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Home Buying Help Thread


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On 2/11/2020 at 3:22 PM, MKnight82 said:

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.  

 

It seems like I'm shooting to be that 5% guy right now lol.

Between 2018 and now I've almost doubled my salary, and once it made sense that I could potentially buy a house leveraging my 401k as part of my down-payment I started to look at purchasing around November 2019. Ended up liking a new build, and projected to have it finished by fall of this year (Sept/Oct is currently the timeline). I had to put down $7,000 in earnest money, which I borrowed from my 401k back in January, but as of the end of this month I'll have finished paying that back into my 401k, and then be able to use those payments to be aggressive towards my CC debt. Plus side is that earnest counts towards my down payment as well. So far one bank has approved me for my purchase price with a conventional loan, the lender from the builder approved me as well but only for the FHA which won't work for me (too much down payment would be required). I've got a contact that I'll have search around for the mortgage once it gets closer to 60 days out.

I feel like I'm walking a thin line currently with my aggressive approach but the base price for my model has risen almost $20k since I signed my contract at the beginning of the year, and with the neighborhood projecting completion early 2021 I'd imagine property values will go up.

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1 hour ago, bigbadbuff said:

How do you know what he can afford? Lol especially if he has a gf that is pitching in.

Depending on their debt, his gf would likely need to make about 50-75k or more to make 275 work. That's just a really big house payment. Especially if they're not putting much down. 

Also, banks pre-approve for some really high numbers. It's just a known fact. Don't take that as gospel for how much you can really afford. You (should) know your finances better than the bank. 

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8 minutes ago, theJ said:

Depending on their debt, his gf would likely need to make about 50-75k or more to make 275 work. That's just a really big house payment. Especially if they're not putting much down. 

Also, banks pre-approve for some really high numbers. It's just a known fact. Don't take that as gospel for how much you can really afford. You (should) know your finances better than the bank. 

Yeah. No way in hell do I actually think buying a home for $275k on our salary is a good idea. With our Salary combined, we feel pretty comfortable about being able to afford a house in the $190-$210k range. 

The Pre-Approval was just a nice surprise that’s all. And nice that we potentially don’t have to both be on the loan, because my credit is a lot better than hers right now. 

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6 minutes ago, holt_bruce81 said:

Yeah. No way in hell do I actually think buying a home for $275k on our salary is a good idea. With our Salary combined, we feel pretty comfortable about being able to afford a house in the $190-$210k range. 

The Pre-Approval was just a nice surprise that’s all. And nice that we potentially don’t have to both be on the loan, because my credit is a lot better than hers right now. 

Couple of things

  1. The bank may yet request her information. The pre-approval is not the whole underwriting process. It's just a quick check against credit, debt and salary. 
  2. Since you guys aren't married, give some more thought about who really owns this asset. She's pitching in, but in the eyes of the law you own it if she's not on the loan. If I were her, I'm not sure I'd be ok with that. Great deal for you though. 
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4 hours ago, holt_bruce81 said:

The Pre-Approval was just a nice surprise that’s all.

I was super surprised about mine when I went in too. I think too many people likely think they can actually afford a home that expensive and put themselves in bad financial situations. 

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What does "Sale Pending" actually mean and can you still put an offer down?

This house that we've kind of had an eye on has had a "pending" mark on it for 3 weeks now. Should we schedule a walk through or just forget about it?

 

Edited by holt_bruce81
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22 minutes ago, holt_bruce81 said:

What does "Sale Pending" actually mean and can you still put an offer down?

This house that we've kind of had an eye on has had a "pending" mark on it for 3 weeks now. Should we schedule a walk through or just forget about it?

 

Basically, to my understanding, that means waiting on closing. I would just forget about it, trying to schedule a showing would probably be rejected anyways.

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23 minutes ago, holt_bruce81 said:

What does "Sale Pending" actually mean and can you still put an offer down?

This house that we've kind of had an eye on has had a "pending" mark on it for 3 weeks now. Should we schedule a walk through or just forget about it?

 

Doesn't hurt to contact the realtor, but likely means that it's going through inspection and is moving towards closing. You won't be able to do anything at this point with it. But you can keep an eye on it in case it falls through. 

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24 minutes ago, holt_bruce81 said:

What does "Sale Pending" actually mean and can you still put an offer down?

It means they want to keep their options open in case the first one falls through. Nothing wrong with making the back-up offer and that's how we got our current home. The first offer was via a 1031 Starker Exchange, which means that there were a lot of moving parts and contingencies - and sure enough it fell through and they came to us and asked if we still wanted in. We did.

I wouldn't imagine it happens often, but it did for us. The offer that is "pending" may be contingent on the sale of the buyers current home, whereas if you're coming from a rental - you don't have that contingency. There are any number of reasons for the deal to fall apart and if you put in a back- up offer, you might be next in line.

Good luck

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16 minutes ago, Counselor said:

This is the home buying help thread correct? So which of you do I ask for a gift of a down payment? 

I had $ 100K set aside for you, but then you made disparaging remarks about California, so I gave it to another family.
They were most grateful as it helped them close on their Dream House at the beach. They scored this beauty for just under $ 1million

 

dune-67.jpg&f=1&nofb=1
 

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8 minutes ago, Shanedorf said:

They were most grateful as it helped them close on their Dream House at the beach. They scored this beauty for just under $ 1million

 

A little TLC and it'll be great. 

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17 minutes ago, Shanedorf said:

I had $ 100K set aside for you, but then you made disparaging remarks about California, so I gave it to another family.
They were most grateful as it helped them close on their Dream House at the beach. They scored this beauty for just under $ 1million

 

dune-67.jpg&f=1&nofb=1
 

I know you’re lying because that’s a 3 million dollar property. 

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