Advice for the first time home buyers/owners . . .
- Thread starter ColdBlooded
- Start date
As a homeowner of almost 12 years and 2 different homes, my advice is DON’T buy a home. There are a lot of costs people don’t realize when they purchase a home. Maintenance can be costly. Property taxes are usually rising. The bigger the home, the bigger the utility bills. You gotta maintain a home. If you let it become a piece of shit, you then own a piece of shit no one will buy.
Unfortunately, people believe they are throwing away their money by renting versus owning. Money is made off of selling homes by the appreciation of that home’s price. Rarely is the money made because you’ve paid down a lot of the principle. You have to buy at the right time to truly make money. Every housing market has its ups and downs, it’s often hard to determine where a certain market is headed.
I am not saying owning a home is bad, it just isn’t for everyone. I’ve been lucky to have a house double in value in a 4 year period. Of course, I sold and upgraded into the house I now own which has only appreciated 25% in the last 7 years.
If you must own a home here’s a little more advice. There’s a lot of good advice so far on this thread. I’ll reinforce some points already made.
1) Don’t buy more than you can afford. Trying to keep up with the Jones’ can wreck your ass!
2) Try to put as much money down as possible, preferably 20%, but that is often unrealistic for most people. Mortgage insurance sucks!
3) Your Debt-to-income ratio and Credit score help to get the best rates for loans.
4) While I’ve always had a fixed rate there are times when an adjustable rate is a better option.
If you’re thinking of buying now, realize that in many markets there is still a lot of turbulence from foreclosures that could force prices down more. Do your homework!
Unfortunately, people believe they are throwing away their money by renting versus owning. Money is made off of selling homes by the appreciation of that home’s price. Rarely is the money made because you’ve paid down a lot of the principle. You have to buy at the right time to truly make money. Every housing market has its ups and downs, it’s often hard to determine where a certain market is headed.
I am not saying owning a home is bad, it just isn’t for everyone. I’ve been lucky to have a house double in value in a 4 year period. Of course, I sold and upgraded into the house I now own which has only appreciated 25% in the last 7 years.
If you must own a home here’s a little more advice. There’s a lot of good advice so far on this thread. I’ll reinforce some points already made.
1) Don’t buy more than you can afford. Trying to keep up with the Jones’ can wreck your ass!
2) Try to put as much money down as possible, preferably 20%, but that is often unrealistic for most people. Mortgage insurance sucks!
3) Your Debt-to-income ratio and Credit score help to get the best rates for loans.
4) While I’ve always had a fixed rate there are times when an adjustable rate is a better option.
If you’re thinking of buying now, realize that in many markets there is still a lot of turbulence from foreclosures that could force prices down more. Do your homework!
AC Transit should probably handle this one but most likely you're thinking of a 5yr I/O. Unless you are buying your house for under $100,000 I think you'd have a hard time paying off your note in 5yrs unless your ballin outta control. This gives you the option to pay interest only for 5yrs, then the loan goes fully amortized over the next 25. The average homeowner moves every 7 years, so there is really no point in getting a 30yr fixed unless you are planning to live there till it's payed off. why pay more monthly (principal + interest) if you are going to move before it's payed off, when you can go with a 5-10yr I/O, and have lower payments by paying interest only. and if you don't move, you can always re-finance and get into a better program the fits your needs at the time. You do have to know what is going on in your market though regardless of which program you choose. Point being, you will probably never pay off 1 house over a 30 yr span.
It's like this - 30 yr fixes are set up where you pay more interest then principal for around the first 15 years. So your average homeowner does not keep this loan for more then 10 years at the most (yes some do keep the loan for the full thirty years but they are a very small percentage). Your average homeowner will refinance for different reasons, pull out cash, lower the rate/payment, sell the house , etc... So if you get a 30 year fixed and only keep it before the time you really start paying off more principal then interest, then all you've done is give the bank money. 30 yr fixes have higher rater then adjustables , so for that time you're paying the mortgage, you're paying a higher payment yet not really paying off the principal but the interest. Adjustables get a bad name cause people actually think borrowers actually let the rate go adjustable. You don't let your adjustable to adjust, you just refi into another adjustable (unless you fuck up your credit and/or you have no equity).
A good way to think about why not to pay off principal is cause it makes no money for you. If your property makes money by market conditions, it really doesn't matter how much money you pay off in your house. The money you put into doesn't make money for you, cause it rises in value by market conditions, not how much you paid off. That money paid off is stagnant - yes its safe but it makes no money for you and how are you gonna get to it if you really need it? Sell the property ? what if you don't want to sell the property. Refi? well if youre credit is fucked, someones gonna jack you on rate and closing costs in order for you to get to that money. Might as well pay a lower rate, keep the money in a saving account and be liquid.
A good way to think about why not to pay off principal is cause it makes no money for you. If your property makes money by market conditions, it really doesn't matter how much money you pay off in your house. The money you put into doesn't make money for you, cause it rises in value by market conditions, not how much you paid off. That money paid off is stagnant - yes its safe but it makes no money for you and how are you gonna get to it if you really need it? Sell the property ? what if you don't want to sell the property. Refi? well if youre credit is fucked, someones gonna jack you on rate and closing costs in order for you to get to that money. Might as well pay a lower rate, keep the money in a saving account and be liquid.
I went into the whole buying a house phase in 2005, and jumped into a arm loan,.... well it's adjusted already and I can keep up with the payments, it came to bite me in the ass because I make enough money and have very good credit but the ltv is almost even so I'm throwing away around 25 k a year in intrest/ insurance/ taxes.
So these last couple of months I've been thinking about short selling or letting it go into forclosure, because I can rent this same damn house for 12k a year, So yea I'll have bad credit for 10 years but I'll have an extra $13K to spend on vacations, cars, boats, jet skis etc. etc.
If I could go back and do it again I'd get a way smaller house, talk to a financial advisor before making my final decision, and also get a lawyer to look over the paperwork. It would have been a small price to pay for the bull shit I'm going through now.........
So these last couple of months I've been thinking about short selling or letting it go into forclosure, because I can rent this same damn house for 12k a year, So yea I'll have bad credit for 10 years but I'll have an extra $13K to spend on vacations, cars, boats, jet skis etc. etc.
If I could go back and do it again I'd get a way smaller house, talk to a financial advisor before making my final decision, and also get a lawyer to look over the paperwork. It would have been a small price to pay for the bull shit I'm going through now.........
sucks what you're going through hustle. Ac Transit coming through with knowledge as always. Dude sayin' a 5 year fixed is better than a 30 yr fixed... wow! like folks said... never buy more home than you can afford... and fuck keepin up with the joneses. I bought my home in 2001 brand new for $143,000. 4 bd 2 bath... 1400 sq ft. Since I've had it.. we've been in a neg-am loan. It's been manageable to me... but then again my loan is at $171,000 at this point. I've refi'd twice and I'm happy with the loan I'm in. But now if the loan was on a $350,000 or more home.... then when the payment readjusted it might be a wakeup call. The deferred interest amount on the World Savings bi-weekly program is 50% less than any other bank's option arm. My neg am for the past year was around $3000 .... while a client I just met with who had an option arm through Countrywide had $8000 neg am for the past year. I would suggest that you find a loan and payment to fit your needs. If your loan amount isn't outrageous I would suggest an option arm from World Savings or any other bank that offers a similar program. But if you're cautious of an option arm or adjustabel... go with the traditional 30 yr fixed. and yes... make sure your taxes and insurance are impounded. paying lump sums in Dec and April definitely spoils your christmas and easter seasons.
why dont u put that bitch up for rent? more and more people are renting since its hard for people to qualify for loans since most lenders are fuckin cautious about who they approve or what not. charge the renters at least 200 or 500 more than what you regularly owe or charge them the same amount that your paying. at least you get to keep the equity in the house and once the market goes back up give those bitches to option to buy or place it in the market to cash out. Not unless you already took out some money off your place.
When did World start letting you use an outside appraisal only? Even if you send in an appraisal, they still send an appraiser to the property.
World really is the shit as long as you can understand yourself the programs and explain them properly to your borrowers. I see a lot of licensed LOs being sued because borrowers are starting to adjust an that 1% teaser rate went away and reality sets in. Even though they knew what they were getting into, they pretend that the docs were never explained to them, and I've seen a few judges make the LOs come out of pocket for their sweet 3% AND have to pay off the borrowers prepay. Its ugly out there right now.
I want out of the mortgage business.
World really is the shit as long as you can understand yourself the programs and explain them properly to your borrowers. I see a lot of licensed LOs being sued because borrowers are starting to adjust an that 1% teaser rate went away and reality sets in. Even though they knew what they were getting into, they pretend that the docs were never explained to them, and I've seen a few judges make the LOs come out of pocket for their sweet 3% AND have to pay off the borrowers prepay. Its ugly out there right now.
I want out of the mortgage business.