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My appraisal came in at $2k over our offer. Does this mean I'm getting a $2k head start over my downpayment on my equity? I realize that's not too much to get excited about, but on a $115k house that still feels like a decent chunk.
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May 13, 2015 05:41
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No, the bank considers the value of the house to be the lower of the appraised value or purchase price, and any future purchasers won't give a poo poo what your appraiser thinks.
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May 13, 2015 06:12
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As a Millennial I posted:My appraisal came in at $2k over our offer. Does this mean I'm getting a $2k head start over my downpayment on my equity? I realize that's not too much to get excited about, but on a $115k house that still feels like a decent chunk. It's typical for an appraiser to come in just slightly above whatever your offer was. That keeps the bank happy, it keeps the buyer happy, and it keeps the seller happy. "Oh look at that, the house is worth approximately what someone was willing to offer for it! Weird!" The margin of error for a home appraisal is huge. Technically that is $2k of equity that you have, yes, but it could easily evaporate on the next appraisal (the one that you'd order in order to get PMI taken off, for instance)
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May 13, 2015 06:20
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How common is it for a seller to rent out the house for some days after closing? And what's a typical rate to charge for this kind of thing, basically just prorate the monthly payment + add some extra fee for the inconvenience? The internet seems to indicate that this is not too uncommon because sellers don't want to move until it's absolutely necessary, but this probably effects a final walkthrough and all of that, right?
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May 13, 2015 06:24
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Lame.
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May 13, 2015 06:48
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QuarkJets posted:How common is it for a seller to rent out the house for some days after closing? And what's a typical rate to charge for this kind of thing, basically just prorate the monthly payment + add some extra fee for the inconvenience? It's common, it's called a leaseback and you do it to bridge time between closings and relocations.
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May 13, 2015 07:17
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Leperflesh posted:I hope you have a very large down payment, or that 6.5 years of paying mostly interest coupled with the short-term risk of a still pretty volatile housing market means you're taking a significant chance of losing money on this house (once you factor in all of the costs of buying and selling, taxes, maintenance, etc.) Understood -- my situation is a little atypical in that I'm using a physician loan, essentially designed for doctors in residency to purchase homes at a lower initial cost knowing that the earning potential will be dramatically higher in five years. The market here isn't great for renters, as good rental properties are few and far between. Landlords know this and are charging rates well above what would be expected. We had to give up a lot to rent a home that we thought was a value, and it meant living about 100 feet from a very active railway. We're looking forward to the burdens of homeownership. Even with the costs of maintenance, we are spending less each month than we were while renting, and getting a dramatically better house in a better location.
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May 13, 2015 11:49
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I also think it's pretty silly to only look at the financial implications of rent vs. buy. None of my rental apartments had 3 bedrooms, a yard, and no landlord. I don't know how much that's worth but it's something.
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May 13, 2015 12:59
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I can tell you if they are looking to move to a Detroit suburb as well, the rising rental rates in downtown Detroit could potentially be a factor. I'm looking at somewhere between 1700-1900 a month staring me in the face if i want a 2 bedroom apartment downtown, which nationally isn't bad, but is more expensive than what I would end up finding in the suburbs. Even if you don't have the 8-10 year window, it might be just that the more manageable monthly aspect is of interest.
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May 13, 2015 13:48
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Andy Dufresne posted:I also think it's pretty silly to only look at the financial implications of rent vs. buy. None of my rental apartments had 3 bedrooms, a yard, and no landlord. I don't know how much that's worth but it's something. There are many rental houses with 3 bedrooms and a yard. And landlords can be pretty awesome.
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May 13, 2015 15:25
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I agree. There's no better friend than a landlord.
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May 13, 2015 15:30
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If I had a landlord I couldn't tear out my ceiling this weekend to install recessed lights 
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May 13, 2015 15:56
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Andy Dufresne posted:If I had a landlord I couldn't tear out my ceiling this weekend to install recessed lights Yep, you also need to pay through the nose when poo poo breaks, as opposed to having the landlord deal with the whole thing.
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May 13, 2015 15:59
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enraged_camel posted:Yep, you also need to pay through the nose when poo poo breaks, as opposed to having the landlord deal with the whole thing. I'm the last person to encourage people to buy but I think you completely missed the point of my post. When you own a home you get to do what you want to it. Because it's yours. "Do never buy" is great advice for people who can't afford it. Some people can. Comparison to rentals is a pretty simple math problem. Are landlords charitable people, or are rent payments enough to cover a mortgage + repairs with a little extra?
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May 13, 2015 16:57
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Andy Dufresne posted:I'm the last person to encourage people to buy but I think you completely missed the point of my post. When you own a home you get to do what you want to it. Because it's yours. Not to completely pile on here, but we went from owning to selling our home, moving across the state and renting until we build our new house. Some things we noticed when looking and finding a place: - Rent is about the same cost, if not a bit more. Plus no mortgage deduction on our taxes. - Landlord will fix things that need to be fixing. Other things, they could care less. So if you want it done you will need to do it. This is probably not everyone's experience, but probably the majority. - Rentals are in worse areas generally. Unless you can find a house to rent, which at least here is quite hard, you're going to be buy a busy road, or in worse off areas. - Deposit. Not all landlords are bad, but we generally get scammed out of a few hundred at least on our deposits. Who knows what will happen here, but not expecting it all back. - Rental Quality. We got a nice rental, and it has nice windows, good items, that isn't always the case though, lot of bottom of the barrel items. - Rental Cared For. If your place has been rented out before it's probably kind of beat up. People don't care as much about rentals, so there are weird things that are done and never fixed. Doors that don't close right, bad placement for items, loose towel bars, doors that don't want to latch...the list goes on. That isn't to say that buying is the right answer, it's just to say it's quite a bit more nuanced as Andy was pointing out.
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May 13, 2015 17:09
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SlapActionJackson posted:No, the bank considers the value of the house to be the lower of the appraised value or purchase price, and any future purchasers won't give a poo poo what your appraiser thinks. Is this true universally? I'm looking at a place that is priced significantly below market (purchase from a friend) and was thinking the LTV would be based on the appraisal.
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May 13, 2015 17:32
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Editing out some incorrect info.
gtkor fucked around with this message at 17:52 on May 13, 2015 |
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May 13, 2015 17:47
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Andy Dufresne posted:I'm the last person to encourage people to buy but I think you completely missed the point of my post. When you own a home you get to do what you want to it. Because it's yours. The math problem isn't that simple. In my area, rent on a house is a good deal less than the cost of covering a 30-year mortgage. It's not because landlords here charitable (some might be), it's just how the market has worked out. It's not stopping us from buying because we want a place to gently caress around with and a fenced-in yard so that we can get a dog, which we don't have at our rented house. But we are looking at increasing our monthly expenses by at least 50% in doing so. It's not a good financial investment by any stretch.
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May 13, 2015 18:49
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antiga posted:Is this true universally? I'm looking at a place that is priced significantly below market (purchase from a friend) and was thinking the LTV would be based on the appraisal. It's true where I'm at, can't speak for other places. And it makes sense, the bank wants to minimize risk so they're going to take the lowest appraised value possible QuarkJets fucked around with this message at 19:10 on May 13, 2015 |
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May 13, 2015 18:51
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QuarkJets posted:It's true where I'm at, can't speak for other places. And it makes sense, the bank wants to minimize risk so they're going to take the lowest appraised value possible Seems like you're right. Seems a bit ridiculous if the house value is way below the mortgage amount but the bank has no incentive to see it the way I do.
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May 13, 2015 20:29
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What's the rule of thumb for affordability as a multiple of your yearly gross income?
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May 13, 2015 22:26
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Rule of thumb is that your debt to income ratio (the DTI) shouldn't exceed 28%. I personally think you are probably doing well if you keep it around a quarter.
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May 13, 2015 22:44
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gtkor posted:Rule of thumb is that your debt to income ratio (the DTI) shouldn't exceed 28%. I personally think you are probably doing well if you keep it around a quarter. Huh? So someone making $100k a year shouldn't have a mortgage (and all other debts) exceeding $28k? Mostly what I have seen is that ones mortgage shouldn't be much more than 2x one's gross annual income. All of these "rules of thumb" are, in my opinion, really bad to pay attention to. Everyone's financial situation is different. Exactly how much debt is manageable for you, is highly dependent on a lot of different factors; your cost of living, your ability to restrict spending if you lose your job, your employment flexibility, availability of family safety nets, whether you have dependents and how many of them you have, and so on. Because of all of that, the odds are that any given rule of thumb will either mislead you into thinking you can afford more than you actually can, or lead you into thinking you can't afford something you actually can afford.
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May 13, 2015 23:02
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I mean their DTI for underwriting purposes. I may have read the question incorrectly. I was assuming he was looking for a percentage of his income. 43% is a common DTI number that will be a cut off for getting an approval, but if you search how much home should i afford, you will find the 28% number. Additional math just to drive the point home. DTI factors in housing and other expenses on your credit report, but wouldn't factor in taxes (using pretax numbers only). It also doesn't factor in all the other stuff you spend money on that never shows up on a credit report (childcare being a big one for a lot of people) Lets say you make 100k annually or 8333 a month. If you multiple that by the 28% DTI figure, you would get a monthly payment of 2333. That would be a number I would avoid exceeding, including taxes, HOI (and PMI and HOA) if applicable. gtkor fucked around with this message at 23:08 on May 13, 2015 |
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May 13, 2015 23:04
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He asked about affordability as a multiple of annual income. E.g., how much house can one afford? If you make (say) 80k, what multiple of that is the most expensive house you should consider buying. But your math is probably just as helpful, because you can take mortgage payment and work backwards to a total house value.
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May 13, 2015 23:17
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That makes sense, I did in fact read the question wrong. I guess id still prefer working the other way around, since simply plugging in a multiplier the other way would potentially neglect the other portions of the payment (taxes, HOI, possibly PMI or HOA).
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May 14, 2015 03:39
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gtkor posted:That makes sense, I did in fact read the question wrong.
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May 14, 2015 03:58
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Leperflesh posted:He asked about affordability as a multiple of annual income. E.g., how much house can one afford? If you make (say) 80k, what multiple of that is the most expensive house you should consider buying. Hmm, so for $100k, you shouldn't exceed a mortgage of $200k, with 20% down that's a house value of $250k. Monthly payment on that with 20% down and 4% interest would only be $1300/month though, which is only about 20% of that person's monthly take-home pay "Don't exceed double your annual pay" seems like it's reasonably close, leaning toward the conservative side. 300% would probably even be fine at that kind of income
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May 14, 2015 05:05
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QuarkJets posted:Hmm, so for $100k, you shouldn't exceed a mortgage of $200k, with 20% down that's a house value of $250k. Monthly payment on that with 20% down and 4% interest would only be $1300/month though, which is only about 20% of that person's monthly take-home pay Yeah, you should add in the taxes and maintenance and other costs of the mortgage, and then assume that most borrowers are also carrying some other debt (car payment, etc.). A "double your salary" rule of thumb isn't far off from that 28% LTV number that gtkor mentioned.
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May 14, 2015 05:08
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Leperflesh posted:Yeah, you should add in the taxes and maintenance and other costs of the mortgage, and then assume that most borrowers are also carrying some other debt (car payment, etc.). A "double your salary" rule of thumb isn't far off from that 28% LTV number that gtkor mentioned. For someone making $100k, 28% is an allowable payment of $2333. At 4% interest 30-year, 20% down, and including HOA and maintenance and all of that poo poo would afford you a roughly $400k house Versus a $200k house Unless one metric is net pay and the other is gross?
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May 14, 2015 05:26
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Double your salary is overly conservative, in general the financial advice in BFC is waaaay too cautious and will have you living the life of a miser eating nothing but dried rice and beans alone with only your tears to salt the meal. Don't get like 6x your salary in a mortgate but 4x is fine if you're stably employed and have reasonable expectations of income growth.
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May 14, 2015 06:36
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Everything's relative, and taxes can be a bitch. Your taxes may be upwards of 4% of market value, per year! In fact, annualized taxes might just equal or exceed your mortgage payment, isn't that neat? Plus, you get to pay them in perpetuity and your location will be forever blighted by the high taxation rate.
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May 14, 2015 07:36
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Monthly % of gross is the most sound advice, but you need to be adding up all monthly debt obligations not just the house. I'm not sure what the rule of thumb % is for the total but I wouldn't be comfortable going over 33% personally. The other advice is that you're getting screwed if you put less than 20% down even if you can afford the monthly payment. So try to save first.
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May 14, 2015 13:25
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I don't know that I believe the last bit to be as true anymore. A lot of that depends on how risk averse you are in real estate. These days anyone with a good credit score can get a loan with no mortgage insurance with less than 20% equity, so then it becomes a question of liquidity. There is certainly never going to be anything wrong with putting 20% down and that is certainly safer, but if you were buying your forever home for instance, and could put 5% down and have the same monthly payment, that's a lot of money that gets to stay in the retirement vessels.
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May 14, 2015 13:40
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gtkor posted:I don't know that I believe the last bit to be as true anymore. A lot of that depends on how risk averse you are in real estate. These days anyone with a good credit score can get a loan with no mortgage insurance with less than 20% equity, so then it becomes a question of liquidity. No, it's about the PMI, which butt-fucks you as hard as credit card debt.
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May 14, 2015 14:57
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Well the thing is, most lenders have loosened up PMI standards quite a bit over the last year or so. LPMI options are a whole lot cheaper than they normally are. Certainly some people will make the argument that LPMI isn't worth it over the really long term and in my forever home argument you could certainly make that case, but it isn't like it is 20% or bust.
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May 14, 2015 15:03
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gtkor posted:Well the thing is, most lenders have loosened up PMI standards quite a bit over the last year or so. LPMI options are a whole lot cheaper than they normally are. I think the argument is that if you can't afford to put down 20%, you have no business buying a house. Whether or not you actually put down 20% will have to be based on a calculation of costs and the benefit of liquidity.
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May 14, 2015 16:11
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baquerd posted:Everything's relative, and taxes can be a bitch. Your taxes may be upwards of 4% of market value, per year! In fact, annualized taxes might just equal or exceed your mortgage payment, isn't that neat? Plus, you get to pay them in perpetuity and your location will be forever blighted by the high taxation rate.
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May 14, 2015 16:17
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I bought in 2009 with 3.5% down. I refinanced out of my MIP (PMI) last year, without adding money, because my house has increased in value by 58% since then. I bought a house costing approximately 2.5x my household combined gross annual income. My wife is still paying off student loans, so if you add in our total debt load, it's something like 2.8x annual. We're in the Bay Area, where it's typical for people to spend 50%+ of their annual income on housing, though, and we deliberately moved to a city (Concord) with lower cost of living then where we were (peninsula). These are just data points. Every detail matters. We have no kids and won't have any. Our cars are paid off. I work from home, which cuts commute costs. We have pets that require careful climate control, which raises climate control costs. Our property taxes are relatively low. Our MIP was tax deductible (and we itemize). Etc. etc. etc. Rules of thumb are just a starting point. Nobody should buy a house without doing a thorough analysis of their own situation, and that analysis is going to tell them what they can afford.
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May 14, 2015 17:02
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I bought a 115 year old house. There are two trees in the basement.
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May 14, 2015 17:15
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