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Home Buying Help Thread


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On 2/12/2020 at 10:12 AM, holt_bruce81 said:

The 20% is a very interesting debate and I love reading both sides of it. 

A question I was kind of asking around, If you can't meet your 20% is it worth putting down more than 5% or would you rather have that money for other expenses? 

Pros: Putting more down will lower your payment.  You'll also be paying less interest over the lifetime of the loan (it will be significant on a 30 year loan). 

And i think i mentioned it back on page 1 or 2 that sellers know how much you're putting down.  They have access to that info.  You're a more attractive buyer if you're putting more down (it signifies that you're a stronger buyer and less likely to back out of the deal for financing reasons).  

Cons: You will have liquid cash available.  Some prescribe to the "never pay off the mortgage" tenant, in which case putting little down fits the model.

 

I'm a big fan of paying off the house and increasing monthly cash flow.  It just makes life easier.  Loans are bothersome, eat up your cash flow and your time, and kill your net worth 3% at a time over your lifetime.  10 years ago i probably would have said differently, but now that i have some accumulated net worth, life isn't about maximizing return.  It's about maximizing quality of life, which means doing things i enjoy.

So i'd be in the camp of putting as much down as you're able (leaving an emergency fund, plus any cash you need for repairs/new stuff).  Not everyone feels the same.

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31 minutes ago, theJ said:

Here's what i didn't have time to type yesterday.

First off, congrats on the brand new home!  Wasn't it you that was having trouble finding something last summer, and also having trouble selling your current home?

Thanks! Yeah, our house sold in a week but appraised lower than the agreement, so we had to work a ton of stuff out and it was really nerve-wracking and frustrating.

31 minutes ago, theJ said:

Secondly, i'm assuming you know the dangers of the 5-1 ARM.  Especially with how bottomed out interest rates have been for the last 10 years, those things feel like bombs at the moment.  If interest rates do rocket up anytime in the next 5 years, you may wish you had that 4% conventional.  I'm hoping you at least have some caps on it, so it can't explode on you down the line. 

Oh absolutely, and I was really frustrated with the circumstances. Long story short, we couldn't beat the interest rate and the ARM was the easiest way to avoid PMI without putting another $23K down to get to 20%. Also, we made sure to get the ARM that does NOT move any more than 2% every 5 years or 5% over the life of the loan (Worst case scenario in 6 years for us on the ARM would be 5.3%, in 10 years 7.3%, and total after that 8.3% in an Armageddon situation). We also (my wife and I) went into this knowing that we would refinance in the next 2-4 years, so barring a complete re-correct of the market (possible), we should buy ourselves some time here.

We went into it saving a lot of money up front, rebuilding our savings/seeing how the new higher mortgage goes, and then hopefully refinancing.

31 minutes ago, theJ said:

I do hope you can get into a 15 year though.  IMO it's the second best way to buying a house short of straight up cash.

ABSOLUTELY! Our last home was a 15 year and it was a no brainer. We wanted to be more conservative initially, but my wife should be going to work full time in the next 3-4 years, meaning our cash flow buffer will be greater. We could PROBABLY do it now, but it would strap us for a few years.

31 minutes ago, theJ said:

Lastly, it was probably wise to sit on some cash when building.  I'm sure there will be some changes as you go, or things you want to buy later that haven't crossed your mind yet.  I wouldn't invest it just yet.  Keeping the cash liquid through construction and afterward for a few months is smart in case there are changes (and there always are in construction).

YEP! This is exactly why we went with the ARM and kept the extra $25K around, just for those reasons. We also decided to finish our basement right away and rent it out to a group of college students that we know personally and go to church with (we have a lease/lawyer and all of that, with a separate entrance, etc.).

Essentially, we are basically going "2020 is a Pilot year" and in 2021 we are reevaluating a 15 year mortgage and resuming semi-aggressively investing the other cash, once we have that set amount in savings (rebound after the dust settles).

Hopefully this makes sense!

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  • 2 weeks later...

Here's a tip for you guys.  I was in the mortgage business for 10 years, including 7 years when I owned my own mortgage company.  I know my way around mortgage programs.  Last summer I bought a house and was able to get a loan program that I couldn't have gotten for my Mom, even when I had my own mortgage company. 

I bought a house for approximately $265,000 with a total of about $2,000-3000 down.  I have a 30-year fixed rate of 2.125% with no PMI.  I did pay 4 points to buy the rate down that far, but if I stay in the house for about 5 years, my savings will pay for the buy-down.  With a rate that low, about half of my payment has been going toward paying down the principal since the first payment.  My monthly payment with taxes and insurance is $1,300.11.  I was paying $1,100 to rent an apartment before buying the house, so it has been well worth making the move.

I got this loan through an organization called N.A.C.A.  It took a little extra work to get the loan through them, but it was worth it to me.  If anyone has any questions, feel free to PM me.  I don't work for them.  I just got a good deal and wanted to pass on the info to you guys.  Check them out at www.naca.com .

I hope it is ok to post this information.  As I said, I'm not an employee of N.A.C.A., and would get no compensation of any kind if anyone gets a loan from them.  I just know it's a darn good program for a lot of people, particularly first-time homebuyers.  

Good luck! 

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We keep going back and forth on buying a vacation rental condo that we can rent out on airbnb when we're overseas but can use during summers while in the US. We will likely make the jump after next school year. Just a question of where. We've thought about in a major city like Seattle or Portland but then you start running into issues with being allowed to airbnb properties along with being much more expensive. More likely options due to most condos we've looked at online already being short term rentals are in places like Kissimmee, FL, Gatlinburg, TN, Park City, UT, or Myrtle Beach, SC.

Obviously condos don't appreciate in value the same way a house does, but we wouldn't have to worry about yard work, roofing, and, if you used a rental agency, dealing with renting it out/cleaning. Just not quite ready to make the dive.

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  • 2 months later...

Hey guys, the soon to be wife and i will be looking into getting our first home next year (if we find the right fit obviously) i have no idea what priced homes we can even look at. I know the bank tells us the price they will fund us for, but is there any way to have a rough idea of what we would get approved for ahead of time?

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I'm sure a lot has been covered, but one thing I'd advise that we took advantage of to save cash up front w/ closing and down-payment was to write into the offer to have the sellers cover all closing costs (and then adjust offer accordingly). Most sellers should be amendable to this since they're getting a cash windfall with the sale. You're really just amortizing this closing costs doing this, but it lets you keep cash in the bank as the buyer when you're already bleeding quite a bit from the 20% down.

Great time to scoop up a mortgage right now...I'm on the fence about doing a re-fi and dropping the rest of my 30 yr down to a 15 yr.

Also, it's cliche, but seriously: location location location. Especially if you're at all handy, but the outdated house that's situated amongst homes that have a higher valuation is gonna give you the best return on your money. I'm sitting pretty having done just that and putting a lot of sweat equity into my place.

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10 hours ago, bigbadbuff said:

Hey guys, the soon to be wife and i will be looking into getting our first home next year (if we find the right fit obviously) i have no idea what priced homes we can even look at. I know the bank tells us the price they will fund us for, but is there any way to have a rough idea of what we would get approved for ahead of time?

The rough rule of thumb is that your payment + insurance + taxes shouldn't be more than 25% of your take home pay.  

I would also advise that you should have a 20% downpayment, as you can avoid PMI that way.  It also keeps you from going underwater if the market crashes, and most importantly means more of your payment is going to principal than interest.  If you do the math on a 30 year payment, you're going to be paying a crap ton and a half in interest.  Putting more down helps avoid that, to a degree (so does a 15 year mortgage).

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17 hours ago, incognito_man said:

Also, it's cliche, but seriously: location location location. Especially if you're at all handy, but the outdated house that's situated amongst homes that have a higher valuation is gonna give you the best return on your money. I'm sitting pretty having done just that and putting a lot of sweat equity into my place.

Good advice
And another piece is that sometimes you can come out ahead by purchasing a 2 bdr 2 bath and adding a new master bdr in the future
EVERYBODY wants a 3/2, so the competition and prices are higher. If you zig when everyone else zags, there's an opportunity to get a great piece of property and a decent home that you can expand later as your family grows.

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13 hours ago, theJ said:

The rough rule of thumb is that your payment + insurance + taxes shouldn't be more than 25% of your take home pay. 

If you’re Dave Ramsey and don’t live in California tbh

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4 hours ago, theJ said:

Buying a house in California is impossible. 

I’m young with a good job and no debt and it feels like it’ll be forever until I could realistically buy anything tbh. At least if I wanna live somewhere halfway smug. Would rather rent somewhere in LA or Orange County than buy anywhere else. 

Edited by TLO
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2 minutes ago, TLO said:

I’m young with a good job and no debt and it feels like it’ll be forever until I could realistically buy anything tbh. At least if I wanna live somewhere halfway smug. Would rather rent somewhere in LA or Orange County than buy anywhere else. 

the MoL should buy a home together in West Virginia or some other flea state, as a compound for summits etc.

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10 hours ago, Shanedorf said:

Good advice
And another piece is that sometimes you can come out ahead by purchasing a 2 bdr 2 bath and adding a new master bdr in the future
EVERYBODY wants a 3/2, so the competition and prices are higher. If you zig when everyone else zags, there's an opportunity to get a great piece of property and a decent home that you can expand later as your family grows.

My neighbor across the street is just now doing that, along with an entire remodel.  I definitely agree with that advice.  I live in between DC and Baltimore in an area with a diverse population (a lot of families who have been in the area for decades or even centuries) as well as middle-class families who have government jobs in DC.  The asking prices for 3 BR/2BR is outrageous.  I bought 4 BR/2.5 BR a few years ago, and now the price for the others has exceeded what I paid for mine.  Just have to make sure you have the yard for it.  

I went with a little more house than I needed, because I hated helping friends move and I wanted to grow into a house.  

Also, the best advice I can give for this thread is to buy a house that's less than 10 years old if possible.  Newer construction usually means you will have less things going wrong with the house or other expenses related to it, while you are still recovering/rebuilding your money from making the down payment.   Also if you can, look into what company built the house.  A lot of realtors know that information or can find it out, and they also know who is good and who is bad.  I was lucky to have a close cousin as my realtor, and one of the reasons we went with the house I had was because of who built it and his reputation. 

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  • 2 weeks later...

So My GF and I were discussing our finances over the weekend and it started up the conversation of buying our first home. It's weird, because there are weeks when I feel like we could afford a nice home right now. And then there are weeks where I feel like we are still 5 years away and we can't afford anything right now. My thought process when talking about it was...

Ok we pay $1,200 a month in Daycare costs and another $600 a month in rent.  And while we don't really have the ability to save a TON, we make it by just fine. It's not like I have a certain amount in my savings and it's slowly creeping down to nothing because we can't afford our current lifestyle. We might have the option to get our daycare costs from $1,200 to $0. My GF has 2 days off during the week currently and that will not change (yes we pay $1200 for 3 days a week right now) and my mom is going to retire in July and has agreed to watch the kids twice a week starting in August. So we need someone for 1 day during the week. If we can make that happen, and I feel like it shouldn't be that hard to find a family member, than my thought is we could afford a house payment of $1,800 dollars. ($1,200 daycare + $600 rent now = $1,800) and if we want to stay on the safe side and not be prisoners to a house payment, look into a home where the monthly payment is between $1,200 - $1,500 dollars. We both really want to move by the time our oldest starts Kindergarten (so we have 1 year) but we have agreed that we don't want to rush anything and we want to do this the right way. 

So my game plan over the next year is just to save as much up as I can. Putting 20% down to avoid a PMI cost sounds AMAZING, but I'm not sure if we would ever get there. Right now we have around $16,000 saved up and I would say we are pretty good with our money. If we are able to make the daycare thing happen and go from $1,200 a month to nothing, we have agreed that we both want to try and be disciplined enough to where we aren't spending that extra money, but instead just throwing it into the savings. And it's mostly me who pays the daycare and I'm a little better with my money. 

So my thoughts are we could be looking for a house a year from now with $25-$30,000 saved up and a salary of around $75,000. I would like to put 5% down, have $5-$10,000 for renovations we want to do around the house and have an emergency fund of around $3-$5,000 dollars.  

Any thoughts on this would be helpful. If I'm way off on my thinking please let me know. Would love to hear other peoples opinion. I know @theJ has helped me and others in this thread before. 

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