Buying a House

[showtime]

It's 76 degrees where I'm currently at in Texas.  What is this fall and winter thing you all speak of?

[minutemancl]

How important is putting 20% down? I've read both perspectives, that you want to avoid PMI at all costs, and that PMI isn't too bad and 10-15% down is just as fine. I just got my first "real" job out of college in April, the pay is pretty nice, and have been very diligent in saving. My goal is 30k saved by Spring of next year and buying a house then. There are homes in an area I'm looking at that are perfect and average about 150-170k. My girlfriend and sister are planning on moving in with me and helping out as well with the monthly payments/utilities. Should I wait longer and do the full 20% down? My parents are horrible with money and I've never had to learn anything about houses financially before. I've done almost every home repair/renovation job there is, but don't have a clue when it comes to the finances.

[MKnight82]

48 minutes ago, minutemancl said:

How important is putting 20% down? I've read both perspectives, that you want to avoid PMI at all costs, and that PMI isn't too bad and 10-15% down is just as fine. I just got my first "real" job out of college in April, the pay is pretty nice, and have been very diligent in saving. My goal is 30k saved by Spring of next year and buying a house then. There are homes in an area I'm looking at that are perfect and average about 150-170k. My girlfriend and sister are planning on moving in with me and helping out as well with the monthly payments/utilities. Should I wait longer and do the full 20% down? My parents are horrible with money and I've never had to learn anything about houses financially before. I've done almost every home repair/renovation job there is, but don't have a clue when it comes to the finances.

I wouldn't wait, interest rates are going up, likely once more in 2018 and 3 more times in 2019.  The cost of interest rates going up will be much more expensive than PMI.  

[bigjohnson2009]

5 minutes ago, MKnight82 said:

I wouldn't wait, interest rates are going up, likely once more in 2018 and 3 more times in 2019.  The cost of interest rates going up will be much more expensive than PMI.  

Agreed. They have conventional loans for first-time home buyers with as little as 3% down and the PMI has not up-front charge. Just goes away at 78% equity I believe.

The PMI on FHA loans is a lot worse and may offset your interest rate savings in the current environment.

[MKnight82]

1 hour ago, BayRaider said:

This is exacty what I’m talking about. The bubble will burst by 2021. All the things that caused the 2008 are happening again, and way worse. 

This isn't true.  I've worked in the real estate industry since 2003 and went through the previous crash.  The current market is nothing like what it was before.  The lenders standards were so ridiculous before that prices were being driven up because there was a flood of people entering the housing market that couldn't afford homes.  The current housing market has values going up because lending standards are more strict and a lot of markets don't have enough inventory for current housing demand.  

[MKnight82]

2 minutes ago, bigjohnson2009 said:

Agreed. They have conventional loans for first-time home buyers with as little as 3% down and the PMI has not up-front charge. Just goes away at 78% equity I believe.

The PMI on FHA loans is a lot worse and may offset your interest rate savings in the current environment.

I would seriously try to go conventional, but ya if you have to go FHA to get in now I'd do it.

[minutemancl]

7 minutes ago, MKnight82 said:

I would seriously try to go conventional, but ya if you have to go FHA to get in now I'd do it.

Time is really that much of a factor right now?

[BayRaider]

1 minute ago, MKnight82 said:

I would seriously try to go conventional, but ya if you have to go FHA to get in now I'd do it.

Agreed, FHA loans are just terrible. There is zero advantage over a 3% conventional, and preferably a 5% conventional. So much cheaper PMI. The only reason you might do FHA is if your credit score is low, and in that case, I would try to raise before buying a house.

As for the market crashing, it might not be as bad as last time, but housing pricing is far exceeding average income in most areas. The housing market is definitely in a bubble, and anyone who owns a house will convince themselves we are not in a bubble. Common psychology. People in cryptocurrency who were heavily invested didn't think it was a bubble because they were bias. Anyone on the outside looking in saw it was a major bubble. Same thing with the stock market. Same thing with the last housing bubble, experts and/or people who didn't own a home were saying the bubble was about to burst yet homeowners would get angry at the idea.. and then poof.

Housing market is 100% in a bubble and it will burst in Early-Mid 2021 IMO. Maybe it won't be as bad as last time where some homes crashed 45-50%. Maybe we will only see 25-30% this time.. but I'm thinking more like 35%.

[MKnight82]

6 minutes ago, minutemancl said:

Time is really that much of a factor right now?

For interest rates yes.  If you're going to try to wait out the next recession, I think you're gonna have to wait like 2-3 more years.

[MKnight82]

7 minutes ago, BayRaider said:

Agreed, FHA loans are just terrible. There is zero advantage over a 3% conventional, and preferably a 5% conventional. So much cheaper PMI. The only reason you might do FHA is if your credit score is low, and in that case, I would try to raise before buying a house.

As for the market crashing, it might not be as bad as last time, but housing pricing is far exceeding average income in most areas. The housing market is definitely in a bubble, and anyone who owns a house will convince themselves we are not in a bubble. Common psychology. People in cryptocurrency who were heavily invested didn't think it was a bubble because they were bias. Anyone on the outside looking in saw it was a major bubble. Same thing with the stock market. Same thing with the last housing bubble, experts and/or people who didn't own a home were saying the bubble was about to burst yet homeowners would get angry at the idea.. and then poof.

Housing market is 100% in a bubble and it will burst in Early-Mid 2021 IMO. Maybe it won't be as bad as last time where some homes crashed 45-50%. Maybe we will only see 25-30% this time.. but I'm thinking more like 35%.

Maybe some of the bigger markets, but I don't think the majority of the county will have massive reduction in home values.  

[BayRaider]

1 minute ago, MKnight82 said:

Maybe some of the bigger markets, but I don't think the majority of the county will have massive reduction in home values.  

Maybe, California is gonna hit 35% for sure though. 

[minutemancl]

1 minute ago, MKnight82 said:

For interest rates yes.  If you're going to try to wait out the next recession, I think you're gonna have to wait like 2-3 more years.

Good to know. Thanks for your help! Maybe I'll make moves sooner than Spring then, especially if conventional loans for first time home buyers are 3 or 5% down. I was expecting to put down 15-20%.

[JaguarCrazy2832]

On 10/16/2018 at 11:23 AM, TENINCH said:

Look at as many houses as you can until you are tired of looking or find the one you love. Make an offer and if it's accepted rub it in peoples faces. 30 days later that bad boy is all yours!!

Pretty much this, at least the 1st part. When you find the right one you'll know. 

[JaguarCrazy2832]

On 10/16/2018 at 3:14 PM, MKnight82 said:

It doesn't drop automatically, but if you call them you can have it removed.

My loan advisor told me it drops automatically. Haven't reached it yet though since we just bought last year but hoping she's right

[JaguarCrazy2832]

On 10/19/2018 at 2:02 PM, AFlaccoSeagulls said:

3) We always had our agent setup weekends to go tour and we'd hit about 5-7 houses a day, and then at the end of each day we'd eliminate all but 1-2 of our favorites. It's also a nice tip to take pictures and take notes as you tour, because little things you won't remember a month later when trying to look back and remember the tour. 

5) Set aside at least $5,000-$10,000 or so for closing costs. This includes inspections (general inspection, sewer scope, etc.) and closing costs to cover the loans.

8) ALWAYS REMEMBER LOCATION. Location trumps all. You might find a nice house in a garbage neighborhood, and I can't tell you how many times we saw this, only to drive up to the house and drive away because of the neighborhood.

Agree with these 3 points specifically. Write EVERYTHING down if you are remotely interested in the house when leaving. Closing costs can sometimes be a bargaining chip so having that money set aside is a good thing when bidding. Location really caused us to drop a few houses like a hot rock. We hit some major traffic going in and out of a certain area and we didn't want any of that headache if we could help it.