Two questions for homeowners

[King Sid the Great 87]

The housing market is as ripe right now as it will ever be. Housing is starting to recover and interest rates probably have another two years at rock bottom.

A particular house today is going to be significantly more expensive in five years even if the price of the house remains flat. A 30 year on $150K at 3.5% is $673.57, at 6% it is $899.33.

If you've got 20% for a down payment, now is the time. 30 years from now, people are going to look back at the recession of '08 and kick themselves for not picking up cheap assets.

[Willie Kool]

its about long-term equity. renting, especially in the market as is, you can have a comparable mortgage for the cost of renting, depending on the area. i have a couple of years of a mortgage paid off while still maintaining my student loan payments. that money on rent is wasted opportunity.

This is exactly how we looked at it when we bought our house. I think we put down 10% at most and originally took a 30 year for the lower payment. Refinanced twice, and now have less than 8 years left and are more than half paid off. We pay about $200 more per month than we were paying in rent 12 years ago.

[Willie Kool]

Also, I would consider a bi-weekly payment if you can afford it as it can shave almost 2 years and a few thousand in interest off a 15 year mortgage.

[pensfan1989]

pensfan1989 is not a homeowner, but will likely rent until he can afford to buy a house without a mortgage, given how much he will travel for work over the next few years.

[eddysnake]

I put down about 10%, didn't have much savings, got laid off and found out a small snake child was on the way shortly after. Things were tight, but we found a great starter house and 3 kids later we are still making it work. Things were tight, but I won't let money control how I live, if you find something you like and you can make it work go for it. Don't blow an opportunity because you think you need to have X amount in savings or so much down, you can always find a way. I may be in the minority, but I feel like these growing pains first starting out with a house are great for the relationship (obviously if you have the money, it's not a concern, but don't let that dictate how you make a decision) I'm more concerned about now than 10 years from now, it may not be the smartest way to live, but it's certainly more enjoyable.

[tifosi77]

1.) When you made your down payment, did you feel like you pushed your self to the limits to make that down payment? Were you comfortable with the amount that you had left over in savings and such after you made the payment? In terms of total assets, how much did you spend on your down payments?


2.) In terms of paying rent vs paying a mortgage, how much did your monthly mortgage payment differ from your rent payment

One our first house, we had an FHA loan. So we had enough in savings to cover the down payment and still have a tidy bit of money left over, but we were still well short of 20%. (Hence FHA) We also had to do a fair bit of renovation on the home because the previous occupant vandalized it (leasing from the owner, who got foreclosed), so it was good we had the buffer. The money came from a few years worth of saving, and leftover money from our wedding registry. (We simply asked for people to contribute to our honeymoon fund, and our friends went guano loco with generosity. We ended up only using like 25% of that registry fund to pay for the honeymoon.) We didn't need to tap into any special assets or anything, just cash money in the bank.

Current house was conventional with a crazy low interest rate, and higher purchase price. But we sold the first house for a tidy profit, and had plenty of cash reserves. The only hiccup we had on this one was we waived the appraisal contingency to win a three-way bidding war. But our house had been completely renovated after being purchased from the last owner, and so it's last sales price was like 40% of what we were agreeing to pay. That triggered an appraisal review by the bank, which meant for a couple restless nights as we stood to lose our earnest money if the appraisal came in low and the seller didn't agree to a reduction. But everything came back kosher and we closed about a week late.

On the first house, we had a good but not great rate. So our mortgage ended up being about triple what our rent had been. But our rent was nowhere near market value (under $2k/mo for a 2br 1,000 sq ft apartment a block from the beach in Redondo....), so in reality the increase should have been only about 35%-40%. We got a much better rate this time around, and so even tho we paid more for this house than for the first one, our mortgage is like $1,000/mo less. That's just on the difference in interest rates. So our current mortgage is just a few hundred dollars more than what our rent at our last apartment would have been if the place had been priced appropriately.

[Pitt87]

Regarding down: I bought a house for which I planned to afford a 20% down payment. I also planned to have ~$20k for updates, so I purposely didn't look at houses that we could not afford. If you can't afford 20% AND the stuff you need to do to the house, you cannot afford the house.

Regarding payments: Find a payment that still allows you to save money each month. A roof is $10k, a water heater is $2500, a new boiler is $5k, cutting down few trees can be $2-3k. All of these things can happen in the same year, so plan to be able to afford it. Relate it to the 'down' question... in 5 years, when you want to update, if you put down 20%, you can probably think about equity loans.

[joopen]

We are building now. We are going up roughly $800 from rent to mortgage. We are also building a pretty decent house that is taking us from a 1700 sq ft apartment to a 3300 sq ft house. We are digging pretty hard to save but we are also saving roughly 31k in 6 months

[Lt. Dish]

kenny the kangaroo does not want to put any undue strain on kenny the kangaroos financial well being

This is key to being a happy home owner.

I know a few people that have extremely nice homes, but have to worry because if they lost their job or something happened, they have absolutely nothing to fall back on. Plus they pretty much live paycheck to paycheck sinking it all into their home.s They can't go on vacation, can't go to sporting events (used to love to go), and are building up some debt because they have to store some on their credit card.

You want to buy what you can afford, while still living the life you want. Sure, there are some adjustments, but if you do it right, you won't notice them after a few months.

I'd like to throw in 2 cents and agree x 1,000 here. You don't ever want to be "house poor."

[mac5155]

What will a $600 mortgage payment get you now a days

[Tomas]

What will a $600 mortgage payment get you now a days

Assuming 3.6% 30-year rate, $600 monthly payments correspond to $132K loan. (Of course, that's assuming that $600 just covers the mortgage and that insurance and taxes are paid extra).

[blurryhaze312]

Glad you asked these questions Kenny.

You and I seem a lot alike in this situation. My g/f and I can probably afford a mortgage payment $500-600 more per month than I'm truly comfortable with, but I just can't justify it right now. Both of us have only been working post-college for 3ish years now and while she does very well for herself (and will continue to) as an accountant, I work in a field that isn't exactly what I would call stable in Pittsburgh. I just worry that if I am left without a job that the only thing around in my field will leave me making up to 20% less than I currently am. This topic has been a bit of a struggle for us since she doesn't have the same career worries I do and simply can't put herself in my shoes in this case. I'd rather be safe, knowing that if worst-case happens I won't have to ask for her help making payments...or worse.

Fortunately, neither of us has any debt outside of her 2010 model car, so at least there's that. We're probably going to shoot for 10% so that we don't deplete all of our savings, though even at 10% in the range we are looking we should both be left with at least half in our savings of what we currently have. Could pay more up front I suppose, but I'd rather keep that cash on hand in case of emergency (and/or home items that we don't already have from our apt) and just throw a few hundred $ extra per month at the payment on my own terms.

It's good to hear from other "real people" from their recent (<----key word) experiences...someone not looking to sell us something.

We spent the last year and some odd months looking in Cranberry Twp and the close areas near rt 79 for a full size home, but it's been frustrating because nothing around here is really worth what it is selling for and it all is off the market so quickly that we can't even compete for the worthwhile listings. After being really against purchasing a town home up until the last few weeks, I think we decided we might be interested after all, so long as it is multi-level so it doesn't feel exactly like the apt setting we are in now. Being a country kid with no town home experience or knowledge, my only worry is re-sale, but I think we should be in fine position to quickly sell should we decide to, being so close to so many businesses such as Westinghouse, etc.

I'd rather take a small risk on this and continue to save up for a house we can build on our own some time down the road when we are able to make the full 20% and are seriously financially established. Anyone with town home experience in the Cranberry/Mars/Wexford/Evans City area?

[skullman80]

The biggest thing I had to get my soon to be wife's head when we bought a house, was just because the bank SAYS we can afford this, and we are approved for "X" amount, doesn't mean we can afford it or have to go that max level.

[KennyTheKangaroo]

The biggest thing I had to get my soon to be wife's head when we bought a house, was just because the bank SAYS we can afford this, and we are approved for "X" amount, doesn't mean we can afford it or have to go that max level.

kenny the kangaroo's sister and fiancee live in rhode island and both are professionals that make good money. but they got pre approved for the laugable amount of like 750,000 or something like that. in reality, they ended up buying a house for less than half of 750k. but its easy to see how that pre approval notion can tempt people into making bad decisions.

[mac5155]

If only more people had that line of thinking, we probably wouldn't have had the housing crisis that we did.

[Pitt87]

My fiancee just asked me to think about buying a house while we're still in grad school as it'll be cheaper than rent. I understand where she's coming from... with what we pay in rent we could easily afford a mortgage on a $150,000 home... BUT we don't have the money saved for a down payment. All the money we are saving is going towards our wedding. We're going to be leaving the area in about 3 years. I don't really understand her want to look for a house, but we're going to look at our options and see what we can come up with.

Its not the monthly payment that could sink you, its everything else. Think of it this way; closing costs on a $150k house is probably $10k. When you graduate, one of you gets a phenomenal job offer 250 miles away (i.e., not that far, but certainly too far to commute), what do you do? Do you sell? If so, can you get enough to cover your note +7% for agent fees? Did you put enough down on this house to have something down for the next one when you sell? What if it sits for 6-8 months? Can you afford a mortgage and rent so you can get to work?

Buying is very permanent. If you are not permanent, the 'extra' cost of a lease is flexibility. Its far more costly to sell a house for a loss out of need than it is to rent an extra year and keep saving...

[Tomas]

One other thing: only after I bought my house, I realized how costly it is to maintain it (especially comparing to just renting an apartment). There are so many things that can go wrong in the crawlspace, attic, roof, plumbing system - even for well built houses. The deck needs to be re-stained every X years. Even relatively new HVAC systems can break, same with water tanks. Plus the costs of maintaining the property. Etc, etc...

So, in addition to paying mortgage, every month you should money into your "personal association fee" budget for those circumstances. The cost of house repairs is often very substantial, and your insurance will cover only very rare cases.

(I just returned to my house after being away for several months, and found out I can hear some very annoying low-pitch humming noise in every room, every corner (something that was not present during the 7 years I lived in the house). None of the remedies suggested on the internet work. I don't want to even think how much it will cost me to get this investigated - with no sure solution in sight... )

[60sixx]

Check into the PHFA program through the state of PA. This is a newer product apparently, I just used it to purchase my home in October. Put less than 10% down, no points, 3.75% interest rate. Not everyone can qualify and there are a couple extra hoops to jump through, but it was worth it to get such a good deal with little initial cash outlay.

[tjand72]

There are also USDA loans for areas that are deemed to be "rural". Rural doesn't necessarily mean on a farm. Our home was eligible, and the line of demarcation was a highway. Half of the town was eligible and the other half wasn't. Looking at the Bridgeville area at the moment, and if you're west of 79 you're eligible, but you're ineligible to the east.

We paid $700 down on our loan and the effective rate is about 4% after fees for getting into the program. It was worth it to us since we found a house that we liked, were a bit short on the 20% down, but still wanted to have some cash left over for upgrades/repairs.

http://eligibility.sc.egov.usda.gov/eli ... Action=sfp

[KennyTheKangaroo]

Additional question:

When you went to view the home you eventually purchased what was your initial reaction to it? How long did it take you to decide that it was the right house for you?

[newarenanow]

Additional question:

When you went to view the home you eventually purchased what was your initial reaction to it? How long did it take you to decide that it was the right house for you?

First home, we wanted to purchase it right then and there. We spent about 3 months looking and nothing met our needs in our price range (this was right before the bubble burst with the housing market). Then the house we bought, it was the perfect price, met what we wanted, and was in good condition. When we ended up selling it after we build our new home 7 years later, we actually made about $30K on it, which was incredible considering we purchased the home at the height of the housing market (although Pgh wasn't affected as much).

Our second home we built, so we only had some model homes to base things off of and pretty much decided what we wanted in it.

The Mrs and I have been pretty fortunate so far with regards to homes. Take your time. You are not going to find the "perfect" home because it does not exist. But you can find a home that you truly like and enjoy and there are some out there. It is tough this time of the year though. Spring/Summer is a good time to look.

You will find something though. Just remember, and this is kind of cliche, but location is everything. Make sure you are happy with the location.

[KennyTheKangaroo]

kenny the kangaroo will be happy w/ the location as long as it is far far far away from nan.

[newarenanow]

kenny the kangaroo will be happy w/ the location as long as it is far far far away from nan.

That 3rd far hurt my feelings.

[Shyster]

One other thing: only after I bought my house, I realized how costly it is to maintain it (especially comparing to just renting an apartment). There are so many things that can go wrong in the crawlspace, attic, roof, plumbing system - even for well built houses. The deck needs to be re-stained every X years. Even relatively new HVAC systems can break, same with water tanks. Plus the costs of maintaining the property. Etc, etc...

Preach on, brother. After a couple years of owning my house I discovered that my main sewer line was infiltrated with tree roots to the point that the only way to fix it was to dig it up. The cost for that was $7,000. Seven thousand freaking dollars. That was years ago and it still hurts.

[pfim]

Additional question:

When you went to view the home you eventually purchased what was your initial reaction to it? How long did it take you to decide that it was the right house for you?

I liked it before I even saw it. Still, we looked at it three times and scheduled 3-4 viewings on other houses after we saw it the first time. We had it down to two houses, and at that point I was a bit ambivalent about which one we got, which took some of the emotion out of negotiating the price.