Home buying thread

Khane · Mar 16, 2015

Jysin_sl said:
Yea, that makes even less sense if she just sold her condo for zero gain and your brother was the only one to actually put actual cash, via 401k no less, into the place.

What on earth makes her think she is entitled to the house?

The fact your family supported this insane purchase just verifies the general topic of conversation in this thread: that the general public have no idea what the fuck they are getting themselves into with mortgages. My own family is the same way. As long as X dollars earned per month is marginally above Y dollars outgoing per month, nothing else fucking matters!! Pure insanity.

Not Noodlebro's family, his wife's. And yes, it is insanity.

Corndog · Mar 16, 2015

I hope I'm not making the same mistake by overbuying. Fell in love with a place that was higher than what we had been looking at. $320k basically. Our payments will be roughly $1950 with our income that hits our account after taxes being. $4500.Gross income is something like $5700 or something. No debts, we currently rent a house for $1400, utilities will be roughly the same and sock away roughly 2k a month into savings. It will put me 20 minutes closer to work and give me a 1500 sq foot shop, to expand my business further. We are only putting 5% down and leaving retirement accounts untouched etc. I should mention that 320k, is not a mansion in the Seattle area, we are in a city outside of it, but many people spend 4-450k for their first home here.

wormie · Mar 16, 2015

Honestly no one should buy a house that is more than 2 years worth of salary. But thats just my opinion.

Let me add to that a little bit.

A house being the american dream is a load of shit. No one needs to own a house. A house is also a fairly terribad investment for long term. Buying a house that puts strain on financial resources and that leaves a household one job loss away from bankruptcy/foreclosure is always a terrible terrible idea. People should buy houses below their means not above. And if one has to pay PMI to finance a house, it usually means you are buying above your means. This isnt directed at any one in particular, just a general observation from experience.

My qualifications is that I work in title insurance which is directly related to real estate.

Jysin · Mar 16, 2015

Corndog_sl said:
I hope I'm not making the same mistake by overbuying. Fell in love with a place that was higher than what we had been looking at. $320k basically. Our payments will be roughly $1950 with our income that hits our account after taxes being. $4500.Gross income is something like $5700 or something. No debts, we currently rent a house for $1400, utilities will be roughly the same and sock away roughly 2k a month into savings. It will put me 20 minutes closer to work and give me a 1500 sq foot shop, to expand my business further. We are only putting 5% down and leaving retirement accounts untouched etc. I should mention that 320k, is not a mansion in the Seattle area, we are in a city outside of it, but many people spend 4-450k for their first home here.

So if I understood you right (assuming identical utility costs), you will be saving about $1500 per month instead of $2k. I know you own your own business, so there's odd cashflow for you. $1500 per month going in the bank isn't terrible but you could get caught out month to month on the inevitable household repairs. I would feel far better in your position getting enough money down to get rid of PMI and get that monthly payment obligation down. PMI is just the same as burning money.

Noodleface · Mar 16, 2015

Khane_sl said:
Not Noodlebro's family, his wife's. And yes, it is insanity.

Yes please, I'm related but not by blood. I tried to be the voice of reason. Also, before they bought the house the dude was planning on proposing and she was normal, while moderately a bit OCD with certain things. From all accounts, before this she was a great match. Then it was the classic tale of switching a light switch as soon as they bought the house.

I kept telling him "can you see yourself with her for 30 years? Because that's what you're doing here"

Also coerce might be a strong word here, but she definitely pushed him to do it. I don't think the family knew about that until after they bought the house.

wormie · Mar 16, 2015

One more thing. Most people look at the monthly payment and decide whether or not they can afford the house. This is an incorrect way to look at things. A person should examine the total costs of a mortgage over the life of the loan to see if it makes sense. For example, a 30 year mortgage of 300k, at current rates, will cost around 550k when all is said and done. And thats just the financing costs. PMI will be added on top of that.

Khane · Mar 16, 2015

wormie_sl said:
One more thing. Most people look at the monthly payment and decide whether or not they can afford the house. This is an incorrect way to look at things. A person should examine the total costs of a mortgage over the life of the loan to see if it makes sense. For example, a 30 year mortgage of 300k, at current rates, will cost around 550k when all is said and done. And thats just the financing costs. PMI will be added on top of that.

This is why I like to recommend looking at what the cost of the same house with a 15yr term mortgage would cost you, and use that as a guideline of whether or not you can "afford" the house. It's not about being able to make the payments month to month, it's about securing your financial future.

wormie · Mar 16, 2015

Khane_sl said:
This is why I like to recommend looking at what the cost of the same house with a 15yr term mortgage would cost you, and use that as a guideline of whether or not you can "afford" the house. It's not about being able to make the payments month to month, it's about securing your financial future.

You have no idea how many people dont understand this.

Jysin · Mar 16, 2015

Khane_sl said:
This is why I like to recommend looking at what the cost of the same house with a 15yr term mortgage would cost you, and use that as a guideline of whether or not you can "afford" the house. It's not about being able to make the payments month to month, it's about securing your financial future.

I get your point, and what you are trying to accomplish. But given his situation with him owning his own business I would feel far better simply putting enough down to get rid of PMI and go with the 30 year mortgage. If you have the extra money leftover each month, use that to dump into principal to bring down the costs. If he goes with a 15 year mortgage, he is on the hook every month for that increased payment. If things go wrong, he doesn't just risk losing his house, but also his business.

Put enough down to get out from under PMI, go for a 30 year and be dilligent about getting extra payments put in to bring the duration of the loan down significantly and therefore paying far less interest.

Remit_sl · Mar 16, 2015

wormie_sl said:
One more thing. Most people look at the monthly payment and decide whether or not they can afford the house. This is an incorrect way to look at things. A person should examine the total costs of a mortgage over the life of the loan to see if it makes sense. For example, a 30 year mortgage of 300k, at current rates, will cost around 550k when all is said and done. And thats just the financing costs. PMI will be added on top of that.

Car salesmen are the best for this. They always ask "What would you like to spend a month to get into this x", and have no idea what to say when I respond with "I don't care, what is the lowest interest rate you can do, otherwise I am going with my lender who already approved me for yadda yadda"

I did a 15 year mortgage, but I dont think that is the best route either unless you are using it as an investment. We bought a super cheap (for the area) foreclosure and did a complete remodel (ourselves). Basically just building as much equity as possible until I likely move out of the area for bigger and better things.

Deathwing · Mar 16, 2015

wormie_sl said:
Honestly no one should buy a house that is more than 2 years worth of salary. But thats just my opinion.

Let me add to that a little bit.

A house being the american dream is a load of shit. No one needs to own a house. A house is also a fairly terribad investment for long term. Buying a house that puts strain on financial resources and that leaves a household one job loss away from bankruptcy/foreclosure is always a terrible terrible idea. People should buy houses below their means not above. And if one has to pay PMI to finance a house, it usually means you are buying above your means. This isnt directed at any one in particular, just a general observation from experience.

My qualifications is that I work in title insurance which is directly related to real estate.

I wouldn't buy a house if I didn't think having a paid off house would make retiring much easier. I don't want to be 75 or whatever and still paying rent.

If that means paying substantially more over 30 years(that I can comfortably afford) compared to a figure I absolutely cannot afford over 15 years, that's worth it to me. IDK, if there was a 22.5 year mortgage, I probably would have taken that? 30 vs 15 is too large of a difference and doesn't serve the large majority of scenarios. If most people could make that 30 vs 15 decision, I want to say, and this is just a guess, that the pricing of houses would quickly change to eat that margin and force most people back to 30.

Remit_sl · Mar 16, 2015

If you have the discipline, you can make far more money in other investments over that 30 year period vs a 15 year mortgage. Most people would rather just blow the extra cash though going from a 15 to 30. I personally just dont have time to dick with anything else so I am dumping it into my mortgage.

Brando · Mar 16, 2015

There are 20 year amortization periods available, you just have to ask. The interest rate is no better than a 30 yr usually though.

opiate82 · Mar 16, 2015

Brando_sl said:
There are 20 year amortization periods available, you just have to ask. The interest rate is no better than a 30 yr usually though.

If the interest rate is no better wouldn't the results be the same of just increasing your principle payment on the 30 year? What would be the point?

Frenzied Wombat · Mar 16, 2015

As a house owner, take whatever the mortgage is, plus your estimated expenses, then add another 20% on top of that. The reality of my estimated pre-purchase expenses was shattered once I actually purchased the house. Repairs and "shit for the house" never fucking ends.. There's a reason why it's called a "money pit". So the best suggestion is if you're "not sure" whether you can afford it based on your cost estimate, you definitely will not be able to once you factor in all the surprise costs that come your way after you move in..

Borzak · Mar 16, 2015

Khane_sl said:
She coerced him into cashing out his 401(k)? Ugh....

That must be some hell of a pussy.

Remit_sl · Mar 16, 2015

Frenzied Wombat_sl said:
As a house owner, take whatever the mortgage is, plus your estimated expenses, then add another 20% on top of that. The reality of my estimated pre-purchase expenses was shattered once I actually purchased the house. Repairs and "shit for the house" never fucking ends.. There's a reason why it's called a "money pit". So the best suggestion is if you're "not sure" whether you can afford it based on your cost estimate, you definitely will not be able to once you factor in all the surprise costs that come your way after you move in..

To go along with that, I live in a rural area that passes large school levies. My first house went from just under $1000 to $1450, and my current house just went from $1200 to $1400 thanks to property tax increases due to the levy. Think of the children.

Brando · Mar 16, 2015

opiate82_sl said:
If the interest rate is no better wouldn't the results be the same of just increasing your principle payment on the 30 year? What would be the point?

Correct, which is why it's never really spoken about or advertised. You save interest over the life of the loan, that's about it. The average life of a loan for most servicing portfolio's is just over 4 years right now, the average person will never get to the end of a 15yr or 30yr term.

Jysin · Mar 16, 2015

Brando_sl said:
Correct, which is why it's never really spoken about or advertised. You save interest over the life of the loan, that's about it. The average life of a loan for most servicing portfolio's is just over 4 years right now, the average person will never get to the end of a 15yr or 30yr term.

Which is even worse, because you never really gain equity outside of market movements. All the interest is front-loaded into a loan, so you are paying a lot of interest in the early years and very little towards principle. If people are shifting houses every 4 years they are really only ever paying banks money for loan costs.

That's a crazy statistic I had never heard!

Noodleface · Mar 16, 2015

Borzak_sl said:
That must be some hell of a pussy.

Hell no bro, she looks like a linebacker

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