the Weber, the SubZero and the other nice stuff when you are able to afford it, not when you're maxing out your plastic.

 

[Whoozyerdaddy]

Originally posted by: nvmyz71
I just built / bought my first house in April of this year. Make sure you have at least a downpayment of 20%, if that's possible for you. If not you'll be paying / wasting about $100 a month in mortgage insurance (PMI) until you have paid down 20% of the principle.

Unlike a lot of people, I lived at home with the parents through college, so this was my first experience living on my own. That said, I hadn't aquired any of the things necessary for living on your own, kitchen stuff, bedding, furniture, etc. If you have to furnish your house, that's going to take even more money.

If you spend, let's say 150 grand on a house, it would be "nice" to have at least 40 - 50 grand in the bank before you dive in, especially if you're starting out with virtually nothing. Keep in mind that's buying new furniture, a big screen tv and all the essentials. Then try to plan at the end of the day to still have at least 10 grand in the bank... having that extra padding is good for peace of mind.

Ummm... That would be ideal but he only has $10k.

Here's how you get around PMI. It's called an 80/15/5. Basically you put 5% down, take a first mortgage at 80% loan to value (this is how you avoid the PMI) and take a second mortgage for the last 15%. I don't know what your budget looks like but with $10k you could probably buy into a place in the $150k area using this technique.

The best short term investment (< 5 years) in america right now is a house. Plus the tax advantages are better than any other investment vehicle. Even if it's a tiny POS little rat hole, It'll probably appreciate at a better rate than just about any other kind of investment.

 

[funboy6942]

Originally posted by: vi_edit
Sadly, nothing *largely* significant. CD's or money market accounts would be your only safe bets. CD's are around 3.5%-3.75% for a 36 month vestment.

Excuse me for being ignorant but you get $3.5% on a $10,000 investment over the 36 months you make almost $400. Is that really worth it or do they pay you that 3.5% permonth?

If really getting a $10,000 cd and after 3 years you make a whoping $350 I would rather take the $10K buy and sell cars and make a few grand off the sales over the 3 years.

 

[Vegitto]

Originally posted by: funboy42

Originally posted by: vi_edit
Sadly, nothing *largely* significant. CD's or money market accounts would be your only safe bets. CD's are around 3.5%-3.75% for a 36 month vestment.

Excuse me for being ignorant but you get $3.5% on a $10,000 investment over the 36 months you make almost $400. Is that really worth it or do they pay you that 3.5% permonth?

If really getting a $10,000 cd and after 3 years you make a whoping $350 I would rather take the $10K buy and sell cars and make a few grand off the sales over the 3 years.

Sorry for asking, I probably am the most stupid little POS ever, but WTF do you mean with 'cd'? I suppose it's not a Compact Disc, either.

 

[skimple]

Take the CD. If you decide that you need the money early, you can always get it out without penalty by forfeiting the interest. That way, if an emergency comes up, you still have quick access to the money, but it's out of your hands for the most part.

 

[Kenazo]

Originally posted by: funboy42

Originally posted by: vi_edit
Sadly, nothing *largely* significant. CD's or money market accounts would be your only safe bets. CD's are around 3.5%-3.75% for a 36 month vestment.

Excuse me for being ignorant but you get $3.5% on a $10,000 investment over the 36 months you make almost $400. Is that really worth it or do they pay you that 3.5% permonth?

If really getting a $10,000 cd and after 3 years you make a whoping $350 I would rather take the $10K buy and sell cars and make a few grand off the sales over the 3 years.

Dude, it's 3.5%/year. I don't know what CD's are, (I presume something like a GIC), but the interest might compound annually, thus over 3 years you would make $1,087.18. Not great money, but it's alright.

 

[Brazen]

I agree to buy a house, even if you have to get a little rathole. You can fix up a dump to be rather liveable with just some texturing and some paint for only a hundred dollars or so and few days of work. You'll only be there for a few years anyway, right? In the end you will not only make money on the house, you'll also save a ton on not paying rent.

Personally, I would suggest getting a <$50,000 house so you don't pay PMI or take out a second mortgage on a house you just bought.

 

[PawNtheSandman]

We have everything to fully furnish a house so that isn't a problem.

The problem is, that I don't make enough money at the current time to afford a mortgage. If I could afford that, I would have bought a house already.

 

[Kenazo]

Originally posted by: Brazen
I agree to buy a house, even if you have to get a little rathole. You can fix up a dump to be rather liveable with just some texturing and some paint for only a hundred dollars or so and few days of work. You'll only be there for a few years anyway, right? In the end you will not only make money on the house, you'll also save a ton on not paying rent.

Personally, I would suggest getting a <$50,000 house so you don't pay PMI or take out a second mortgage on a house you just bought.

I don't know NYC's market, but could you even get a fridge box in an alley for $50k there?

 

[timswim78]

Originally posted by: iversonyin
It depend on where you live. If the value of the real estate in your area goes up every 20% every year. You are better off getting the house NOW.

This rate of growth is unsustainable. There is no way that housing prices will continue to rise at this rate for the next three years. In many markets, expect to see leveling off and even some drops in prices.

 

[PawNtheSandman]

I left NYC 6 years ago. I now live upstate where prices are somewhat normal.

 

[vi edit]

Originally posted by: funboy42

Originally posted by: vi_edit
Sadly, nothing *largely* significant. CD's or money market accounts would be your only safe bets. CD's are around 3.5%-3.75% for a 36 month vestment.

Excuse me for being ignorant but you get $3.5% on a $10,000 investment over the 36 months you make almost $400. Is that really worth it or do they pay you that 3.5% permonth?

If really getting a $10,000 cd and after 3 years you make a whoping $350 I would rather take the $10K buy and sell cars and make a few grand off the sales over the 3 years.

It's closer to $1100 for a 3 year investment. Like I said, it's nothing great, but it's low risk and you at least make *something* off of it.

 

[cHeeZeFacTory]

all the guys talking about $50k houses must live in idaho or something. You'll be lucky to get a patch of green grass for 50k in his market.

 

[Brazen]

Originally posted by: cHeeZeFacTory
all the guys talking about $50k houses must live in idaho or something. You'll be lucky to get a patch of green grass for 50k in his market.

ha, hadn't thought of that. Around here, you can get a house for as low as 30,000 - 50,000. They are dumps, but it's a place to live without sinking money into rent.