Mortgages

[SDHNTR]

We only have to look back to 2008 to see how government intervention in the housing market and low-down/no-down residential mortgages are a bad idea and a risk to the financial system. I don’t begrudge people for taking advantage of them, but to your point IMO it is not a good thing they exist.

Exactly..

 

[ianpadron]

7/1 ARMs at the local credit union are the best deal going right now. That's what I have, and more than half of my clients from last year went with.

3 and 5 year ARMs are where the bad reputation comes from...along with all the NINJ (no income no job) balloon mortgages that were responsible for the 2008 crash.

7/1 ARM is a totally different animal and a fantastic tool for wealth building, here's why:

If you look at the market stats, 90%+ of homeowners sell or re-fi PRIOR to year 7, so it makes sense to save the 1.5-ish % APR vs locking in a 30 yr fixed product that is more expensive... that you'll likely refi or sell out of anyway.

Guys will disagree because they knew someone who had a terrible loan 15 years ago that was also adjustable, but I'm telling you right now they are worth looking into, and I say this as someone who is very risk averse and works in real estate full time.

Unless you're buying in a rapidly appreciating market, I'd recommend putting 20% down to secure the best rate possible...BUT if you can park that cash elsewhere and earn more interest than you're paying, 5 and 10% down products are totally fine.

The answer to almost every real estate question will always be "it depends", and without knowing your exact situation I'll leave it at that. Reach out anytime via PM with specific questions, I absolutely love getting people dialed into real estate as it is rocket fuel to building wealth.

 

[Gone4Days]

Are you single? If so I would keep renting with a roommate or two until real estate comes back to earth. Hopefully that is sooner than later. Super high home prices with super high interest would steer me away from buying right now.

 

[Marble]

My advice for first-time home buyers:

Do everything you can to get 20% down
Don't try to time the market
Get a 15-year loan
Have an emergency fund
Date the rate and marry the mortgage.
Payment should be no more than 25% of your take-home money.

Understand that your first home will not be your last home. Very few people buy their first home and live in it forever.

Sent from my SM-S918U using Tapatalk

 

[Ucsdryder]

Avoid a home with an HOA.

There’s good debt and bad debt, so sometimes paying off the good debt doesn’t make financial sense BUT…the peace of mind associated with no mortgage is amazing.

My wife and I work for different pharmaceutical companies. Our industry is very fluid, so we made the decision to pay down the mortgage as quickly as possible, even though our mortgage interest rate was lower than what our money could earn.

We missed out on a bit of interest income but no mortgage makes me a dangerous man.




P

I never understand the HOA deal. I love having an HOA. It keeps my neighbors from letting their lawn turn into a weed bed, having 15 cars parked outside, having their junker boats and motor homes leaking oil everywhere, etc.

Ask around about the HOA. Knock on a neighbors door. Read the HOA bylaws, etc. Do your homework, just like you should with everything else involved in buying a home, but the right HOA is great at protecting property values and eliminating heartburn’s.

 

[SDHNTR]

Here's my advice and remember it's usually worth what you pay for it.

Also, not trying to lecture, but share my experiences as a Medicare eligible person who has not had a mortgage for over five years.

Put down the smallest amount possible to get into the house that you can if you have high confidence you can make the payments.

This does a numbers of things:

1) Keeps cash available if you need it for home repairs, remodels, life emergencies, etc.

2) You are paying back the mortgage with lower valued dollars. Inflation, and our debt based economy, is going nowhere anytime soon so why not pay them back with dollars that are losing 5-10% of its value every year? Just be sure you can make the monthly payment.

3) If housing prices crater like they did 2008, then a "strategic default" is a viable option which means you'll lose little since you put a small amount down. You put 20% down and that disappears in a SD scenario but a 3% or 5% DP loss is an easier pill to swallow.

4) If you home appreciates in value never, ever use it as an ATM unless somebody's life is at risk.


20-30 years ago I was of the mindset that you sign a contract like a mortgage, then by god you make the payments no matter what but the last 15-20 years has opened my eyes to do what's in the best interest of you and your family. Corporate America got a free pass for bad decisions of biblical proportions so why not you or me?


Good luck,

Thumbs down. Default should never be a wilful strategy.

 

[NRA4LIFE]

No PMI, no escrow, period. If you can't get that done, wait. Not a great time to be buying a home anyway.

 

[MCS]

You have to pay PMI for the life of a FHA loan. But you can have a worse debt to income ratio and qualify for a FHA loan.

A lot of conventional loans you can put 5-10% down but you will have to have a lower debt to income ratio. The plus side of a conventional is that once you have 20% equity you can have the PMI removed without refinancing the loan.

Another thing you can do is ask the seller to buy down your rate. A lot of house builders will buy them down.

People will always tell you it's a bad time to buy a house. People told me in 2010 it was a bad time to buy a house. Buy a house when your financially ready to do it.

 

[MCS]

No PMI, no escrow, period. If you can't get that done, wait. Not a great time to be buying a home anyway.

There are two types of escrow. One handles the Ernest money and tittle transfer of the sale.
The other is the holding on the money for your taxes and insurance that is required for most home loans.
What is wrong with going through escrow?

 

[NRA4LIFE]

Holdback.

 

[UncleBone]

Look into a USDA rural housing loan. Depends on the area (there's a map online if you search;think non urban areas) , but we moved into our place in 2018 for only 7k in closing costs and zero down payment The rate was lower than a conventional 30 year too and we saved our down payment instead. It's a sweet program

Came here to say this!! Glad someone mentioned it already.

 

[WiscoHoundsman]

There are less expensive houses out there if you’re willing to move or take a different job. Anyone thinking they need 100k to buy a house hasn’t looked where I live. Buying a cheaper house is easy to do but take some sacrifice to make work. Maybe your state or city has gotten too expensive to live in. It all depends on one’s priorities.

The wife and I managed to save 20% done and it worked wonders when we went to build our house.

 

[pacoalcracker]

terrible time to buy a house. You will be over-paying by at least 20%. Once rates start coming down it won't get better because there will be a stampede of homebuyers that were waiting for the rate reduction and that is then going to drive home prices higher....and then the gubmint's are broke and property taxes are on the upswing. it's a terrible time. stay renting and saving until the next recession takes hold when property prices will plummet and interest rates with be way lower. there will be a next recession and i don't think it's that far away.

 

[maxx075]

terrible time to buy a house. You will be over-paying by at least 20%. Once rates start coming down it won't get better because there will be a stampede of homebuyers that were waiting for the rate reduction and that is then going to drive home prices higher....and then the gubmint's are broke and property taxes are on the upswing. it's a terrible time. stay renting and saving until the next recession takes hold when property prices will plummet and interest rates with be way lower. there will be a next recession and i don't think it's that far away.

I'm hoping the election is the straw that breaks the camel's back.

 

[HoneyDew]

I never understand the HOA deal. I love having an HOA. It keeps my neighbors from letting their lawn turn into a weed bed, having 15 cars parked outside, having their junker boats and motor homes leaking oil everywhere, etc.

Ask around about the HOA. Knock on a neighbors door. Read the HOA bylaws, etc. Do your homework, just like you should with everything else involved in buying a home, but the right HOA is great at protecting property values and eliminating heartburn’s.

Personally I don’t want others having any control over my property. Sounds like you’re having an ideal experience with your HOA. Hopefully that will continue for the duration of your time in that house. However just because it’s great today doesn’t mean it will be tomorrow. I know many people who have had bad experiences with their HOAs. I don’t know anyone whose bad experience was from not having one. Just my two cents.

 

[Pharmseller]

I never understand the HOA deal. I love having an HOA. It keeps my neighbors from letting their lawn turn into a weed bed, having 15 cars parked outside, having their junker boats and motor homes leaking oil everywhere, etc.

Ask around about the HOA. Knock on a neighbors door. Read the HOA bylaws, etc. Do your homework, just like you should with everything else involved in buying a home, but the right HOA is great at protecting property values and eliminating heartburn’s.

Do you have a boat?

Man gets realistic picture of his boat painted on a fence intended to hide it

A California man who was ordered to keep his boat out of sight has had the last laugh — by commissioning an artist to paint a realistic image of it on the fence that obscures it.

www.yahoo.com

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[Pharmseller]

And everything is peachy with the HOA until the wrong people get elected to the board.

The joke is, what do you call a gaggle of Karens?

An HOA.





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[MattB]

I never understand the HOA deal. I love having an HOA. It keeps my neighbors from letting their lawn turn into a weed bed, having 15 cars parked outside, having their junker boats and motor homes leaking oil everywhere, etc.

Ask around about the HOA. Knock on a neighbors door. Read the HOA bylaws, etc. Do your homework, just like you should with everything else involved in buying a home, but the right HOA is great at protecting property values and eliminating heartburn’s.

There are HOA people and there are non-HOA people.

Where we live has no HOA (thank god) but all our rentals do. I was recently threatened with a fine by one of them because someone other than our tenant parked in front of our house with trailer. On another we get threatened with a fine every year for not trimming our palm tree - even though everyone waits a few months until they fruit before trimming. The same one threatened us with a fine for not having our landscaping up to their subjective standard. When I asked them to specifically point out was wrong with our landscaping, the issue was magically resolved.

Another HOA got on board with a neighbor to try and punish a tenant for running power tools outdoors to refinish a piece of furniture (family heirloom). The neighbor called the cops, code enforcement (said they were running a commercial business out of the house) and my HOA to try to make them stop even though there was no violation of HOA rules. When my HOA suggested I asked the tenant to stop, I told them to tell the neighbor (and them by intimation) that, if the tenant left because of the harassment and I suffered a financial loss, I would sue them on principle. Not to mention I learned that the complainant was himself running a business out of his house and pointed that out to the HOA. The issue magically resolved itself.

F HOA’s.

 

[Pharmseller]

Saying some HOAs are good is like saying he only hits me when he drinks.





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[Tahoe1305]

I’m closing on my 6th in two weeks. Love real estate and since I move so much get to play with it a bit more than I’d planned. I’ve learned some things/developed some strategies over the last 20 years of doing it.

1) concur with avoid PMI if you can (VA or 20%). Also agree if it’s only a few bucks it’s not the end of the world.

2) I always go 30 year fixed. May cost you .25-.5% on rate but if you are disciplined you can pay it down at a 15 year pace with minimal extra cost (just that rate difference). I think this is important because it gives you flexibility. Using the banks money on something like a loan and freeing up your cash for other things (maybe another house someday) is good. Also keeps debt to income ratio lower to enable more purchase power later.

3) Do the numbers on what a refinance timeframe could be. You’ll be offered rates at varying discount points. I personally wouldn’t pay down rates if the break even is more than 3-4 years. I personally prefer to not pay down. I’m at a 6.25% on the current deal with a $2k lender credit for reference. No fees. (Ask if this doesn’t make sense).

4) make sure to get estimates on taxes and insurance. These can make or break a house payment (especially with HOA and PMI). Oh yeah, and they almost always go up each year…sometimes a lot (insurance) depending on locality.

5) understand that in most markets the housing prices are still close to peak (within 10% almost everywhere). IMO there is still ~30% “risk” in current prices. Doesn’t mean they will go down, just be prepared if they do. The only thing on your side is time. Be prepared to hold for 5-10 years and you’ll be in good shape. Do this by renting. Long term rentals over a longer period of time are great investments.

6) reference #5 being in the “game” is almost always better than sitting on the sideline paying for others to make money in the “game”. There are risks in everything. Two years ago I was terrified to buy a house with Covid and fear of a crash. I did anyway and arguably one of the best (most lucky?) financial decisions I’ve made (I’ve already sold and avoided taxes). IMO real estate is almost the safest bet. I’ve always been able to make money if I’m patient.


Hope that helps.

Edit: my only regret is ever selling any of them. I wish I still had all 6!

#7. Don’t forget about tax benefits of homeownership. At a minimum (while residing in it) you can write off interest. You’ll have to beat the standard deduction (which is high now) but once you open that door there are many other things to write off too. For my situation (on a house close to what you are spending) I am factoring in a $300/month tax benefit to my mortgage due to the crazy amount of interest I’m going to have to pay. It’s a way to compare apples to apples actual out of pocket expense. Later if you rent the write offs get even better (everything plus depreciation is written off).