MWil23 Posted February 10, 2020 Share Posted February 10, 2020 Just now, Counselor said: Are your kids in school yet? 😉 Just now, Counselor said: and parent of a an oldest child entering Kindergarten this fall. Not for another 6 months buddy 1 Quote Link to comment Share on other sites More sharing options...
MKnight82 Posted February 10, 2020 Share Posted February 10, 2020 20 minutes ago, JoshstraDaymus said: Update: We met with the realtor and honestly more than anything, before any type of relationship with him and anything was written down, he got us on a good path and gave us some great insight about taxes and whatnot in the area. Like holt, my fiancee is worried about school districts and whatnot because if we had kids there is a district or 2 in my area that are for lack of a better term awful and cutting tons of extra curricular activities. Furthermore, while we aren't expecting, she (fiancee) has been adamant about wanting to do foster to adopt potentially which means getting into a better area earlier might not be a bad idea, and he took this all into consideration. So, for what I'm looking for, we have a good foundation, and honestly my monthly payments in his mind based on a few things gives us more flexibility than even I thought it would. We will be meeting with a lender here in the next few weeks to get our preapproval letter and then the fun begins. What a year this could be, Hey first off, congrats, buying a home is the american dream. It looks like you're already on a good path, you should definitely get an agent when buying, as you're not going to have to pay them anything. So you definitely benefit from having a professional represent you. Also, getting pre-approval on financing is smart. Not only will it help set your price range better, but it'll make your offer on any home stronger since you're pre-approved (if you got in a bidding war against another buyer and you can show you're pre-approved and they aren't, your offer looks stronger). Couple of things: - You brought up schools, idk if you're from that area or completely in the dark on schools or not. This is a site I use when comparing schools: https://www.greatschools.org/ - @theJ brought up PMI. If you aren't familiar with that term, it is private mortgage insurance, and basically what that means is if you don't put enough of a down payment the bank is going to require you to pay them additional money for the risk of less collateral. PMI sucks, and if you can avoid it you should. But its not crippling, and will eventually go away. For instance, I purchased my house a few years ago. I only put down 5.0%, so I had to pay an additional $1,400 a year in PMI, which added a little over $115 a month to my payment. This is money that does not go towards the principal at all, and literally just goes into the banks pockets. However, the PMI can be dropped from your loan if the loan to value ratio exceeds 20%. Mine did this after 2 & 1/2 years, so yes I had the PMI, but I also had a rapidly increasing asset that I owned gaining value. Had I waited to save up the 20% in down payment, I wouldn't benefiting from that home value increase. - Realize that beyond your actual down payment, there will likely be several thousand dollars in other closing costs (inspections, appraisal, legal fees, bank fees, etc). - Have an understanding where we are in this market cycle. It has been a historically long rally. A recession has to hit eventually (and probably soon). This is also an election year, which can do funny things to the market. Just be careful what you are buying, and be prepared to stay in that place for 5-6+ years if you have to ride out a recession to regain the home value you purchased (which is why you should probably look at the schools now). 1 Quote Link to comment Share on other sites More sharing options...
TOUCAN Posted February 10, 2020 Author Share Posted February 10, 2020 6 minutes ago, MKnight82 said: Hey first off, congrats, buying a home is the american dream. It looks like you're already on a good path, you should definitely get an agent when buying, as you're not going to have to pay them anything. So you definitely benefit from having a professional represent you. Also, getting pre-approval on financing is smart. Not only will it help set your price range better, but it'll make your offer on any home stronger since you're pre-approved (if you got in a bidding war against another buyer and you can show you're pre-approved and they aren't, your offer looks stronger). Couple of things: - You brought up schools, idk if you're from that area or completely in the dark on schools or not. This is a site I use when comparing schools: https://www.greatschools.org/ - @theJ brought up PMI. If you aren't familiar with that term, it is private mortgage insurance, and basically what that means is if you don't put enough of a down payment the bank is going to require you to pay them additional money for the risk of less collateral. PMI sucks, and if you can avoid it you should. But its not crippling, and will eventually go away. For instance, I purchased my house a few years ago. I only put down 5.0%, so I had to pay an additional $1,400 a year in PMI, which added a little over $115 a month to my payment. This is money that does not go towards the principal at all, and literally just goes into the banks pockets. However, the PMI can be dropped from your loan if the loan to value ratio exceeds 20%. Mine did this after 2 & 1/2 years, so yes I had the PMI, but I also had a rapidly increasing asset that I owned gaining value. Had I waited to save up the 20% in down payment, I wouldn't benefiting from that home value increase. - Realize that beyond your actual down payment, there will likely be several thousand dollars in other closing costs (inspections, appraisal, legal fees, bank fees, etc). - Have an understanding where we are in this market cycle. It has been a historically long rally. A recession has to hit eventually (and probably soon). This is also an election year, which can do funny things to the market. Just be careful what you are buying, and be prepared to stay in that place for 5-6+ years if you have to ride out a recession to regain the home value you purchased (which is why you should probably look at the schools now). I appreciate it! Actually I was going to ask questions about PMI but you pretty much covered bases for me there so I am thankful. I honestly just moved to the area in which we live last year, but I haven't lived far, just across the bridge all my life. (We live in York County, I grew up in Lancaster County. It's 2 worlds) so she knows the districts better than I do. That website is super helpful though for sure. Quote Link to comment Share on other sites More sharing options...
Shanedorf Posted February 10, 2020 Share Posted February 10, 2020 6 minutes ago, MKnight82 said: However, the PMI can be dropped from your loan if the loan to value ratio exceeds 20%. does this happen automatically or do you have to initiate the event with the lender ? Quote Link to comment Share on other sites More sharing options...
MKnight82 Posted February 10, 2020 Share Posted February 10, 2020 Just now, Shanedorf said: does this happen automatically or do you have to initiate the event with the lender ? I initiated it. My lender has a form I had to fill out, and I paid for the appraiser they hired. The guy came and gave them the value, they dropped PMI from my monthly payment the next month. 1 Quote Link to comment Share on other sites More sharing options...
Shanedorf Posted February 10, 2020 Share Posted February 10, 2020 3 hours ago, MKnight82 said: - Realize that beyond your actual down payment, there will likely be several thousand dollars in other closing costs (inspections, appraisal, legal fees, bank fees, etc). Good call And here's a link with more info on all the closing costs and who typically pays them - but sometimes there is some room for negotiation dependent on what your realtor tells you for the market you're in. Not sure about their comment on attorney fees, but the bottom line is that these are additional costs to be aware of as you lay out your budget. https://www.fool.com/millionacres/real-estate-market/homebuying/who-pays-closing-costs-when-you-buy-home/ Quote Link to comment Share on other sites More sharing options...
theJ Posted February 11, 2020 Share Posted February 11, 2020 23 hours ago, MKnight82 said: Mine did this after 2 & 1/2 years, so yes I had the PMI, but I also had a rapidly increasing asset that I owned gaining value. Had I waited to save up the 20% in down payment, I wouldn't benefiting from that home value increase. So this does happen more often than not (i would think, though i don't have the data), and most of the time people don't get themselves in trouble. However, since you told the good side, i'll just warn everyone on the bad side. If you elect to put 5% down, and then the poop hits the fan for you, you could be in a world of hurt. There are a ton of living examples from 2008/9 of people who had very little down, lost a job or w/e and couldn't make payments. The house was underwater, and they ended up in bankruptcy hearings. And the thing is that is all of that is out of your control. You can say you have a steady job and you're prepared and it won't happen to you, but if you don't have a pile of cash sitting around to get yourself above water, it really is out of your control. All it takes is one market plunge and you're SOL. There's a reason banks charge this interest, and it's not because they're greedy. It's because they know they're statistically less likely to get the money back out of the loan if the buyer has less than 20% equity. So...buyer beware. I will always recommend that people should have 20% down, and a healthy emergency fund (3-6 months of expenses) on top of that. Your chances of running into the scenario i outlined above are almost NIL in that setup. Quote Link to comment Share on other sites More sharing options...
holt_bruce81 Posted February 11, 2020 Share Posted February 11, 2020 (edited) 1 hour ago, theJ said: So this does happen more often than not (i would think, though i don't have the data), and most of the time people don't get themselves in trouble. However, since you told the good side, i'll just warn everyone on the bad side. If you elect to put 5% down, and then the poop hits the fan for you, you could be in a world of hurt. There are a ton of living examples from 2008/9 of people who had very little down, lost a job or w/e and couldn't make payments. The house was underwater, and they ended up in bankruptcy hearings. And the thing is that is all of that is out of your control. You can say you have a steady job and you're prepared and it won't happen to you, but if you don't have a pile of cash sitting around to get yourself above water, it really is out of your control. All it takes is one market plunge and you're SOL. There's a reason banks charge this interest, and it's not because they're greedy. It's because they know they're statistically less likely to get the money back out of the loan if the buyer has less than 20% equity. So...buyer beware. I will always recommend that people should have 20% down, and a healthy emergency fund (3-6 months of expenses) on top of that. Your chances of running into the scenario i outlined above are almost NIL in that setup. Such a hard thing to accomplish for first time home-buyers. Do you have any tips for saving money? Was thinking about putting my 401k on hold and asking my 2nd job for more hours so I can continue to build my savings as much as possible right now. Should I start Investing in things? And I know Putting my 401k on hold isn’t the smartest thing, I’m just determined to do this thing right the first time and not go through a lot of first time home-buyer mistakes. Edited February 11, 2020 by holt_bruce81 Quote Link to comment Share on other sites More sharing options...
The_Romen Posted February 11, 2020 Share Posted February 11, 2020 Just bought my first place. Close next month... What should I do in the mean time to prepare, besides all the packing and things like that? 1 Quote Link to comment Share on other sites More sharing options...
theJ Posted February 11, 2020 Share Posted February 11, 2020 5 minutes ago, holt_bruce81 said: Such a hard thing to accomplish for first time home-buyers. Do you have any tips for saving money? Was thinking about putting my 401k on hold and asking my 2nd job for more hours so I can continue to build my savings as much as possible right now. Should I start Investing in things? And I know Putting my 401k on hold isn’t the smartest thing, I’m just determined to do this thing right the first time and not go through a lot of first time home-buyer mistakes. It is hard. But the answer is the obvious one that no one really wants to hear: usually it just takes time. During which time you'll be renting, and no one really loves that, but it is better from a risk management standpoint. From a practical point of view, these are the things i would look at to save money quickly, in this order: Stop eating out (if you eat out for lunch at $10/meal, that's $2600/year - just for weekdays!) Review your budget (or make one) - you probably have some things you can cut, and will want to cut, upon review (for us it was cable TV) Stop your investments (not counting 401k) - if you have massive debt, investing doesn't make a ton of sense anyway Get a cheaper car - the average American has a car payment, and therefore is spending several hundred dollars/month they could avoid. Get a second job - Mo' money Pay off your debt - it accomplishes two things. 1) Gets rid of a payment/improves your cash flow 2) Stops you from paying interest Stop the 401k temporarily - I'm talking like hopefully only 6 months to a year while you clean everything else up above. I wouldn't stop the 401k just to save up a down payment. My wife and I saved for 4 years before we bought our first house. Then another 4 years once we made the decision to upsize after purchasing the first one. But we'll be 36/37 with a paid off house, no debt of any kind, with total monetary freedom. IMO, the patience is worth it. 1 Quote Link to comment Share on other sites More sharing options...
theJ Posted February 11, 2020 Share Posted February 11, 2020 7 minutes ago, The_Romen said: Just bought my first place. Close next month... What should I do in the mean time to prepare, besides all the packing and things like that? Just off the top of my head. Figure out how to get utilities switched over. Get pricing on moving vans or a moving company Start buttering up your friends so they'll move your crap for only pizza and beer If you're doing any renovations before you move in, get your contractors lined up Closer to, or the day before Pack an overnight bag like you're staying a hotel, put it in your car. That way you find your toothbrush the first night in the new place. Pack sheets/pillows in a separate bag and put it in your car so you have a place to sleep the first night. Switch over utilities (generally you can't do this until a few days before) 1 Quote Link to comment Share on other sites More sharing options...
MKnight82 Posted February 11, 2020 Share Posted February 11, 2020 2 hours ago, theJ said: So this does happen more often than not (i would think, though i don't have the data), and most of the time people don't get themselves in trouble. However, since you told the good side, i'll just warn everyone on the bad side. If you elect to put 5% down, and then the poop hits the fan for you, you could be in a world of hurt. There are a ton of living examples from 2008/9 of people who had very little down, lost a job or w/e and couldn't make payments. The house was underwater, and they ended up in bankruptcy hearings. And the thing is that is all of that is out of your control. You can say you have a steady job and you're prepared and it won't happen to you, but if you don't have a pile of cash sitting around to get yourself above water, it really is out of your control. All it takes is one market plunge and you're SOL. There's a reason banks charge this interest, and it's not because they're greedy. It's because they know they're statistically less likely to get the money back out of the loan if the buyer has less than 20% equity. So...buyer beware. I will always recommend that people should have 20% down, and a healthy emergency fund (3-6 months of expenses) on top of that. Your chances of running into the scenario i outlined above are almost NIL in that setup. Your insistence on 20% down is a very conservative approach. Let's have some fun with math: Assume a $300,000 home. Assume two buyers, both make exactly the same amount of money. In one scenario we will put down 5.0%, the other we'll put down 20%. Home price $300,000.00 $300,000.00 Down Payment % 5.00% 20.00% Down Payment $15,000.00 $60,000.00 Mortgage Amount $285,000.00 $240,000.00 Payment -$1,279.78 -$1,077.71 RE Taxes -$100.00 -$100.00 Insurance -$100.00 -$100.00 PMI -$100.00 $0.00 Total Monthly Payment -$1,579.78 -$1,277.71 Putting down 5.0% instead of 20% is going to raise your monthly payment from $1,277.71 to $1,579.78, not just because of the bigger loan amount, but also because of the PMI. Let's assume the person has the 15K now, but can only save 15k per year going forward, so it would take them about 3 years to save up enough to get to $60,000. While they wait those 3 years saving up money, this happens to the person who bought right now for 5.0% down: 0 $285,000.00 -$1,279.78 $831.25 -$448.53 $284,551.47 1 $284,551.47 -$1,279.78 $829.94 -$449.84 $284,101.64 2 $284,101.64 -$1,279.78 $828.63 -$451.15 $283,650.49 3 $283,650.49 -$1,279.78 $827.31 -$452.46 $283,198.03 4 $283,198.03 -$1,279.78 $825.99 -$453.78 $282,744.24 5 $282,744.24 -$1,279.78 $824.67 -$455.11 $282,289.14 6 $282,289.14 -$1,279.78 $823.34 -$456.43 $281,832.70 7 $281,832.70 -$1,279.78 $822.01 -$457.77 $281,374.94 8 $281,374.94 -$1,279.78 $820.68 -$459.10 $280,915.84 9 $280,915.84 -$1,279.78 $819.34 -$460.44 $280,455.40 10 $280,455.40 -$1,279.78 $817.99 -$461.78 $279,993.61 11 $279,993.61 -$1,279.78 $816.65 -$463.13 $279,530.49 12 $279,530.49 -$1,279.78 $815.30 -$464.48 $279,066.01 13 $279,066.01 -$1,279.78 $813.94 -$465.83 $278,600.17 14 $278,600.17 -$1,279.78 $812.58 -$467.19 $278,132.98 15 $278,132.98 -$1,279.78 $811.22 -$468.56 $277,664.42 16 $277,664.42 -$1,279.78 $809.85 -$469.92 $277,194.50 17 $277,194.50 -$1,279.78 $808.48 -$471.29 $276,723.20 18 $276,723.20 -$1,279.78 $807.11 -$472.67 $276,250.54 19 $276,250.54 -$1,279.78 $805.73 -$474.05 $275,776.49 20 $275,776.49 -$1,279.78 $804.35 -$475.43 $275,301.06 21 $275,301.06 -$1,279.78 $802.96 -$476.82 $274,824.24 22 $274,824.24 -$1,279.78 $801.57 -$478.21 $274,346.04 23 $274,346.04 -$1,279.78 $800.18 -$479.60 $273,866.44 24 $273,866.44 -$1,279.78 $798.78 -$481.00 $273,385.44 25 $273,385.44 -$1,279.78 $797.37 -$482.40 $272,903.03 26 $272,903.03 -$1,279.78 $795.97 -$483.81 $272,419.22 27 $272,419.22 -$1,279.78 $794.56 -$485.22 $271,934.00 28 $271,934.00 -$1,279.78 $793.14 -$486.64 $271,447.36 29 $271,447.36 -$1,279.78 $791.72 -$488.06 $270,959.31 30 $270,959.31 -$1,279.78 $790.30 -$489.48 $270,469.83 31 $270,469.83 -$1,279.78 $788.87 -$490.91 $269,978.92 32 $269,978.92 -$1,279.78 $787.44 -$492.34 $269,486.58 33 $269,486.58 -$1,279.78 $786.00 -$493.77 $268,992.81 34 $268,992.81 -$1,279.78 $784.56 -$495.22 $268,497.59 35 $268,497.59 -$1,279.78 $783.12 -$496.66 $268,000.93 36 $268,000.93 -$1,279.78 $781.67 -$498.11 $267,502.83 So 5.0% guy's balance after 3 years is now $267,502.83, which means if they sold right then they would receive approximately $17,497.17 of those payments back, plus their $15,000 down payment for a built in equity of $32,497.17. Then we have 20% down payment guy, he had the 15k to start as well, but he needed 45k more before he purchased. But, 20% guy has to live somewhere, so lets assume he rents for $1,000 per month. The different in monthly payment would be $579.78 ($1,579.78 mortgage payment - $1,000 apartment rental payment). So over the full 3 years, 20% guy saves $20,871.98 from paying less monthly than the other guy. That is only a difference of $3,374.81 over a 3 year period. 5.0% guy only needs the house to go up more than $3,374.81 in value to beat 20% guy. Also, 5% guy can apply to drop PMI if values really go up, and can also apply to refinance later if he wants to alter anything else later on. And finally, 5% guy has a few years head start on paying off his mortgage. 2 Quote Link to comment Share on other sites More sharing options...
Forge Posted February 11, 2020 Share Posted February 11, 2020 3 hours ago, theJ said: So this does happen more often than not (i would think, though i don't have the data), and most of the time people don't get themselves in trouble. However, since you told the good side, i'll just warn everyone on the bad side. If you elect to put 5% down, and then the poop hits the fan for you, you could be in a world of hurt. There are a ton of living examples from 2008/9 of people who had very little down, lost a job or w/e and couldn't make payments. The house was underwater, and they ended up in bankruptcy hearings. And the thing is that is all of that is out of your control. You can say you have a steady job and you're prepared and it won't happen to you, but if you don't have a pile of cash sitting around to get yourself above water, it really is out of your control. All it takes is one market plunge and you're SOL. There's a reason banks charge this interest, and it's not because they're greedy. It's because they know they're statistically less likely to get the money back out of the loan if the buyer has less than 20% equity. So...buyer beware. I will always recommend that people should have 20% down, and a healthy emergency fund (3-6 months of expenses) on top of that. Your chances of running into the scenario i outlined above are almost NIL in that setup. Pay it up front. If you're going to stay in the home several years, I always recommend upfront pmi Quote Link to comment Share on other sites More sharing options...
theJ Posted February 12, 2020 Share Posted February 12, 2020 4 hours ago, MKnight82 said: Your insistence on 20% down is a very conservative approach. Let's have some fun with math: I would never claim that you'll win on the math by taking the conservative approach. I admit it's the conservative approach. Those that take the biggest risks in life also make the most. They also lose more often. It's a conversation about risk management, not which one gets you a few thousand ahead. 1 Quote Link to comment Share on other sites More sharing options...
theJ Posted February 12, 2020 Share Posted February 12, 2020 4 hours ago, Forge said: Pay it up front. If you're going to stay in the home several years, I always recommend upfront pmi If you can party the PMI upfront, why not put more down and avoid the PMI? Am I missing something? Quote Link to comment Share on other sites More sharing options...
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