Mortgages

[Fowl Play]

I would not wait for another recession. It's always just around the corner.... but it also might not make financial sense for you to buy right now. Really do the numbers in your area to see if rent vs buy makes sense. With these interest rates it does NOT in allot of areas.

Honestly, the only hope for the next generation of homebuyers is to get institutional investors and foreign investors OUT of single family homes. I love capitalism, but unchecked capitalism like we are seeing in single family homes is terrible. And investment properties/short term rentals are killing some markets. Islamorada, FL passed laws on no new weekly rentals, for homes with a value under like $1.5 million (don't quote me on exact numbers). Every rental existing before was grandfathered in, but no new properties. On one hand I hated it, as a beautiful VRBO I went to every year SOLD and was no longer grandfathered in. Had to be monthly rentals or longer, etc. But I understand it. It started getting so bad that every restaurant, store, all the workers that make that town tick could literally not afford to live there anymore due to so many short term rentals, institutional investors, etc.

 

[AZ8]

To the OP make sure you have your financial ducks in a row. I read most of the responses, mostly about mortgages, but I didn’t see where anyone mentioned your personal financial situation.

What’s your DTI (debt-to-income) ratio? Front end and back end DTI. Credit score? Assets? How many loans or credit cards have you opened within the past 2 years?

You might think you’re ready, but the numbers will tell you the truth. Have you received a large cash deposit? Be prepared to write a letter of explanation during the underwriting process for any “odd” financial alert.

I bought my first home in 1999 and the mortgage process was pure hell! Always wanting another document. Hang in there and just keep providing.

Go talk with a lender and run the numbers. It will be a hard hit on your credit, but it’s a necessary evil.

 

[NRA4LIFE]

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.

We had a flimsy HOA at our house in MO when we lived there. One of the guys on the board had a clue and was my neighbor. He leaked info on the board and their finances. They had none and tried several times to bilk money from the homeowners, against our contracts. Nobody paid. I knew they had no money so I just said FU and did whatever the hell I wanted, along with half the neighborhood when I let them know they could. The HOA could not take us to court with zero dollars in their account. It was a $hit show and the HOA could do nothing about it.

 

[downthepipe]

If I were you I would have bought your first home in 2011.

 

[maxx075]

If I were you I would have bought your first home in 2011.

Same lol

 

[HoneyDew]

We had a flimsy HOA at our house in MO when we lived there. One of the guys on the board had a clue and was my neighbor. He leaked info on the board and their finances. They had none and tried several times to bilk money from the homeowners, against our contracts. Nobody paid. I knew they had no money so I just said FU and did whatever the hell I wanted, along with half the neighborhood when I let them know they could. The HOA could not take us to court with zero dollars in their account. It was a $hit show and the HOA could do nothing about it.

Again sounds like a lucky situation. If they had any money it sounds like they would have enjoyed making your life hell.

 

[cardiac5]

I’m not a financial advisor. Just throwing another angle out there that if one were to split the 20% down “if” you have it and put half of it in stocks or something else with a higher return. 400k home 20% is 80k. 360k mortgage at 7.5% is $2,517/ month 906k over 30years. 320k is $2,237/month 805k over 30 years. These are just quick numbers without pmi and insurance/property tax. If you put 40k in an index fund over 30years at 8% avg it comes out to 402k @10% avg return you’d have 697k. Those numbers are just for putting in 40k and not investing another penny. I’d personally rather pay the extra few hundred a month and know I have a safety net if I needed it. Takes a long time to get 40k free and clear in the bank.


Sent from my iPhone using Tapatalk

 

[ianpadron]

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 cringe everytime I see some variation of this opinion.

Historically, recessions never moved the needle on real estate. Then, a real estate centric crash happens and everyone forgets that PROPERLY leveraged real estate is the best hedge against a recession and inflation.

The fact of the matter is that there is a SFR shortage of 4-5 MILLION units (depending on the source) in the country TODAY.

Supply and demand is what has kept prices high, even with rates 2x what they were 18 months ago.

Ironically, this inventory shortage is the fallout of so many builders going belly up in the last crash, and the 4-5 year gap in housing production it caused, we're still playing catch-up today.

If you think buying a home is ever going to be cheaper than it is today, you're going to be waiting for a looong, looooong time.

 

[ianpadron]

I’m not a financial advisor. Just throwing another angle out there that if one were to split the 20% down “if” you have it and put half of it in stocks or something else with a higher return. 400k home 20% is 80k. 360k mortgage at 7.5% is $2,517/ month 906k over 30years. 320k is $2,237/month 805k over 30 years. These are just quick numbers without pmi and insurance/property tax. If you put 40k in an index fund over 30years at 8% avg it comes out to 402k @10% avg return you’d have 697k. Those numbers are just for putting in 40k and not investing another penny. I’d personally rather pay the extra few hundred a month and know I have a safety net if I needed it. Takes a long time to get 40k free and clear in the bank.


Sent from my iPhone using Tapatalk

This is how I rolled on our first home purchase. Put 5% down on a conventional loan, knew the area well and was bullish on the coming run-up. Kept enough dry powder to be dangerous elsewhere and that home appreciated $350k in 3 years.

There is merit to the argument that one's primary residence is a liability since it doesn't produce cash flow (for most people), but there are ways to maximize ones ROI on a primary...and low money down on the RIGHT property is the best way to do just that. I'll reiterate that this is an approach for housing in desirable areas with above average appreciation, not BFE in a flyover state.

 

[OKHunter84]

PMI is not forever... you will hit 20% faster than you think between payments and potential appreciation. Those who bought in 2020 with nothing down are far better off now than those who tried to wait to get 20% down.

If you look at housing prices over the last 100 years, time in the market is far greater than trying to time the market as others have said.

If you do an FHA then they'll never remove the PMI. you'd have to refi to get rid of it.

I've done an FHA 3.5% down, a 30 year 20% down and a 15 year 30% down. I by far did the best on the 15 year mortgage when we sold it. It would be hard to swing with prices what they are now.

 

[CorbLand]

I cringe everytime I see some variation of this opinion.

Historically, recessions never moved the needle on real estate. Then, a real estate centric crash happens and everyone forgets that PROPERLY leveraged real estate is the best hedge against a recession and inflation.

The fact of the matter is that there is a SFR shortage of 4-5 MILLION units (depending on the source) in the country TODAY.

Supply and demand is what has kept prices high, even with rates 2x what they were 18 months ago.

Ironically, this inventory shortage is the fallout of so many builders going belly up in the last crash, and the 4-5 year gap in housing production it caused, we're still playing catch-up today.

If you think buying a home is ever going to be cheaper than it is today, you're going to be waiting for a looong, looooong time.

The vast majority of people that say it’s going to crash have been saying it since before Covid. If 2008 happened today, prices would still be higher than they were in 2018/19.

 

[Red Letters]

Lots of snakes in these waters, having an attorney is not a bad idea.
PMI insurance insures the lender not you.

 

[Bama67]

I think the "only spend 20% of your net income on your monthly payment" ship has sailed unless you are making a shit ton of money.
A guy with a solid job making $100,000 a year before taxes could only afford a $150,000 house, which in 2024 won't buy you shit.

It's a bummer, I worry about what my 3 children are going to do in a few years.
I'll probably have to move considering a starter home like I bought 20 years ago that was $125k is now $500k and wages have went basically no where.
And I love the "just make more money" responses.
Why didn't we think of that before!? Lol

 

[bone collector 13]

If I were you I would have bought your first home in 2011.

Lmao I know silly me. Should have bought a house instead of worrying about highschool English.

Seriously appreciate everyone’s insight. Finances have come up a ton. Some background on me, 155k last year DTI 2 vehicles, 45k and 18k 3 credit cards 1 is currently 80% 1 is at 30 1 is 0. Which isn’t a huge deal can 0 those out. Credit is sitting at about 720-730 depending on where I look at it. Home market here is rough. Low inventory and it’s all pretty much brand new homes in the 4-550 range. Moving isn’t an option because of work. And adding my finance isn’t an option because her credit is absolutely worthless. We are aggressively trying to get hers built up to atleast get the 18k car potentially off my credit and under her name, but not sure what the time frame of that is.

 

[Wrench]

You have a good plan and have identified the action items. Knock the 80% down to 10 and that will help a bunch. Moving forward stay under 10% on those.

Cars are secured and a bit less risk to creditors.

If you can live like your broke for a few years at 150k you should get monied up. You should be netting 6-7k a month....now roll that from dinner to debt and rock on.

 

[SDHNTR]

wages have went basically no where.

You do realize this is incorrect, right? And mathematically impossible while still maintaining a functioning society. I feel like an asshole bringing this up as I know there are very real feelings around this topic, but it’s important to understand there is a marked distinction currently between “feelings” like this and actual economic data.

According to the Federal Reserve’s Q1 data at the end of March 2024, full time wage growth was 5.2% over the trailing 12 months.
Core CPI increased 3.6% over the same period. Food prices increased 2.2% and energy 2.6%, respectively. Despite feelings, wages have handily outpaced inflation over the last year.

Let’s look longer term…. Curiously enough, long term average wage growth since 1998 is roughly about 3.6% annually. In the same time period, inflation has averaged 2.6%. Again, wages outpacing inflation.

In the field of behavioral finance, it has been shown that the human memory as it relates to financial decision making is strongest over the most recent 2-3 years. Coincidentally, 2022 and 2023 have been the only years within the last 25 where we have seen persistent inflation over 5%. So this certainly feels most painful now, but this has not been a long term, systemic problem. Again, the data doesn’t support the feelings.

I’m not trying to be an insensitive jerk, I realize times are tough for a lot of people. I’m just presenting factual data. You can come up with your own conclusions.

 

[TxLite]

Not saying it’s right or wrong, but when we bought our first house we did 5% on a conventional and ate the pmi for a few years. We ended up doing a refi for a lower interest rate and dropped from the 30 year to a 15 year, and our equity had built up enough that we were able to drop the pmi.

 

[maxx075]

You do realize this is incorrect, right? And mathematically impossible while still maintaining a functioning society. I feel like an asshole bringing this up as I know there are very real feelings around this topic, but it’s important to understand there is a marked distinction currently between “feelings” like this and actual economic data.

According to the Federal Reserve’s Q1 data at the end of March 2024, full time wage growth was 5.2% over the trailing 12 months.
Core CPI increased 3.6% over the same period. Food prices increased 2.2% and energy 2.6%, respectively. Despite feelings, wages have handily outpaced inflation over the last year.

Let’s look longer term…. Curiously enough, long term average wage growth since 1998 is roughly about 3.6% annually. In the same time period, inflation has averaged 2.6%. Again, wages outpacing inflation.

In the field of behavioral finance, it has been shown that the human memory as it relates to financial decision making is strongest over the most recent 2-3 years. Coincidentally, 2022 and 2023 have been the only years within the last 25 where we have seen persistent inflation over 5%. So this certainly feels most painful now, but this has not been a long term, systemic problem. Again, the data doesn’t support the feelings.

I’m not trying to be an insensitive jerk, I realise times are tough for a lot of people. I’m just presenting factual data. You can come up with your own conclusions.

According to the White House, inflation has gone down as well. So take your numbers with a grain of salt.

 

[intunegp]

You do realize this is incorrect, right? And mathematically impossible while still maintaining a functioning society. I feel like an asshole bringing this up as I know there are very real feelings around this topic, but it’s important to understand there is a marked distinction currently between “feelings” like this and actual economic data.

According to the Federal Reserve’s Q1 data at the end of March 2024, full time wage growth was 5.2% over the trailing 12 months.
Core CPI increased 3.6% over the same period. Food prices increased 2.2% and energy 2.6%, respectively. Despite feelings, wages have handily outpaced inflation over the last year.

Let’s look longer term…. Curiously enough, long term average wage growth since 1998 is roughly about 3.6% annually. In the same time period, inflation has averaged 2.6%. Again, wages outpacing inflation.

In the field of behavioral finance, it has been shown that the human memory as it relates to financial decision making is strongest over the most recent 2-3 years. Coincidentally, 2022 and 2023 have been the only years within the last 25 where we have seen persistent inflation over 5%. So this certainly feels most painful now, but this has not been a long term, systemic problem. Again, the data doesn’t support the feelings.

I’m not trying to be an insensitive jerk, I realise times are tough for a lot of people. I’m just presenting factual data. You can come up with your own conclusions.

The answers aren't all in that type of data though.

As it relates to this conversation...from 1985 to 2022, median home sale price increased 423%. In that same time, median household income only grew 216%. Home prices have grown two times faster than income over the past 40 years.

If you look at the same data just since 2000, home values have increased 162% — from $165,300 to $433,100. Meanwhile, wages have increased 78% — from $41,990 to $74,580.

If home prices had increased at the same rate as wages, people wouldn't have such negative feelings about food and energy and everything else in the world getting more expensive too.

 

[SDHNTR]

The answers aren't all in that type of data though.

As it relates to this conversation...from 1985 to 2022, median home sale price increased 423%. In that same time, median household income only grew 216%. Home prices have grown two times faster than income over the past 40 years.

If you look at the same data just since 2000, home values have increased 162% — from $165,300 to $433,100. Meanwhile, wages have increased 78% — from $41,990 to $74,580.

If home prices had increased at the same rate as wages, people wouldn't have such negative feelings about food and energy and everything else in the world getting more expensive too.

Valid points. Which goes back to the solution being the need to refuse to be average. Either make more than the average or spend less (on a home) than average. Those are the only solutions.