[lucas.kent]

I can't believe this thread is 3 pages long. It really has taken on a life of its own! Good advice here, and an interesting debate - no doubt!

[S_M]

Originally Posted by AllBlackBimmer

OP HERE AGAIN.

This thread has taken on a life of it's own. haha. I do appercaite all the info, but can we get back on topic?

The debate on 20% or not is great... BUT.. I see it as this...

I am pretty sure I will NOT be putting 20% down. There. End of story.

sure I agree 20% is great... if you have it.

Now, unless you are an IDIOT, I think everyone on here understands differences in market, region, situations, etc and what is best for one person is not always best for another. Sure if you make 120k a year, putting 20% down and having emergency funds probably isn't a problem, but I am not in that case.

Once again, I am 26. I will be living at whatever home I buy for poteintially 5-10 years at a maximum. I do not need that 4 car garage, white picket fence house as my first house either.

I am NOT going to "stretch" myself or "overspend"... I am not stupid and know that I cannot afford a 250k house, even if it was my dream house.

I live in Pennsylvania... if that makes any difference.

I am looking for guidence, help, tips, and thoughts on MY situation. It is cool to start a thread so many find interesting enough to post in... but this is NOT A GENERAL REAL ESTATE THREAD. ... I am trying to find help for my situtation. I understand people get way off topic by posting one comment, that leads to another, but I did not intend to start an all out real estate debate.

I thank everyone for their information and please keep it coming -- esp to you knowledgable ones - the agents, brokers, and everyone else that is in the business.

I am going to look into FHA... so those of you that think this is a bad idea, please chime in why this is a bad idea in MY SITUATION.

THANKS!!

I think the FHA loan is risky in your current situtation. You have less than your 20% down liquid, a decent size liability (car loan), and are only putting 3% down on a home that could easily lose 3% of its value in a short period, leaving you negative equity on the home. Overall that would give you very little, or negative net worth.

[S_M]

Originally Posted by AllBlackBimmer

Just because I am not putting 20% down, doesn't mean I will not have some liquid funds. I do intend on the "9 months of morgage payments" for emergency funds...

On my car loan I have about 12k-13k left? My car is probably 60-65% paid off.

And just because I do an FHA - doesn't mean I can't put MORE down than the 3%....

I mean, I might be able to put 7-8% down, just not the whole 20%... you follow?

thakns for the input and I do realize it is a little risky...

Understood, I don't know you're exact situation. I think you have the right idea

[JasonCSU]

Originally Posted by MediaArtist

You mean ignore facts that your advice about low down payments is horrible? Okay, let's ignore the fact that your advice would leave people 4x more likely to default than someone who follows my advice and address your "clear points".

So basically, your advice is based on an outdated faulty premise. I think the only "clear" point here is that your advice is horrible.

It's still not horrible advice overall, but I think a couple things need to be specified. I don't disagree with the data from the last 10 years showing more delinquency on loans with less than 20% down, but how does that automatically make someone 4 times more likely to default if they do put less than 20% down? Like I said in my previous example, someone could have the full 20%, though only put 10% down to keep the other 10% on hand. In that example, you would have money for emergencies and could pay additional principal every month from it if you so chose. Why is this a bad idea? Over the last 10 years that data represents, many people were approved for loans who never should of had them to begin with. My guess is many of those delinquencies were from people who put the minimum 3.5% down, but had no other liquid assets outside of that 3.5%. In a case like that, I agree it would be a bad idea to purchase a house. Also, what is the ratio of loans with less than 20% to those with 20% or greater? Basically what I'm trying to say:

Putting down the minimum 3.5% and having no other liquid assets available = a bad idea

Putting down less than 20% but still having liquid assets available = not necessarily a bad idea, and depends on your situation

Now, I know you said before that one should save the 20% plus additional cash. This may work fine for someone who is making a great salary, but what about people at the median household income level (around $50,000 I think)? How long will it take to save up that kind of money? During that time while saving, they are also throwing away money on rent while home prices and interest rates may be rising. It may be an unrealistic expectation for a lot of people to save that kind of money.

[JasonCSU]

Originally Posted by AllBlackBimmer

OP HERE AGAIN.

This thread has taken on a life of it's own. haha. I do appercaite all the info, but can we get back on topic?

I am going to look into FHA... so those of you that think this is a bad idea, please chime in why this is a bad idea in MY SITUATION.

Sorry about that. One thing to keep in mind about the FHA loans is that they require the PMI be paid for at least 5 years even if you reach 20% equity or pay 20% of it off before that time.

[MediaArtist]

Originally Posted by 48Laws

As I said, predatory lending and shady underwriting during the boom of FHA loans is the chief cause of defaults.

Gee, that sounds familiar. That sounds like what private banks did during 2001-2007.

It's fun when someone argues your point for you unknowingly.

[MediaArtist]

Originally Posted by JasonCSU

I don't disagree with the data from the last 10 years showing more delinquency on loans with less than 20% down, but how does that automatically make someone 4 times more likely to default if they do put less than 20% down? Like I said in my previous example, someone could have the full 20%, though only put 10% down to keep the other 10% on hand.

I think the real point is that the stats/facts show that people who put low down payments, or don't have enough for 20% down and reserves tend to let their notes become delinquent at a higher rate.

Sure, there could be someone who puts 5% down, and then takes his other money and invest it elsewhere, and is perfectly fine. But that's simply anecdotal, the statistics show the opposite happens more often than not. I'm not someone who makes conclusions based on someone on the internet saying "it can work!", I want to see proof in the form of reliable and trustworthy statistics, and guess what? Those statistics shows that low down payment loans default at a very high rate.

It's one of the reasons I was able to predict FHA would be in trouble last year, and it's one of the reasons I know FHA delinquency will continue to rise.

[MisterSkiMask]

Originally Posted by MediaArtist

I think the real point is that the stats/facts show that people who put low down payments, or don't have enough for 20% down and reserves tend to let their notes become delinquent at a higher rate.

Sure, there could be someone who puts 5% down, and then takes his other money and invest it elsewhere, and is perfectly fine. But that's simply anecdotal, the statistics show the opposite happens more often than not. I'm not someone who makes conclusions based on someone on the internet saying "it can work!", I want to see proof in the form of reliable and trustworthy statistics, and guess what? Those statistics shows that low down payment loans default at a very high rate.

It's one of the reasons I was able to predict FHA would be in trouble last year, and it's one of the reasons I know FHA delinquency will continue to rise.

Let’s not ignore the fact that amateur real estate investors skewed the data, buying multiple houses at a time with little to nothing down and, ultimately, defaulting on many loans each.

[f30nynj]

Originally Posted by MediaArtist

Not a good market to be buying IMO, even with low rates.

The housing market is down and prices are low(if not lowest). If you are talkign about the economic conditions in general then I agree. But it has always been inversely proportional to buying a house.

I am saving for downpayment to buy one next year and I've been researching for last 2 years. I had other commitments like education loans etc which I cleared off. Now in market.

[xtac]

kinda off topic, but anyone know if anyone still does stated income or asset based mortgages?

[tmppgh]

Am I the only one here that thinks 2-2.5 of your income is high for a price. When I bought my house I would have never spent that much. I like having a payment that is low in case anything bad ever happens (layoff, illness, etc.). It is comforting knowing that I will always be able to afford to shelter my family even under bad circumstances.

[xtac]

Originally Posted by tmppgh

Am I the only one here that thinks 2-2.5 of your income is high for a price. When I bought my house I would have never spent that much. I like having a payment that is low in case anything bad ever happens (layoff, illness, etc.). It is comforting knowing that I will always be able to afford to shelter my family even under bad circumstances.

Depends on location, but yes under most conservative backends you shouldn't be able to afford anything more than that.

[MediaArtist]

Originally Posted by MisterSkiMask

Let’s not ignore the fact that amateur real estate investors skewed the data, buying multiple houses at a time with little to nothing down and, ultimately, defaulting on many loans each.

That is partially true. Many of those "amateur investors" were smoked out during the subprime crash, so it's not clear that they were using FHA after the crash (or if they could even qualify for another loan at all in such a short period of time).

FHA became the "new subprime" when private banking stopped doing those loans in 2007-2008. It just makes sense to me that the institution, in this case FHA, with the lowest underwriting standards, would have the highest default rate, but that's just me.

[MediaArtist]

Originally Posted by capriguy84

The housing market is down and prices are low(if not lowest). If you are talkign about the economic conditions in general then I agree. But it has always been inversely proportional to buying a house.

I am saving for downpayment to buy one next year and I've been researching for last 2 years. I had other commitments like education loans etc which I cleared off. Now in market.

High unemployment.
Stagnant wages.
Poor hiring forecast.
High amount of distressed homeowners (NOD/Underwater/etc). Some people call this "shadow inventory"
Artificially low inventory (MLS/Listed)
Median housing prices in nicer areas of the country are still 5x-10x the median income.

Also, this latest bombshell from the HELOC market:

Ten days ago, the Office of the Comptroller of the Currency published some frightening figures about the looming payments. In its spring 2012 “Semiannual Risk Perspective,” it said that almost 60 percent of all home equity line balances would start requiring payments of both principal and interest between 2014 and 2017.

The amounts owed in these lines of credit climb significantly in coming years. While $11 billion in home equity lines are starting to require principal and interest payments this year, the amount jumps to $29 billion by 2014, the office said. That is followed by a surge to $53 billion in 2015 and $73 billion in 2017. For 2018 and beyond, it’s $111 billion.

... anyone else think that's going to cause defaults to surge?

Add the fact that the U.S will probably be in another recession within the next 6 months.. to me, it seems like a very poor decision to buy a house right now unless you feel absolutely confident of your employment, and financial situation for the next decade or so. Otherwise, there is time to wait.

[Z3->WRX->335]

Well I can probably help you out OP. I bought a house in PA last year, I was 24.

1.) Go get your pre-approval letter and start looking.

2.) My house cost HALF of what I was pre-approved for.

3.) It's good to have that 9 months worth of payments saved. If you own the place you're obviously responsible for unforseen repairs.

4.) You can put a LOT of money into a house very quickly...doing work yourself can probaly save you at least 50% though

5.) One thing I undervalued is a nice sized backyard with privacy. Fortunatley, I ended up with a 6' high privacy fence and a nice sized yard...I'm just saying I didn't realize how much I like it till I moved in.

6.) Realtors can get annoying fast but just remember they're the ones working for you

7.) Don't make any major purchases with credit between the time you're pre-approved and the time you close. THey will keep checking your shit until the day you sign all the papers.

8.) Obviously putting 20% down is great but I didn't...

9.) In the end it's nice not having to deal with a landlord and to know that your money is going towards something

10.) The whole process actually kind of sucked haha. There was such a big weight off my shoulders after signing the papers

[.b0link]

Originally Posted by MediaArtist

Add the fact that the U.S will probably be in another recession within the next 6 months.. to me, it seems like a very poor decision to buy a house right now unless you feel absolutely confident of your employment, and financial situation for the next decade or so. Otherwise, there is time to wait.

So being career military....would that foot the bill?

[MediaArtist]

Originally Posted by .b0link

So being career military....would that foot the bill?

Foot what bill? The worthless HELOC notes? I'm going to guess another bailout at some point, which would mean the U.S Taxpayer foots the bill.

[.b0link]

Don't know what that means, but I was asking if that puts me in a good position to be buying in this market....

[MediaArtist]

Originally Posted by .b0link

Don't know what that means, but I was asking if that puts me in a good position to be buying in this market....

Well, if your income in the military is going to be stable for a long time (which I'm guessing it is), and you're buying something 2.5 to 3.0 your yearly income (max) and put a sizable down payment (20%), I think you will be just fine.

[.b0link]

Originally Posted by MediaArtist

Well, if your income in the military is going to be stable for a long time (which I'm guessing it is), and you're buying something 2.5 to 3.0 your yearly income (max) and put a sizable down payment (20%), I think you will be just fine.

Yeah gonna wait till after my next cruise so I can have some money saved up and enough for a decent down payment.

Now my next question would be, the only things I can find that I feel are reasonably priced in my range and good quality, are town homes. Some of them are pretty big, with two car garages etc, but the HOA and repair assessments that can blindside you sort of scare me. Don't want to randomly get a bill for thousands of dollars because something is structurally wrong with the building or new rood, etc.

Obviously a SFH would be preferred, but am I over stressing the HOA and condo fee things? Aside from the fact that theres other houses connected to some of them, I actually like quite a few, and they seem like good deals, but I still feel like I should stay away since there will be financial requirements eventually that I won't see coming.

I guess what it comes down to, is buying a Townhome a bad idea? Bear in mind I am a single service member with no dependents and when I am actually in the market to buy I will be 27, and it will be my first home.

[mlifxs]

Originally Posted by AllBlackBimmer

How should I go about picking a real estate agent? (There has to be some agents on here that can chime in!)

How do I go about knowing what I can afford?

How do I go about estimating monthly bills, etc.




Any other info would be helpful. This is the start of a new life

How do I go about knowing what I can afford?

A good rule of thumb is: your mortgage payment (principal and interest) + taxes + homeowners ins should not exceed 28% of your gross (before tax) income and your total debt payments should not exceed 35% of your gross (before tax) income. This is not only a decent benchmark to manage your expenses but also approximates how a lender will qualify you.

Make yourself a budget and be thorough and honest about it.

How do I go about estimating monthly bills, etc.?

Talk to friends who own homes in your area. Get a sense of all the expenses you may be taking on. Depending on where you live, you'll need to mow, fertilize, and water grass and landscaping. You'll need to pay for utilities. Last but not least you'll need to replace things over time: roofs, air conditioners, paint, appliances. You need to think about how long these things will last and what do they cost to replace, averaged per month. As you look at houses, get a feel for how old these things are in each house.

Once you figure out cost side of things, find a good lender. One example: Check out Provident.com. If you have a good FICO score and can put 20% down, you should see very attractive rates from them. We've done 4 refi's with them on our current house. Very competitive rates and very transparent process. Even if you decide not to use them, their website is Freakin Fantastic for tracking mortgage rates.

[JasonCSU]

Originally Posted by .b0link

Yeah gonna wait till after my next cruise so I can have some money saved up and enough for a decent down payment.

Now my next question would be, the only things I can find that I feel are reasonably priced in my range and good quality, are town homes. Some of them are pretty big, with two car garages etc, but the HOA and repair assessments that can blindside you sort of scare me. Don't want to randomly get a bill for thousands of dollars because something is structurally wrong with the building or new rood, etc.

Obviously a SFH would be preferred, but am I over stressing the HOA and condo fee things? Aside from the fact that theres other houses connected to some of them, I actually like quite a few, and they seem like good deals, but I still feel like I should stay away since there will be financial requirements eventually that I won't see coming.

I guess what it comes down to, is buying a Townhome a bad idea? Bear in mind I am a single service member with no dependents and when I am actually in the market to buy I will be 27, and it will be my first home.

I went the townhouse route myself and would say it's not a bad option for someone who is in a living situation like yours. Keep in mind that most new places whether they be a townhome, condo, or single family home will probably have an HOA of some sort. Having an HOA with dues is not necessarily a bad thing, just do as much research as possible on what the HOA covers out of your dues. With townhomes for example, the HOA usually covers exterior maintenance of the units, so you probably wouldn't have to worry about structural or roof issues. Again, the rules and coverage vary by HOA, so don't assume what they will and won't cover.

Another plus for a townhome is that the HOA typically takes care of the yard and landscape maintenance so that you don't have to worry about it. And if you can, try to get the budget information of the HOA to see how they manage their money. I've seen some ridiculously high monthly HOA dues on some places and haven't been able to determine where that money goes. I feel my monthly dues are reasonable because they cover services like:

landscaping
trash removal
water
community pool
snow removal
exterior painting

In my case, I feel the HOA offers a decent return for the money.

Something else to think about is what your long term plan is for the place you buy. Do you see yourself living there quite a while, or eventually moving on to something different? I picked my place out with the idea of renting it out down the road, knowing that they are popular rental units. Good luck with the search.