Did you put 20% down?

[meresal]

Date: 1/6/2010 11:18:41 AM
Author: janinegirly
meresal: the 20% figure is to protect the bank's interest too. A major cause of the current econoimic crisis was due to people buying houses they couldn't afford, putting down 0-10% with no doc loans on adjustable rate mortgages they didnt' understand. If an individual however chooses to put down less so they can utilize the cash to put in other investment vehicles AND can afford the monthly mortgage payment easily (plus property taxes which are hefty in my area at least) then it may be a good decision. We bought our house end of '08, so banks may have eased off since then, but for us, the fact that we were able to put down over 20% plus solid credit made things move alot quicker. Most banks that I'm familiar are alot more wary of mortgage applicants who do not have the funds to put down 20%.

I understand. I also think this is where all the history of rent payments comes in handy. I'm sure they have backed off a bit and have replaced the need to the full 20% with the requirement of more and more documentation.

For example, I just got an email from the bank we are using saying that eventhough we provided all the documents for the pre-approval in order to start building the house, we will again need to provide even more current documents when we close. (All bank statements as of 30 days prior to closing date, a new W-2 since we passed over the end of the year, the 2 most current pay stubs prior to closing, etc.)

I believe you that the 20% down would make things much simpler.

 

[Hest88]

We bought our house in 2000 and, yes, we put 20% down. We also calculated the amount we could spend on a house by making sure we could afford the mortgage payments on one income alone. I''d been laid-off once by then, and was adamant that if it ever happened again we''d still be able to live in our house and not subsist on cat food.

 

[rhbgirl24]

I agree with Meresal.

We are exactly the same here. In our predictions for many different home price points we should have paid 20% of the purchase price paid off during the first two years, and our PMI payments will be roughly the same as Meresal's. I dont see this as a bad thing at all. I work in real estate - have for 8 years - just because you don't want to put down 20% doesn't mean you shouldn't own a home.

I live in NJ with VERY high housing costs comparatively. And you can still have a mortgage payment comparable to rent...... I watch House Hunters and see the price some of these houses go and I would Kill for prices like that here!!!

There are worse problems: like Ohio's $100 down program

...... if you only have $100 to put down on a house, THEN maybe you cannot afford one. This is where we get a lot of the foreclosures from. I'm glad NJ doesn't have a program like that one to tell you the truth.

 

[Haven]

Date: 1/5/2010 10:37:36 PM
Author: movie zombie
yes, definitely did put 20% down. paying PMI is throwing $ out the window.

i read an article today that said we should return to buying a home, not a palace....or an investment. it also stated that new buyers should purchase a home at 75% of what they have been approved for a loan. just because one is approved doesn''t mean one has to get that amount as a loan. it also stated that every effort should be made to pay off early and that even one extra payment per year can make a difference over the long run. the article was really about returning to our grandparents values and not overloading ourselves with debt. and the writer doesn''t buy the idea that things cost more now, etc. his point of view is that things weren''t easy for our grandparents either and the only thing many of them bought on credit was a home.

mz

I wholeheartedly agree with this post. mz--You would probably enjoy reading some of Sarah Susanka''s Not So Big House books. They are all about quality not quantity in home design. I''m also a big proponent of the anti-McMansion movement.

Anyway . . .

We put 20% down on our current home, which we bought in May 2008. DH put 30% down on his condo, which he still owns and currently rents out to a tenant, and I put 20% down on the condo I lived in before we were married, which I sold.

We house hunted for over nine months and looked at 70+ homes. The banks pre-approved us for a ridiculously high amount of money, and we ended up buying a home that cost less than half of our pre-approved amount. We ultimately decided that we preferred to be able to live off of one income, and I''m so happy that we made that choice.

I think rainwood makes a great point about first-time homebuyers. Expectations seem to far outweigh the reality of their true financial situation, and it''s sad to see so many couples buried under huge mortgages and other debt.

 

[DivaDiamond007]

Date: 1/6/2010 11:41:01 AM
Author: rhbgirl24
I agree with Meresal.

We are exactly the same here. In our predictions for many different home price points we should have paid 20% of the purchase price paid off during the first two years, and our PMI payments will be roughly the same as Meresal''s. I dont see this as a bad thing at all. I work in real estate - have for 8 years - just because you don''t want to put down 20% doesn''t mean you shouldn''t own a home.

I live in NJ with VERY high housing costs comparatively. And you can still have a mortgage payment comparable to rent...... I watch House Hunters and see the price some of these houses go and I would Kill for prices like that here!!!

There are worse problems: like Ohio''s $100 down program

...... if you only have $100 to put down on a house, THEN maybe you cannot afford one. This is where we get a lot of the foreclosures from. I''m glad NJ doesn''t have a program like that one to tell you the truth.

I''m an Ohioan so I''d like to see a link for this. We used the OHFA program for our mortgage....and had to put down a lot more than $100!

Re: PMI payments. Ours are about $41.00/month.

Rent prices vary in my area depending on where you want to live and in our local economy mortgage payments are slightly less than rent, obviously depending on the purchase price of the house and terms of the mortgage. I tend to think, however, that renting is a waste of money since it''s not going towards anything whereas when you purchase a house, even with a small downpayment, you''re gaining equity and ownership in something. I also don''t think that homeownership is a right.

 

[iheartscience]

Date: 1/6/2010 11:53:07 AM
Author: Haven

Date: 1/5/2010 10:37:36 PM

Author: movie zombie

yes, definitely did put 20% down. paying PMI is throwing $ out the window.

i read an article today that said we should return to buying a home, not a palace....or an investment. it also stated that new buyers should purchase a home at 75% of what they have been approved for a loan. just because one is approved doesn''t mean one has to get that amount as a loan. it also stated that every effort should be made to pay off early and that even one extra payment per year can make a difference over the long run. the article was really about returning to our grandparents values and not overloading ourselves with debt. and the writer doesn''t buy the idea that things cost more now, etc. his point of view is that things weren''t easy for our grandparents either and the only thing many of them bought on credit was a home.

mz

I wholeheartedly agree with this post. mz--You would probably enjoy reading some of Sarah Susanka''s Not So Big House books. They are all about quality not quantity in home design. I''m also a big proponent of the anti-McMansion movement.

Anyway . . .

We put 20% down on our current home, which we bought in May 2008. DH put 30% down on his condo, which he still owns and currently rents out to a tenant, and I put 20% down on the condo I lived in before we were married, which I sold.

We house hunted for over nine months and looked at 70+ homes. The banks pre-approved us for a ridiculously high amount of money, and we ended up buying a home that cost less than half of our pre-approved amount. We ultimately decided that we preferred to be able to live off of one income, and I''m so happy that we made that choice.

I think rainwood makes a great point about first-time homebuyers. Expectations seem to far outweigh the reality of their true financial situation, and it''s sad to see so many couples buried under huge mortgages and other debt.

Ha, my parents were looking at those Not So Big House books when they were deciding what type of house to build. Those houses are not so small! Some of the houses featured in those books were larger than the 5 bedroom house they were currently in that I grew up in. It was pretty funny because that''s what they were trying to get out of.

 

[NewEnglandLady]

Date: 1/6/2010 11:53:07 AM
Author: Haven

Date: 1/5/2010 10:37:36 PM
Author: movie zombie
yes, definitely did put 20% down. paying PMI is throwing $ out the window.

i read an article today that said we should return to buying a home, not a palace....or an investment. it also stated that new buyers should purchase a home at 75% of what they have been approved for a loan. just because one is approved doesn''t mean one has to get that amount as a loan. it also stated that every effort should be made to pay off early and that even one extra payment per year can make a difference over the long run. the article was really about returning to our grandparents values and not overloading ourselves with debt. and the writer doesn''t buy the idea that things cost more now, etc. his point of view is that things weren''t easy for our grandparents either and the only thing many of them bought on credit was a home.

mz

I wholeheartedly agree with this post. mz--You would probably enjoy reading some of Sarah Susanka''s Not So Big House books. They are all about quality not quantity in home design. I''m also a big proponent of the anti-McMansion movement.

Anyway . . .

We put 20% down on our current home, which we bought in May 2008. DH put 30% down on his condo, which he still owns and currently rents out to a tenant, and I put 20% down on the condo I lived in before we were married, which I sold.

We house hunted for over nine months and looked at 70+ homes. The banks pre-approved us for a ridiculously high amount of money, and we ended up buying a home that cost less than half of our pre-approved amount. We ultimately decided that we preferred to be able to live off of one income, and I''m so happy that we made that choice.

I think rainwood makes a great point about first-time homebuyers. Expectations seem to far outweigh the reality of their true financial situation, and it''s sad to see so many couples buried under huge mortgages and other debt.

I wholeheartedly agree with MZ and Haven.

I think it can be enchanting for couples to think about what they could have. I will admit that I had to take a step back and re-evaluate what we really wanted. We were pre-approved for more than twice as much as our personal budget, which threw me for a loop. Then I started thinking about what we could afford if we put less than 20% down since it''s such a big chunk of money up front. Then I started thinking "Hmm, what if I decided not to be a SAHM and we didn''t need to rely solely on D''s income for the house". Luckly D snapped me back into shape pretty quickly and I shook it off.

While I still sometimes think about the home we could have instead of a home that is realistic for us (meaning 20% down + closing costs + emergency fund still in-tact, monthly payment no more than 20% of D''s net montly income, 15-year mortgage instead of 30), I know in my gut, my heart and my brain that we are making the best financial decision. I want completely financial freedom without the burden of a mortgage payment ASAP. The moment that mortgage is paid off is the moment I can actually think about accumulating some wealth! Until then the mortgage will just be a sack of potatoes we have to carry around on our backs.

 

[Hudson_Hawk]

Date: 1/6/2010 11:31:31 AM
Author: Smurfyimproved
I have to agree with that renting is a total waste of money. We have been paying what we could be paying on a house mortgage for 2 years but that is just the reality until we can get our credit scores boosted up after having them seriously affected because of job loss. meh.

As a former homeowner, I 100% disagree with you. Renting is not a waste of money. In fact some economists and financial advisers who used to preach home ownership as being the first step towards amassing wealth are changing their tune. Owning a home isn't only about the mortgage and PMI. There's also homeowners insurance, taxes and maintenance costs that add up very quickly. Many people don't realize that while they might be able to handle a $1500 mortgage payment, the $2k they're actually forced to fork out every month for the mortgage AND the extras would not be manageable. Do you know that if you don't pay your property taxes promptly the town will auction off your house, even though they don't own it? Do you know that some mortgage companies require you to carry extra homeowners insurance (over and above PMI) if the ratio of your home loan to the home value is above a certain point?

ETA: Another issue with renting is that there's some security should you lose your job. You can move to a smaller place with a smaller rent payment. With a house, you lose your job and you're up the creek. I would make sure I was in a VERY secure employment position before I took on a mortgage payment.

We lost our house last year. It was a sad and horrible thing to have happen and I'm still upset about it. DH had to refinance when he got divorced in order to keep the family home he's lived in for most of his life. His grandfather built this house. After refinancing, Citi Bank sold the mortgage to a predatory lender, and we got slammed financially. We worked for two years to get our loan modified and in the end our credit was ruined and we had to walk away from the house anyway. DH cried on the day we moved, the one time in our relationship when I've ever seen him so emotional. People can scream at me and tell me that we're irresponsible for our actions and that's OK with me, what happened wasn't ideal for anyone but we did what we had to do to survive.

We're now renting an amazing town home that's bigger than our previous home (4 BR) and our rent is $700 less than our mortgage was at the time we moved. In addition, we don't have to pay property taxes, we don't have to worry about maintenance and our renters insurance is under $100/month. By renting our current house we're saving almost $1000 a month. That's money that's going into savings, something we'd never be able to do before. That's money that we can use to pay off debt to get ourselves in the best financial position we can be in for the future. We'd never have been able to do that by owning our previous home.

Everyone dreams of owning a home and I don't know anyone who buys a home thinking (or knowing) that they're going to walk away leaving someone else with the bill. Personally, if we bought a home again it wouldn't be for years. Not because of the foreclosure issue, but because we have no idea where we want to settle for the long term. When we do buy another home it will be our "forever home", so we want to make sure it's perfect and we can support ourselves there until we pass on. We can't do that living paycheck-to-paycheck.

 

[NewEnglandLady]

Very well-written post, HH. I completely agree. I know that renting was the better financial decision for us. We''ve never lived in a nice home (wanted our rent to be as cheap as possible), but not having to pay for property taxes, maintenance, repairs, etc. is the reason we could even save to buy a house. If we had bought instead of continuing to rent we would have been up a creek. Renting is by far the best option for those who can''t afford to buy and we rented for nearly 10 years before we could afford to buy.

 

[meresal]

Date: 1/6/2010 12:57:43 PM
Author: NewEnglandLady
Very well-written post, HH. I completely agree. I know that renting was the better financial decision for us. We''ve never lived in a nice home (wanted our rent to be as cheap as possible), but not having to pay for property taxes, maintenance, repairs, etc. is the reason we could even save to buy a house. If we had bought instead of continuing to rent we would have been up a creek. Renting is by far the best option for those who can''t afford to buy and we rented for nearly 10 years before we could afford to buy.

Yes it is. Unless you have an amazing relationship with IL''s

.

What I don''t agree with, are the people that DH and I know, who have bought a house relying on the fact that they will have roomates to share the expenses.

Even with 20% down, THAT is not a good idea, IMO. I am in complete agreement that you should only buy what you alone can afford.

 

[lilyfoot]

Date: 1/6/2010 1:11:39 PM
Author: meresal

Date: 1/6/2010 12:57:43 PM
Author: NewEnglandLady
Very well-written post, HH. I completely agree. I know that renting was the better financial decision for us. We've never lived in a nice home (wanted our rent to be as cheap as possible), but not having to pay for property taxes, maintenance, repairs, etc. is the reason we could even save to buy a house. If we had bought instead of continuing to rent we would have been up a creek. Renting is by far the best option for those who can't afford to buy and we rented for nearly 10 years before we could afford to buy.

Yes it is. Unless you have an amazing relationship with IL's

.

What I don't agree with, are the people that DH and I know, who have bought a house relying on the fact that they will have roomates to share the expenses.

Even with 20% down, THAT is not a good idea, IMO. I am in complete agreement that you should only buy what you alone can afford.

I agree with all of the above!

HH, the story of your DH's family house made me tear up. I'm sorry you guys had to go through all that, and still lost the house

We're renters, and don't plan on buying until we've saved up a substantial down-payment (trying for upwards of 20%-30% of whatever we buy). Owning a home does come with a lot of extra responsibilities and costs, and that's pretty scary for me to think about

. The low house prices are very tempting right now, but I'm happy renting for now.

 

[icekid]

Well, we''re not buying for a few more years yet for the sheer fact that we move often for my training and may do so again in 2.5 years. Luckily this affords us tons of time to save

We''ll definitely have 20% for a nice home by then. I am pretty fiscally conservative and feel more comfortable putting more down.

 

[upgrade]

Maybe other Canadians here can correct me if I''m wrong, but it seems we have a different system. We don''t have PMI. We have CMHC fees. I believe (and I could be wrong as it''s been a few years since we bought) that it''s a 1 time fee or around $1000 if you have less than 25%? I don''t know what an ARM loan is either? We put down a little less than 20% so we did have to pay the CMHC fee, however at the time that we bought we were at the very start of a huge market upswing here, so paying the $1000 was a lot less expensive than saving until we had 25% and having the prices skyrocket on us in the meantime. My opinion is that is always better to avoid extra fees if you can, but there are times when it''s better to pay the fees and be able to buy at a certain price point rather than wait and be priced out of the market. In those instances, the value of the home would increase to the point where equity would be greater than 20% anyway. In our case we paid $1000 fee to avoid having to pay $50 000 or so more for the same house a year later.

I don''t believe that we have ever had 0 down mortgages either. I believe the minimum here is 5%. The concept of being able to take out such a huge loan with no collateral is kind of foreign to me. I don''t really understand a circumstance where that would be a wise move... What if housing prices drop? Now there''s a negative equity situation and that not good for the lender or the home "owner". A lot of this is really interesting to me as we have not been experiencing a housing price drop on the same scale.

I think the way our mortgages work is different too. If I''m understanding correctly, in the US you sign a fixed rate mortgage for 15-30 years (whatever the desired full term is)? We generally sign 5 year mortgages. The home is payed off over a period of 25 years (usually) but interest rates are set in 5 year increments.

HH- What a horrible situation! I had no idea that could even happen. I just wanted to say that I''m sorry you had to go through that. It must have been heartwrenching.

 

[Hudson_Hawk]

ARM stands for Adjustable Rate Mortgage. Most primary mortgages are fixed rate so the interest doesn''t go up or down. ARM mortgages can vary due to any number of external factors or even just the structure of the underwriting.

 

[studyer83]

To echo everyone here (there seems to be quite a consensus!). I get so frustrated with this "American Dream" homeownership stuff. There are wonderful reasons to own a house. There are good reasons that financially savvy people might not put 20% into a completely illiquid asset. But for many, its not all its cracked up to be! And many people waste quite a bit of money in the housing market that would give them more return in the stock market (and many--like people who bought houses in SF/NJ/NYC in the 1980''s--made out like bandits!)

One article

Another article

 

[rhbgirl24]

Date: 1/6/2010 11:59:02 AM
Author: DivaDiamond007

Date: 1/6/2010 11:41:01 AM

Author: rhbgirl24

I agree with Meresal.



There are worse problems: like Ohio''s $100 down program

...... if you only have $100 to put down on a house, THEN maybe you cannot afford one. This is where we get a lot of the foreclosures from. I''m glad NJ doesn''t have a program like that one to tell you the truth.

I''m an Ohioan so I''d like to see a link for this. We used the OHFA program for our mortgage....and had to put down a lot more than $100!


Re: PMI payments. Ours are about $41.00/month.

Linky
http://www.nhmsi.com/ohincentive.html

 

[DivaDiamond007]

Date: 1/6/2010 2:17:01 PM
Author: rhbgirl24

Date: 1/6/2010 11:59:02 AM
Author: DivaDiamond007

Date: 1/6/2010 11:41:01 AM

Author: rhbgirl24

I agree with Meresal.



There are worse problems: like Ohio''s $100 down program

...... if you only have $100 to put down on a house, THEN maybe you cannot afford one. This is where we get a lot of the foreclosures from. I''m glad NJ doesn''t have a program like that one to tell you the truth.

I''m an Ohioan so I''d like to see a link for this. We used the OHFA program for our mortgage....and had to put down a lot more than $100!


Re: PMI payments. Ours are about $41.00/month.

Linky
http://www.nhmsi.com/ohincentive.html

Thanks for the link! It looks like you can do that only if you''re purchasing a HUD. A HUD is a home that was a FHA mortgage that has been foreclosed. Unfortunately, there are a lot of those around here now due to the real estate and economy meltdown. It was also dated 2008 so I don''t know if you can even get those loans anymore

A $100 downpayment is a scary thought though.

 

[sunnyd]

Date: 1/6/2010 1:11:39 PM
Author: meresal

Date: 1/6/2010 12:57:43 PM
Author: NewEnglandLady
Very well-written post, HH. I completely agree. I know that renting was the better financial decision for us. We''ve never lived in a nice home (wanted our rent to be as cheap as possible), but not having to pay for property taxes, maintenance, repairs, etc. is the reason we could even save to buy a house. If we had bought instead of continuing to rent we would have been up a creek. Renting is by far the best option for those who can''t afford to buy and we rented for nearly 10 years before we could afford to buy.

Yes it is. Unless you have an amazing relationship with IL''s

.

What I don''t agree with, are the people that DH and I know, who have bought a house relying on the fact that they will have roomates to share the expenses.

Even with 20% down, THAT is not a good idea, IMO. I am in complete agreement that you should only buy what you alone can afford.

Ugh, my ex BF did that with his current house.

Definitely not 20% down, and has a live in GF that he hates but won''t break up with because she brings in some money and another roommate...at almost 29 years old. I shudder to think if we were still together...

DH and I would love to buy in the next year, but I just don''t think it''s going to happen. We''ve been strapped for cash the last two years saving for a ring and a wedding, that we just want some breathing room at this point!

The Seattle market hasn''t changed that much, so we''re okay renting for awhile.

 

[Loves Vintage]

Date: 1/6/2010 12:36:23 PM
Author: Hudson_Hawk

Date: 1/6/2010 11:31:31 AM
Author: Smurfyimproved
I have to agree with that renting is a total waste of money. We have been paying what we could be paying on a house mortgage for 2 years but that is just the reality until we can get our credit scores boosted up after having them seriously affected because of job loss. meh.

As a former homeowner, I 100% disagree with you. Renting is not a waste of money. In fact some economists and financial advisers who used to preach home ownership as being the first step towards amassing wealth are changing their tune. Owning a home isn''t only about the mortgage and PMI. There''s also homeowners insurance, taxes and maintenance costs that add up very quickly. Many people don''t realize that while they might be able to handle a $1500 mortgage payment, the $2k they''re actually forced to fork out every month for the mortgage AND the extras would not be manageable. Do you know that if you don''t pay your property taxes promptly the town will auction off your house, even though they don''t own it? Do you know that some mortgage companies require you to carry extra homeowners insurance (over and above PMI) if the ratio of your home loan to the home value is above a certain point?

ETA: Another issue with renting is that there''s some security should you lose your job. You can move to a smaller place with a smaller rent payment. With a house, you lose your job and you''re up the creek. I would make sure I was in a VERY secure employment position before I took on a mortgage payment.

We lost our house last year. It was a sad and horrible thing to have happen and I''m still upset about it. DH had to refinance when he got divorced in order to keep the family home he''s lived in for most of his life. His grandfather built this house. After refinancing, Citi Bank sold the mortgage to a predatory lender, and we got slammed financially. We worked for two years to get our loan modified and in the end our credit was ruined and we had to walk away from the house anyway. DH cried on the day we moved, the one time in our relationship when I''ve ever seen him so emotional. People can scream at me and tell me that we''re irresponsible for our actions and that''s OK with me, what happened wasn''t ideal for anyone but we did what we had to do to survive.

We''re now renting an amazing town home that''s bigger than our previous home (4 BR) and our rent is $700 less than our mortgage was at the time we moved. In addition, we don''t have to pay property taxes, we don''t have to worry about maintenance and our renters insurance is under $100/month. By renting our current house we''re saving almost $1000 a month. That''s money that''s going into savings, something we''d never be able to do before. That''s money that we can use to pay off debt to get ourselves in the best financial position we can be in for the future. We''d never have been able to do that by owning our previous home.

Everyone dreams of owning a home and I don''t know anyone who buys a home thinking (or knowing) that they''re going to walk away leaving someone else with the bill. Personally, if we bought a home again it wouldn''t be for years. Not because of the foreclosure issue, but because we have no idea where we want to settle for the long term. When we do buy another home it will be our ''forever home'', so we want to make sure it''s perfect and we can support ourselves there until we pass on. We can''t do that living paycheck-to-paycheck.

Are you saying the terms of the loan changed AFTER Citi sold the mortgage? I didn''t think this was possible. If Citi sold the mortgage, then the same terms of the mortgage would apply, regardless of who purchased it, right? Maybe, I''m wrong, but I was just surprised to read this. Doesn''t seem fair?! Sorry to hear that your DH had to leave his family home. I''m sure it was heartbreaking to leave.

 

[Loves Vintage]

Date: 1/6/2010 2:32:41 PM
Author: DivaDiamond007

Date: 1/6/2010 2:17:01 PM
Author: rhbgirl24

Date: 1/6/2010 11:59:02 AM
Author: DivaDiamond007

Date: 1/6/2010 11:41:01 AM

Author: rhbgirl24

I agree with Meresal.



There are worse problems: like Ohio''s $100 down program

...... if you only have $100 to put down on a house, THEN maybe you cannot afford one. This is where we get a lot of the foreclosures from. I''m glad NJ doesn''t have a program like that one to tell you the truth.

I''m an Ohioan so I''d like to see a link for this. We used the OHFA program for our mortgage....and had to put down a lot more than $100!


Re: PMI payments. Ours are about $41.00/month.

Linky
http://www.nhmsi.com/ohincentive.html

Thanks for the link! It looks like you can do that only if you''re purchasing a HUD. A HUD is a home that was a FHA mortgage that has been foreclosed. Unfortunately, there are a lot of those around here now due to the real estate and economy meltdown. It was also dated 2008 so I don''t know if you can even get those loans anymore

A $100 downpayment is a scary thought though.

I''d also suspect that many of these homes were "owned" by investors and rented out. I believe Ohio has certain areas that have very low valued (less than 40k) homes that are owned for the most part by investors, whose dreams of being wealthy property managers were never realized. This program looks like it is designed for low-income renters to actually become property owners. What other options exist to turn-around cities that suffer from low-owner-occupied-homes, than encouraging home ownership?

 

[janinegirly]

Paying off the mortgage asap is only beneficial if you have no other more finanacially lucrative way to invest that money and if you plan on living in your house for the 30 years. Otherwise you are losing out on potential returns that cash could bring in other investment vehicles such as further house purchases (investment property), stock market,etc. With mortgage rates so low, it''s not impossible to imagine you are borrowing at 4.5-5% while making 10% on that same cash in the stock market on average. This would not be the case in the 70''s/80''s when interest rates were double digit.

 

[Hudson_Hawk]

Date: 1/6/2010 2:55:18 PM
Author: Loves Vintage

Date: 1/6/2010 12:36:23 PM

Author: Hudson_Hawk

Date: 1/6/2010 11:31:31 AM

Author: Smurfyimproved

I have to agree with that renting is a total waste of money. We have been paying what we could be paying on a house mortgage for 2 years but that is just the reality until we can get our credit scores boosted up after having them seriously affected because of job loss. meh.

As a former homeowner, I 100% disagree with you. Renting is not a waste of money. In fact some economists and financial advisers who used to preach home ownership as being the first step towards amassing wealth are changing their tune. Owning a home isn't only about the mortgage and PMI. There's also homeowners insurance, taxes and maintenance costs that add up very quickly. Many people don't realize that while they might be able to handle a $1500 mortgage payment, the $2k they're actually forced to fork out every month for the mortgage AND the extras would not be manageable. Do you know that if you don't pay your property taxes promptly the town will auction off your house, even though they don't own it? Do you know that some mortgage companies require you to carry extra homeowners insurance (over and above PMI) if the ratio of your home loan to the home value is above a certain point?


ETA: Another issue with renting is that there's some security should you lose your job. You can move to a smaller place with a smaller rent payment. With a house, you lose your job and you're up the creek. I would make sure I was in a VERY secure employment position before I took on a mortgage payment.


We lost our house last year. It was a sad and horrible thing to have happen and I'm still upset about it. DH had to refinance when he got divorced in order to keep the family home he's lived in for most of his life. His grandfather built this house. After refinancing, Citi Bank sold the mortgage to a predatory lender, and we got slammed financially. We worked for two years to get our loan modified and in the end our credit was ruined and we had to walk away from the house anyway. DH cried on the day we moved, the one time in our relationship when I've ever seen him so emotional. People can scream at me and tell me that we're irresponsible for our actions and that's OK with me, what happened wasn't ideal for anyone but we did what we had to do to survive.


We're now renting an amazing town home that's bigger than our previous home (4 BR) and our rent is $700 less than our mortgage was at the time we moved. In addition, we don't have to pay property taxes, we don't have to worry about maintenance and our renters insurance is under $100/month. By renting our current house we're saving almost $1000 a month. That's money that's going into savings, something we'd never be able to do before. That's money that we can use to pay off debt to get ourselves in the best financial position we can be in for the future. We'd never have been able to do that by owning our previous home.


Everyone dreams of owning a home and I don't know anyone who buys a home thinking (or knowing) that they're going to walk away leaving someone else with the bill. Personally, if we bought a home again it wouldn't be for years. Not because of the foreclosure issue, but because we have no idea where we want to settle for the long term. When we do buy another home it will be our 'forever home', so we want to make sure it's perfect and we can support ourselves there until we pass on. We can't do that living paycheck-to-paycheck.

Are you saying the terms of the loan changed AFTER Citi sold the mortgage? I didn't think this was possible. If Citi sold the mortgage, then the same terms of the mortgage would apply, regardless of who purchased it, right? Maybe, I'm wrong, but I was just surprised to read this. Doesn't seem fair?! Sorry to hear that your DH had to leave his family home. I'm sure it was heartbreaking to leave.

The terms didn't change. The new bank was habitually bad with paperwork and didn't pay our property taxes like the agreement stated they were supposed to. They finally paid when the auction warning came from the town, which put our escrow in the red by thousands. They never adjusted our payments to account for the extra $, so every month we made a payment it went to the escrow balance and not towards our monthly due amount (we weren't looking at the statements because our payment was always $50 more than the usual amount due each month). So according to their records, even though we were paying on time every month, their records indicated that we were habitually overdue. One thing led to another, the foreclosure process started (even though we'd never been late with a payment or missed, ever) and we went into the modification process. They tacked on $200/month for the modification "program" and then continued to "lose" our paperwork conveniently at the end of the term of the program. So they'd reject our application and offer to re-enroll us. We'd re-enroll, they'd take on ANOTHER $200 to the already higher monthly payment and the cycle would continue. This went on and on until we were making payments of $2200/month on a $1400-$1500 mortgage and we just couldn't afford it any more. After the fact we did some research and discovered that this modification "program" was pretty much bogus and we weren't the only ones who went through this. This company is currently under criminal investigation by the government.

It's not fair and it's their fault, but we were exhausted and we just wanted out. The only recourse we have is to link up with the class action lawsuit that they have against them but even then nothing would come of it.

 

[steph72276]

Date: 1/6/2010 3:11:54 PM
Author: janinegirly
Paying off the mortgage asap is only beneficial if you have no other more finanacially lucrative way to invest that money and if you plan on living in your house for the 30 years. Otherwise you are losing out on potential returns that cash could bring in other investment vehicles such as further house purchases (investment property), stock market,etc. With mortgage rates so low, it's not impossible to imagine you are borrowing at 4.5-5% while making 10% on that same cash in the stock market on average. This would not be the case in the 70's/80's when interest rates were double digit.

I disagree with this! Just as an example, when you pay $1,349 a month for 30 years at 6% interest on a $225,000 home, you are actually paying $486,000 over the life of the loan....When you cut it down to 15 years, you'll save yourself $144,000 over the life of the loan. Cut it down even more, and you save even more in interest. And to top it off, when you don't have that $1300 or more payment every month, you actually have lots more money to invest in things like the stock market.

 

[Haven]

Date: 1/6/2010 12:19:16 PM
Author: thing2of2

Date: 1/6/2010 11:53:07 AM
Author: Haven

Date: 1/5/2010 10:37:36 PM
Author: movie zombie
yes, definitely did put 20% down. paying PMI is throwing $ out the window.

i read an article today that said we should return to buying a home, not a palace....or an investment. it also stated that new buyers should purchase a home at 75% of what they have been approved for a loan. just because one is approved doesn't mean one has to get that amount as a loan. it also stated that every effort should be made to pay off early and that even one extra payment per year can make a difference over the long run. the article was really about returning to our grandparents values and not overloading ourselves with debt. and the writer doesn't buy the idea that things cost more now, etc. his point of view is that things weren't easy for our grandparents either and the only thing many of them bought on credit was a home.

mz

I wholeheartedly agree with this post. mz--You would probably enjoy reading some of Sarah Susanka's Not So Big House books. They are all about quality not quantity in home design. I'm also a big proponent of the anti-McMansion movement. \

Ha, my parents were looking at those Not So Big House books when they were deciding what type of house to build. Those houses are not so small! Some of the houses featured in those books were larger than the 5 bedroom house they were currently in that I grew up in. It was pretty funny because that's what they were trying to get out of.

???? I wonder which specific book they read. I have three of them right here and can't find a huge house in the bunch. She does detail one large house that, while large, still embraces the ideals of her "not so big house." I wonder if that is what you're thinking of.

I think your response is misleading, as these books are really fabulous resources for homeowners or builders who are interested in building a house that focuses on the quality of the space rather than the quantity. They do not showcase large homes.

 

[Haven]

HH--I''m so sorry that happened to you.

 

[rhbgirl24]

Date: 1/6/2010 2:32:41 PM
Author: DivaDiamond007

Date: 1/6/2010 2:17:01 PM

Author: rhbgirl24

Date: 1/6/2010 11:59:02 AM

Author: DivaDiamond007

Date: 1/6/2010 11:41:01 AM


Author: rhbgirl24


I agree with Meresal.




There are worse problems: like Ohio''s $100 down program

...... if you only have $100 to put down on a house, THEN maybe you cannot afford one. This is where we get a lot of the foreclosures from. I''m glad NJ doesn''t have a program like that one to tell you the truth.

I''m an Ohioan so I''d like to see a link for this. We used the OHFA program for our mortgage....and had to put down a lot more than $100!



Re: PMI payments. Ours are about $41.00/month.

Linky

http://www.nhmsi.com/ohincentive.html

Thanks for the link! It looks like you can do that only if you''re purchasing a HUD. A HUD is a home that was a FHA mortgage that has been foreclosed. Unfortunately, there are a lot of those around here now due to the real estate and economy meltdown. It was also dated 2008 so I don''t know if you can even get those loans anymore

A $100 downpayment is a scary thought though.

Yup, I know its only thru FHA and HUD homes, I''ve worked extensively with them. 2008 is when it came into play, believe me, its still active. I have to deal with it every day.

 

[janinegirly]

Date: 1/6/2010 3:29:33 PM
Author: steph72276

Date: 1/6/2010 3:11:54 PM
Author: janinegirly
Paying off the mortgage asap is only beneficial if you have no other more finanacially lucrative way to invest that money and if you plan on living in your house for the 30 years. Otherwise you are losing out on potential returns that cash could bring in other investment vehicles such as further house purchases (investment property), stock market,etc. With mortgage rates so low, it''s not impossible to imagine you are borrowing at 4.5-5% while making 10% on that same cash in the stock market on average. This would not be the case in the 70''s/80''s when interest rates were double digit.

I disagree with this! Just as an example, when you pay $1,349 a month for 30 years at 6% interest on a $225,000 home, you are actually paying $486,000 over the life of the loan....When you cut it down to 15 years, you''ll save yourself $144,000 over the life of the loan. Cut it down even more, and you save even more in interest. And to top it off, when you don''t have that $1300 or more payment every month, you actually have lots more money to invest in things like the stock market.

There are also tax factors to consider plus you are still assuming your figures will beat returns on same cash invested in stock market with historical averages of 10% over the life of the loan (this is on average, some years will be 1%, others 20%). Anyway, I''m generalizing--each situation has unique factors to take into consideration (income, what rate did you lock in, etc etc). I found a blurb that might say it better than I can.

http://www.usatoday.com/money/perfi/columnist/krantz/2005-12-13-pay-off-mortgage_x.htm

 

[steph72276]

As far as tax deductions go: If you have a $200,000 mortgage at 5% interest, you are paying $10,000 in interest. If you have a $10,000 tax deduction that means you don’t pay taxes on $10,000 of your income. If you lose that deduction because you paid off your mortgage, you’d have to pay taxes on the additional $10,000. Taxes on $10,000 for most people are probably around $3,000.

So not paying off your house means that you keep paying the bank $10,000 a year to avoid sending the government $3,000. That doesn't make much sense to me. If you want to turn $10,000 into something, give it to charity. You still get to deduct the $10,000, but you don't have a mortgage.

As far as I see it, I would rather be completely debt free with no mortgage payment at an early age so that I can put lots more away into investments...but that is what makes sense to me personally. I agree everyone should make up their own minds, but you stated that it doesn't make sense to pay it off early in your other post, so I wanted to show why it does make sense to me and a lot of others that think along the same lines.

 

[Mrs Mitchell]

Steph, I agree with you on this.

I''m being forced (much against my will) to take a course at law school on financial services at the moment and I''m surprised to see that UK Financial Services Authority licensed advisors are taught (and teaching) that the priority should be debts (managed efficiently, not necessarily paid off in lump sums), then insurances (including life assurance, income protection etc depending on circumstances), then pension planning, then emergency fund, then tax free / tax efficient savings, then diversified investment and only then, property. Obviously, clients'' own priorities will take precedence, but that''s the standard plan.

I did it completely the other way around, personally - debt free, house paid off, then savings.

 

[NewEnglandLady]

Date: 1/6/2010 3:29:33 PM
Author: steph72276

Date: 1/6/2010 3:11:54 PM
Author: janinegirly
Paying off the mortgage asap is only beneficial if you have no other more finanacially lucrative way to invest that money and if you plan on living in your house for the 30 years. Otherwise you are losing out on potential returns that cash could bring in other investment vehicles such as further house purchases (investment property), stock market,etc. With mortgage rates so low, it's not impossible to imagine you are borrowing at 4.5-5% while making 10% on that same cash in the stock market on average. This would not be the case in the 70's/80's when interest rates were double digit.

I disagree with this! Just as an example, when you pay $1,349 a month for 30 years at 6% interest on a $225,000 home, you are actually paying $486,000 over the life of the loan....When you cut it down to 15 years, you'll save yourself $144,000 over the life of the loan. Cut it down even more, and you save even more in interest. And to top it off, when you don't have that $1300 or more payment every month, you actually have lots more money to invest in things like the stock market.

I can definitely see the rationale behind investing in something that one hopes earns more than the interest on the mortgage. I even know of some financial analyst who would say that's a sound financial strategy, though I think that most financial analyst would say that any investments made would be offset by the debt of the mortgage. Especially if a person is "investing" in real estate, which can really only be considered an investment if it's paid for in cash. I don't think investor would consider taking out multiple mortgages as an investment, it's way to risky to be a sound investment strategy. While I would never say that one shouldn't invest while he/she has a mortgage, I don't think that any real investing can start until the mortgage is knocked out.

ETA: I did keep a student loan around for a long time because the interest was so low--we just paid it off because I got sick of carrying around the debt...I wish I'd done that years ago.