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Andy Dufresne posted:Can you clearly state what your rules of thumb would be rather than simply trying to poke holes in everyone else's opinions? Sometimes Buy. edit: Wait a second.... Andy Dufresne posted:Potential first time home buyer checking in. I had planned for quite some time to buy a home this Fall but my apartment is dicking my rates for a 6 month lease extension so I'm considering just buying now. The challenge is that I would need to close and move by April 20th because I'm going to be out of the country for roughly a month after that. My lease is up April 26. You took out a loan against a 401k to buy your house, per your first post in this thread. Your advice to yourself is that you couldn't afford to buy and that you should have waited because you made a terrible financial decision. Thoguh fucked around with this message at 20:28 on Aug 4, 2017 |
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Aug 4, 2017 20:15
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Please don't tell me that the very goony, tongue-in-cheek "Do Never Buy" response is flying right over some people's heads. Trying to poke holes in that statement is like examining acorns on the forest floor, ok? As for "Sometimes buy, depends on your circumstance" I mean....no loving poo poo  I kind of thought that part was assumed. The whole reason for the thread is so folks can provide specifics and then get advice.
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Aug 4, 2017 21:14
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Thoguh posted:Sometimes Buy. I actually didn't, but I find it amusing that you read through my post history to try and find dirt rather than simply answer my question.
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Aug 4, 2017 21:22
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I think its ideal to put 20% down or at least very close to it so that you only have to pay PMI for a short amount of time. It just costs a lot more in the long run to put something like 3.5-5% down. I guess if someone is making enough money with a stable job to easily cover the higher payments then it wouldn't matter too much if they didn't have the liquid cash to do a significant down payment, but even in that case they'd save more money in the long haul if they just waited a year and saved up.
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Aug 4, 2017 21:31
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Why not "insist" on 30%, for less interest paid over time? Or: is PMI the only reason that 20% is a magic number?
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Aug 4, 2017 21:59
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Subjunctive posted:Why not "insist" on 30%, for less interest paid over time? 80% LTV is also the point at which you will get the best interest rates. e: You'll also have an option of pretty much any loan product from any lender at that price point, where the more creative loans like 80+15+5 aren't offered by everyone because they can't be sold as easily.
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Aug 4, 2017 22:07
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Andy Dufresne posted:80% LTV is also the point at which you will get the best interest rates. Better interest rates than 70% LTV?
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Aug 4, 2017 22:15
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Andy Dufresne posted:80% LTV is also the point at which you will get the best interest rates. When I bought my second house, my lender offered offered me an extra 0.25% one time credit to put 25% down instead of 20%. So I think you need to update your hard line to at least 25% down based on your logic. Also, "creative loans like 80+15+5 can't be sold as easily" makes no sense, because the loans are completely independent. The 80% loan can be offloaded to Fannie or Freddie just like any other conforming loan. It is literally no different than buying a house with 80% down and then deciding to get a home equity loan 2 months later from a second individual lender.
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Aug 4, 2017 22:19
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Subjunctive posted:Better interest rates than 70% LTV? Jesus christ man. Droo posted:When I bought my second house, my lender offered offered me an extra 0.25% one time credit to put 25% down instead of 20%. So I think you need to update your hard line to at least 25% down based on your logic. I don't have a hard line. I feel like people in this thread just want to argue for the sake of arguing. And regardless of the why some lenders don't offer all loan types, when you purchase an 80+15+5 loan you are limited to the lenders which do offer them. My lender didn't.
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Aug 4, 2017 22:29
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Andy Dufresne posted:Jesus christ man. I thought you were addressing why, absent PMI, the magic number would be 20% instead of 30%. Apologies if I misinterpreted that.
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Aug 4, 2017 22:32
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Subjunctive posted:I thought you were addressing why, absent PMI, the magic number would be 20% instead of 30%. Apologies if I misinterpreted that. Sorry if I misunderstood, I thought you were just nitpicking. But yeah, as it turns out you can get better rates for better LTV. As it turns out I also ended up moving to 25% down for a better interest rate, I had forgotten. And for me PMI was the answer. I spoke with several lenders and nobody offered 80+15+5. It was 20% down or PMI. I don't know if that's specific to Texas or what.
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Aug 4, 2017 22:34
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I think it's universal in the US, but not around the world. In Canada there's a sliding scale for LTV from 95% to 65%, and the cost scales from 4% of mortgage value to 0.60%. Many lenders won't require insurance below 80% LTV, though. Above $1M in home value the insurance isn't available, so lenders will require a 20% down payment.
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Aug 4, 2017 22:46
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20% is the magic number in the US, at least, because people who put in 20% of their own cash - and as anyone who has ever gotten a US mortgage in the last 10 years knows the underwriter will absolutely look into where that cash is coming from - are statistically the least likely to default or otherwise detract from the lienholder's net cash flow, and 20% also allows for a good cushion if the loan does go in default and needs to be sold off (since the 20% paid in by the "homeowner" is the absolute last consideration in those cases). It is that simple. You can get better LTV with more - my last mortgage I got under 3% with no points via 30% down on a 15y fixed - but diminishing returns start to kick in. At least in today's market. Doing 80+15+5 or other creative solutions don't actually make you look any better, it's just a way to spread the risk around for the lienholders. Sometimes it works out better on a monthly payment basis than PMI and also allows you to sometimes qualify for more but trust me, the primarily lienholder does not consider those in the same light as someone with liquid assets of their own putting in 20%.
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Aug 4, 2017 22:46
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Ixian posted:20% is the magic number in the US, at least, because people who put in 20% of their own cash - and as anyone who has ever gotten a US mortgage in the last 10 years knows the underwriter will absolutely look into where that cash is coming from - are statistically the least likely to default or otherwise detract from the lienholder's net cash flow, That can't be the case. Why would they offer a lower rate for lower LTV if it didn't represent less risk of default?
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Aug 4, 2017 22:48
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I think Leperflesh encapsulated everything that I was going to say and was much more eloquent than I would have been but I'll add one thing:Andy Dufresne posted:The only posts that really annoy me are the "renting is cheaper than buying", as if there's an entire industry that exists to lose money. I've saved a considerable amount of money by owning my home even with new floors, appliances, painting, cabinets, and a roof factored in. And I got to pick all that poo poo out to suit my tastes. That won't apply to everyone but will to many. Renting often is cheaper than buying simply because rentals are much smaller on average by virtue of apartments existing; the average apartment size is less than 1k sqft. That's the only argument I've ever seen in this thread, which is why "remember that your costs are going up" gets raised when someone asks if they can afford a house; buying a house usually entails an upgrade in living space. When you start getting into renting houses then the comparison becomes apples-to-apples and you find that renting a house usually costs more than buying it, but that too is YMMV and entirely dependent on the local market (anecdote: my wife and I rented a house for less than the equivalent mortgage payment because the owner owned it outright and was a savvy lawyer who cared more about having reliable trustworthy tenants than trying to squeeze every last dollar out of us; he sold the house while we were still living in it) Thoguh posted:To include in the thread a different opinion than 20% down or bust. You're not actually reading the thread very often if you think that's the only opinion. We've had long discussions about when it can be okay to take 401k loans and what that entails, how to deal with PMI, alternatives to PMI, etc. Buying at less than 20% is financially less risky than buying at 3% (obviously) and it's worth conveying that because people often get pumped up by older family members and decades of misleading advertising over the surefire financial boons that come from buying a house, even at 3% down. Maybe Andy Dufresne didn't wind up taking out a 401k loan for his first home purchase, but I'll be upfront and say that I sure as gently caress did. I borrowed $30k and do not regret doing that even knowing that my retirement income will be lower because of it. It was not the best financial choice, but the thread helped me to identify the financial upsides and downsides of doing that versus something else (PMI, not buying) and I decided that I was okay with doing that.
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Aug 4, 2017 23:04
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I only put 3% down and have PMI, tell me how much of a gently caress up I am.
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Aug 4, 2017 23:08
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Subjunctive posted:That can't be the case. Why would they offer a lower rate for lower LTV if it didn't represent less risk of default? Probably it's a trade space between risk of default and the bank's profit. The risk of default surely decreases continuously with decreasing LTV but the bank makes less money with lower LTV, so there's an incentive for banks to keep the LTV high (but not too high)
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Aug 4, 2017 23:09
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fozzy fosbourne posted:What do you think of the New York Times rent vs buy calculator? Is it legitimate? Seems like at least some of these discussions about rent vs buy boil down to a math problem. The kind that are motivated by fear of throwing away money on rent/house expenses, at least. It's great, but you have to supply actual numbers for things like the interest rate, taxes, cost of a home, and how long you plan on living somewhere. It really shows how the costs add up and it included all the major ones.
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Aug 4, 2017 23:13
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QuarkJets posted:Probably it's a trade space between risk of default and the bank's profit. The risk of default surely decreases continuously with decreasing LTV but the bank makes less money with lower LTV, so there's an incentive for banks to keep the LTV high (but not too high) That is what it is. No expert here, just have some family in the mortgage business. There's any number of complicated formulas involved these days but they all boil down to a graph that outlines profit and risk. For whatever reason, 20% or thereabouts falls in X where they meet.
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Aug 4, 2017 23:19
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QuarkJets posted:Probably it's a trade space between risk of default and the bank's profit. The risk of default surely decreases continuously with decreasing LTV but the bank makes less money with lower LTV, so there's an incentive for banks to keep the LTV high (but not too high) But banks are limited by capital and not number of issued mortgages, right? They can set rates such that their expected return on $100M of 70% LTV loans is the same as on $100M of 50% LTV loans. If the risk of default is continuously decreasing, I don't know why we treat PMI specially versus just getting a worse rate at 95% LTV. And in that case, it doesn't seem like 80% would be magical for some reason. *That's* the part I'm trying to chase down. From 95% to 5% LTV you get a better rate. Why not tell people to go to 70% instead of 80%?
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Aug 4, 2017 23:20
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That NYT calculator does seem really nice. I put in all my info, and my $500k house is apparently equivalent to about $1,400 a month in a rental house. I think in the market here right now, $250k places are renting for about that much. Subjunctive posted:From 95% to 5% LTV you get a better rate. Why not tell people to go to 70% instead of 80%? Don't forget the extra good rate you get at 0% LTV!
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Aug 4, 2017 23:28
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Droo posted:Don't forget the extra good rate you get at 0% LTV! Oh, I won't!
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Aug 4, 2017 23:31
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Subjunctive posted:If the risk of default is continuously decreasing, I don't know why we treat PMI specially versus just getting a worse rate at 95% LTV. And in that case, it doesn't seem like 80% would be magical for some reason. *That's* the part I'm trying to chase down. From 95% to 5% LTV you get a better rate. Why not tell people to go to 70% instead of 80%? There's a cliff at the point where PMI is included, it's not a smooth line from 70-95. I also suspect that the best APRs available at 20% down are better than the best rates available on the primary loan in an 80-15-5 scenario, but I can't actually demonstrate that because there's no online marketplace for the latter.
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Aug 4, 2017 23:46
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Andy Dufresne posted:There's a cliff at the point where PMI is included, it's not a smooth line from 70-95. I would not have predicted that! I wonder what the difference in reasoning is between Canada and the US on sliding-scale insurance.
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Aug 5, 2017 00:14
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Andy Dufresne posted:I also suspect that the best APRs available at 20% down are better than the best rates available on the primary loan in an 80-15-5 scenario, but I can't actually demonstrate that because there's no online marketplace for the latter. I got an 80-15-5 loan when I purchased my house and I explored a few different options with my lender. If I remember the details correctly, the conventional loan terms were the same regardless of if I brought 20% to closing or if I got an 80-15-5 loan. However the HELOC portion's interest rate was more expensive, I don't recall the specifics of the other options, but I took a 15year fixed payment on the HELOC which meant that the interest rate matched the interest rate on my 30y fixed. I didn't really shop around though (which was probably a mistake in general, but I think it worked out OK) because our seller was a bit of a jerk and he got really stuck on having the specific bank we were going to get financing from being a part of the offer/sale contract.
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Aug 5, 2017 00:19
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Subjunctive posted:But banks are limited by capital and not number of issued mortgages, right? They can set rates such that their expected return on $100M of 70% LTV loans is the same as on $100M of 50% LTV loans. A) I think they're way more limited by the number of issued mortgages, which is why marketing specifically for mortgages (refinancing and otherwise) is a huge industry. B) There's also consumer demand at play here. The rates are set to whatever value they think will maximize profit, and if maximum profit is at 70% LTV with a slightly lower rate (due to higher default risks at 80% LTV) then that's what they'll try to push people toward
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Aug 5, 2017 00:19
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QuarkJets posted:A) I think they're way more limited by the number of issued mortgages, which is why marketing specifically for mortgages (refinancing and otherwise) is a huge industry. Do you mean that banks run out of number of mortgages they can issue before they run out of capital (assuming they don't sell them on; let's pretend)? I don't know why they would set rates such that they make different amounts (including default rate) at different points along the LTV spectrum. How does that help them?
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Aug 5, 2017 00:34
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Subjunctive posted:I don't know why they would set rates such that they make different amounts (including default rate) at different points along the LTV spectrum. How does that help them? Generally they don't, the bank's rates are going to be set for the most part in a way that the profit margin is roughly the same across available LTVs, FICOs, etc. Longer lock periods tend to be a little more favorably priced for the lender, but that's mostly due to longer lock periods falling through more often than shorter lock periods and they're trying to recoup losses from locks that fall through. The profitability for the bank comes from the margin between the lender credit/discount fee that they charge you for a given interest rate as compared to what they turn around and sell that loan for on the secondary market or to a GSE, plus whatever admin/origination/etc. fees they charge. Since most loans get sold onto the secondary market or rolled into an MBS through one of the GSEs, there's less reason for a lender to tweak their margins at specific LTV brackets to encourage people to go for a certain level of down payment as the risk is going to be largely offloaded from the lender. That said, since there's been a lot of discussion in the last few pages about rates and LTV buckets - Fannie Mae has their Loan Level Price Adjustments posted online which can give you a good idea of where the sweet spots are as far as getting a good break by going to a higher down payment or if it's worth trying to eek out a few more points on your credit score. The full set of charts is available at https://www.fanniemae.com/content/pricing/llpa-matrix.pdf and breaks down various factors that contribute to what you end up paying/getting paid for a given interest rate. Table 1 is the basic breakdown of LTV vs FICO score, 0.000% is the baseline and higher numbers = worse rate/higher cost to keep the same rate. Lenders can have their own pricing overlays as well of course, but it gives you an idea of what you're looking at.  For example, a borrower with a 680 credit score is being offered a 3.5% rate on a 30 year fixed with a credit of 1% of the loan amount if they put down a 20% down payment. If they were to put down 25% instead, they could get that same interest rate with a credit of 1.5% of the loan amount instead, or maybe they could get a 3.25% rate for the same 1.0% original credit. If they had a 640 FICO instead, that same 3.5% original offer with a 20% down payment would require they pay a 0.250% discount fee to the lender instead of getting a 1% credit. Someone with a 740+ FICO would get a credit of 2.25% for that same 3.5% rate with 20% down. Also, for those who were discussing the 80% cutoff of LTV for MI vs. non regarding interest rates - you'll notice in the above table that for certain high FICO scenarios there's actually a dip in the 80.01 - 95% LTV brackets where the pricing hit is actually more favorable than if you were to put a straight 20% down. This is due to the presence of MI making those loans overall less risky to Fannie/Freddie (in terms of actual monetary loss incurred in the event of default rather than risky in terms of the likelihood of default itself) as the MI company will reimburse them up to certain losses depending on the amount of coverage that was required. The savings from the potentially lower interest rate/additional credit for closing costs is obviously offset by having to pay MI premiums, particularly in the short term, but it's worth pointing out.
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Aug 5, 2017 02:01
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Subjunctive posted:Do you mean that banks run out of number of mortgages they can issue before they run out of capital (assuming they don't sell them on; let's pretend)? More accurately, I mean they run out of people who want mortgages before they run out of capital. I think they have the staffing throughput and whatever else is required It helps them to maximize profit by enticing customers toward a more profitable part of the LTV spectrum. As an example, if the risk of default at 80% LTV starts rising then the bank's overall profit goes down, so they'd want to start enticing people toward 70% LTV, where default rates are lower. One way to create this result is by offering a lower interest rate at 70% LTV than at 80% LTV. If a 0.5% change in interest rate at 70% pays for itself twice-over by reducing your rate of default then you've made a profit-increasing decision by decreasing an interest rate at one part of the LTV spectrum but not another. e:fb by a way better post QuarkJets fucked around with this message at 02:04 on Aug 5, 2017 |
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Aug 5, 2017 02:01
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I had never seen that NY Times calculator before. I decided to stick the numbers in there, with the assumption that the housing market would grow slightly slower over the next few years than over the last few years, that rents would grow at about the same speed, that property taxes go up substantially, that I would have a 3% down payment with a 4% mortgage, that my investment rate of return would average 7%, and that my maintenance would run 2% of my value, my commons fees would be $300 a month, and my utilities would be $200ish. It told me that if my landlord isn't paying me at least $271 a month to rent, I should buy. If I assume the housing price growth rate drops to half of what it has been, I should still buy (since I'm paying over $1194 a month). I recognize that's not going to be 100% correct, especially in hot markets, but it is a reflection of the sort of crazy loving numbers I'm looking at. Ham Equity fucked around with this message at 02:06 on Aug 5, 2017 |
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Aug 5, 2017 02:04
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Leperflesh posted:I'm not gonna just lie to people about the risks they're taking, though, and this thread - hell, this subforum - should not be a cheering squad to encourage people to make bad financial decisions based on faulty logic or good feelings. Most people already have plenty of sources for that kind of feedback. Nothing against the other helpful posters, but this is the type of thing I was hoping for in this thread. Something to put the fear of God into me. Thanks, Leper. Even so, I still think I want to try and buy. At least, I want to look and do some real math and make a budget and maybe get a preapproval to see if it makes sense to buy. Or at least talk to my parents to see if they will kick me square in the jimmies.
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Aug 5, 2017 02:16
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I'm working on closing on a house that was built in 2008. The sellers claim the roof is the original, but they have only been the owners since 2015. The home inspector say there is no way the roof is original, he thinks it is 3-5 years old. There was a major hail storm in the area in 2014 and nearby roofs show damage from it while ours does it. My home insurance says if we can prove the roof was replaced on X, we can get a large discount and better valuation if it is damaged and needs repair in the future. My agent is going to ask the sellers agent if they can find any record, but barring that is there anyway else I can do?
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Aug 5, 2017 19:49
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Xenoborg posted:I'm working on closing on a house that was built in 2008. The sellers claim the roof is the original, but they have only been the owners since 2015. The home inspector say there is no way the roof is original, he thinks it is 3-5 years old. There was a major hail storm in the area in 2014 and nearby roofs show damage from it while ours does it. My home insurance says if we can prove the roof was replaced on X, we can get a large discount and better valuation if it is damaged and needs repair in the future. My agent is going to ask the sellers agent if they can find any record, but barring that is there anyway else I can do? You could search the county recorder records to find the name of the person they bought the house from, and possibly also find their new address and try to contact them. I feel like most people are jerks and wouldn't help you, but if someone found me that way I would send them information so who knows. There might also be some kind of records in the local permit office - you could try calling the local building permit office and ask if a roof replacement would have required a permit, and if so how could you find a copy of it.
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Aug 5, 2017 19:56
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The clue report will show any insurance claims for that address. Ask your insurance person
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Aug 5, 2017 20:02
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Magnetic North posted:Nothing against the other helpful posters, but this is the type of thing I was hoping for in this thread. Something to put the fear of God into me. Thanks, Leper. Go for it! I mean look, I don't want to be a hypocrite so I'll tell you what I did (although this thread is so old I'm pretty sure my own situation is in my post history here). In 2009, we started looking at foreclosed houses in the Bay Area. At that point, we had about $60k in assets including retirement accounts and cash, $15k in credit card debt plus $2k owed to my mom, and my wife had about $45k in student loan debt (mostly federal unsubsidized at an average of around 5% on a 10yr payoff plan). That is not the financial picture of someone ready to buy a house. BUT: -$8k homebuyers credit was good till the end of the year, and we were eligible to claim all of it, so we'd get a cash injection in April 2010 to help us not be completely out of cash after buying -FHA 3.5% down loans had much better terms, particularly with regards to mortgage insurance, than they do now -Our rent was $1650 a month for 600 square feet, and was going up rapidly; if we didn't buy, we were facing the prospect of being driven out of the bay area by rising rent costs -One car was paid off and the other only had a couple months of payments left to be paid off, both in good condition, and I can do most of the work on my cars myself -Houses in the east bay were available for under $200k, albeit in widlly varying conditions and some of them in really lovely neighborhoods -We have no kids or other dependents and were in our mid 30s, so if we wound up homeless on the street we wouldn't be hurting children and we'd have decades to recover before retirement -My wife was only working part time: in a bad situation she could suspend her art practice and go full time, and her skills are fairly marketable -I work in software in the bay area and was already at a reasonably senior level, so my job security and employability was very very good -We are both very good with our hands, have our own tools, and were confident we could handle a lot of kinds of home repair ourselves (our confidence has been justified by several issues we've resolved ourselves over the last 7 years) -my parents are retired and fairly well off and they promised to help out if we needed it, with the capability of loaning or gifting tens of thousands of dollars on demand if we got in trouble That last item was a game changer, really. They gave us $10k to help with our down payment so we wouldn't have to tap our retirement accounts or be moving into our new house with zero cash left. I paid them a lot of it back over the following two years before they told me to stop doing that, but it really wasn't a loan in a legal sense (if anyone is reading this from the IRS etc. I mean it, it was a gift exactly as we reported on our paperwork etc.) We wound up buying a vacant, REO bank-owned house in December 2009 for $240,800. We got a FHA 30-year fixed rate mortgage for around 5.125% with 3.5% down and folding the up front MIP premium into the mortgage (which was a mistake, but we were preserving cash). Right off the bat, our escrow payments - which included P&I, mortgage insurance, homeowner's insurance, and property taxes - were a hundred bucks a month lower than our rent had been, for 1200 square feet plus twice the garage space and a front & back yard. Our respective commutes were identical. Other costs of living in our new town (Concord, CA) were actually lower than our old place on the peninsula: stuff like food, gas, etc. were all cheaper. Our energy bills went up by more than the cost difference, and we had to save money for home repair costs, and for the first probably four or five years, our total budget was tighter than it had been. With the second car paid off, that freed up ~400 a month in cashflow that went to those expenses. We resurfaced our hardwood floors by hand, spending maybe $500, and spent another $300 or so doing some needed interior painting, before we moved in. Within a month we had leaking water pipes in the crawlspace, which we repaired by splicing in and soldering/sweating copper pipes ourselves, for around $100 in parts costs. We rented a u-haul for one day and moved the rest of our stuff using our pickup truck and help from family & friends. We did not buy any new furniture or furnishings. All told we probably spent less than $2k on repairs and move-in. It was hard, stressful work, but it kept the cash costs to a minimum. In 2012 we refinanced to lower the interest rate to 3.75% IIRC. FHA had changed their rules so the FHA monthly mortgage insurance premium actually rose, but we still saved a bit due to the interest savings, and the FHA quick-refi itself worked out to be basically free after our broker found us a loan with generous credits to cover the costs. In 2014, we had the house appraised, showing a value of around $340k, which was sufficient to refi into a conventional non-FHA loan and get rid of mortgage insurance (although loving FHA does not refund/pro-rate the up-front premium, which is a total dickbag move), again lowering our total cost despite a slightly higher interest rate (we're now at around 4.25%). In the meantime, due to rising incomes, aggressive savings, and good market conditions, our retirement accounts have more than doubled, my wife's student loans are completely paid off, we have no credit card debt, still owe nothing on cars, are saving more annually for retirement than we were before, and rents in the bay area have skyrocketed. If we were still renting, we could not rent a 2 bedroom apartment anywhere in the bay area for anything under $2500/mo probably. Comps for our house this year are over $425k. If we wanted to sell, we would need to put at least $30k into renovations and repairs and landscaping, and then also pay the 6% commissions, and loan payoff would be right around $210k (because as others have said, with so little down, the past seven years of payments have been mostly interest). So despite barely paying anything towards principal, we'd clear something like $160k+ in cash if we sold this summer. So... it worked out for us. After 7 years. But let me tell you, in 2010-11 it looked a lot worse. Comps in our neighborhood continued to drop through 2010, and at the bottom of the market in 2011 our $240k house was probably worth $180k. If we had lost our jobs, or had to sell for some other reason, we'd have had to bring probably $40k to $50k to the table just to be rid of the house. Between our retirement accounts and my parents' generosity, we could have done it, but boy would that have hurt! And today, our $160k+ in equity (even after accounting for $25k in commission and $30k in pre-sale upgrades) is entirely due to the booming house market in the area since 2012. If the market suffers another catastrophe like it did in 2007-8, we'll be right back where we were, albeit with a lot more cash and no other debts. But we'd have more cash and no other debts anyway. My point here is twofold: 1. Strictly looking at our small down payment, debt-to-income, and the size of the mortgage, our purchase in 2009 was not prudent. But, there were mitigating factors, in particular the opportunity to grab an $8k credit before it expired, and the likelihood that the large inventory of empty, bank-owned foreclosures would not last; plus the very large factor of having no kids to worry about and parents who could rescue our dumb asses if it all blew up in our faces. 2. Our fortune in being in a much better position today is due in part to hard work and rising incomes and being very careful with spending for seven years, but it's also due to just sheer luck that the housing market in the bay area is so crazy. That was never guaranteed, and it is way too easy to just say "oh well this is what I expected, so I'm obviously very smart and can predict the future" when that is actually total bullshit. I guessed and hoped that the market would recover and that we were timing it well, but we were off by a year or two in predicting the bottom of the market, and there was always the possibility that California in the 2010s would look like the last thirty years of Japan's real estate market, e.g. totally flat and awful. We took a big risk. That's all there is to it. We went into it with our eyes wide open, understood the risks, and then pressed forward anyway. We did it understanding that we might lose money, maybe a lot of money, but we did it anyway because we wanted to own a home in the bay area, where we have family and friends. We wanted to do our own home projects on our house that we own, with nobody to tell us that we have to have a lawn or we can't have five cats or it's not allowed to run a kiln or a forge in the garage. We wanted to work on the truck in the driveway. We wanted to get to stay in the same town for as long as we wanted, and build a connection to a community. We wanted to at least give ourselves a chance of owning a home outright by the time we retired. And even with the debts and lack of cash we had, the fixed rate of the mortgage coupled with CA's uniquely terrible property tax growth restrictions (prop 13) and my pretty solid career choice gave us a reasonable chance that, irrespective of what the housing market decided to do, we'd be able to pay off this mortgage in 30 years and have that. So when I tell folks in this thread about the risks, it's not necessarily intended to mean "Do Never Buy." It's intended to convince people that the risks are real, and substantial, and can't just be dismissed or rationalized away. Only you, as a buyer, can decide whether the rewards of home ownership are commensurate to the specific risks you're taking, and only by examining all of the details of your finances and life situation can you determine exactly what the risks are and weigh them against the various likely outcomes. "Do never buy" is just a cautionary phrase. It really means "Be careful, this poo poo is risky and can backfire spectacularly. Take off the rose-tinted glasses and be realistic. You don't get to buy a house just because you really want to buy a house: if you do it and can't actually afford it, you'll severely regret it." But if you've done your due diligence and you want to move forward and buy? Well look, I can't speak for everyone, but I'm rooting for you. I want you to be happy and have a good future.
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Aug 5, 2017 20:44
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lampey posted:The clue report will show any insurance claims for that address. Ask your insurance person It seems like I can't get the CLUE report until I'm legally the owner of the property. And my state/county does not require permit to repair to replace roofs. We've asked the seller if they can give us contact info on the previous owners and otherwise I guess we have to wait for close so I can get the report.
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Aug 6, 2017 18:02
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Thanatosian posted:I had never seen that NY Times calculator before. I decided to stick the numbers in there, with the assumption that the housing market would grow slightly slower over the next few years than over the last few years, that rents would grow at about the same speed, that property taxes go up substantially, that I would have a 3% down payment with a 4% mortgage, that my investment rate of return would average 7%, and that my maintenance would run 2% of my value, my commons fees would be $300 a month, and my utilities would be $200ish. Gotta love insane market areas. Average 2BR condo in my town runs between $990K-$1.4M and rent on a 2BR apartment runs between $3,500-$4,500 a month. Throw in the local numbers and technically it's still better to buy than rent per the calculator, but that's a meaningless statement because you'd have to be a high-income DINK to even pretend it's feasible. Technically, renting Versaille is not as cost-effective as buying it, so... I will continue to write ungodly rent checks each month rather than pay that much for a rundown condo built 30-50 years ago. quote:I think I can boil this down a lot. Some folks have reasonably good jobs but live in areas where the two choices - renting and buying - are both really lovely options. They are suffering hardship. Not the same hardship as the unemployed or homeless in their areas, but: they're being priced out of their own home towns, and that is terrible. I can directly relate: back in ~2004 I was priced out of my home town of San Francisco, and I'm resigned to the fact that I will likely never afford to live there again. I had to get a job elsewhere and move. I lost some friends and I live farther from my parents than I want to and it sucks. Amen. I moved here a year ago and live just south of SF. I've never seen anywhere as broken as the bay area.
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Aug 6, 2017 21:30
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Thanks for the anecdotes, encouragement and insight. I promise I will be more prudent and less profitable than you were. Just a side note: how does buying a home with a non-spouse significant other work? Or is it just a situation where it's legally yours? I'm planning on doing this alone for now, but I am a (hopefully) permanent but currently non-marriage relationship with my girlfriend so that will eventually enter into it.
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Aug 6, 2017 21:37
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Magnetic North posted:Thanks for the anecdotes, encouragement and insight. I promise I will be more prudent and less profitable than you were. If you want to commit to a multi-hundred thousand dollar house together, you should be able to commit to a marriage also. If not, then yes one of you should outright own it, and the other should pay rent. It just gets too messy otherwise.
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Aug 6, 2017 21:48
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What are some things to look for during a showing?
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Aug 6, 2017 23:23
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