Buying a house?
DjArcadian
3,633 Posts
For those that have bought a house. I have some questions. I think it's that time in my life where I need to start planning for my future home. I'm totally clueless so here's some basic questions.1. Are most home loans paid off over 30 years? Is that the standard?2. What interest rate would be considered good? How does that work exactly?3. What type of down payment is typical? I've heard 20% but with houses in the Bay Area being a minimum of $500K to $650K a deposit like that would cost a minimum of $100K. It would take me 5 to 8 years to save up just for the deposit. Should I be planning for that?4. What effect does owning a house have on your taxes? I've heard that owning a house is a nice tax write.Some about the amateur nature of these posts. I feel clueless about this stuff.
Comments
Best thing I ever did.
Our rent was $750, but when we bought the place ($89k) payments dropped to a few hundred dollars.
Most realtors work for the seller, and represent the sellers intrest first. In some states this is the law. In some states you can find a realtor who will represent you. I have a friend who bought a place off craigslists with no realtor.
1) 30 year is typical mortgage. We are paying our mortgage off faster. For me independance from debt is very important. My friends who know these things say it smarter to invest our cash in market accounts than the house.
2) You can look in the business section of the paper and see the intrest rates. Stay away from gimmick mortgages.
3) If you qualify for an FHA loan you can go with a 3% down payment. When we bought 10% was typical. We did 20% because we were self employed and our building was "non-conforming" and no one wanted to loan us money.
4) Taxes suck. I think intrest is deductable or something like that. But then you have to pay property taxes.
We knew a property lawyer who was willing to help us, but my wife didn't want to take advantage of her kindness. Everything turned out ok, but I signed a 10" stack of papers without reading them, which was stupid.
Christ, $89K? You can't get a closest for that much over here. Where do you live?
re:4
Don't take this as Gospel-- and this may depend on whether or not you are a first time buyer, but I believe in some instances the payments themselves are tax deductible and I'm pretty certain that any late payments or penalties associated with the house can be deducted. I need to look into both of these things as I've made so little money in the past few years that I haven't even had to file taxes. I'm definitely owed a little bit of loot.
Also, I think there are additional tax benefits if you are an investment property buyer.
My interest rate is around 7%. This is fairly good/standard.
And yes, buying is a great move. Although in hindsight I should have purchased the older Victorian that I always wanted.
Nor here. I bought 12 years ago so I have a little equity. Plus our place is a nonconforming falling down old store front in an undesirable part of Portland.
DO NOT plan your purchase around what is typical. These days any knob can get a mortgage. Easy credit is what caused the housing bubble. Interest-only mortgages are out there, 40/50 year mortgages are out there and it's absolutely ridiculous. People are way over their head into debt these days and if you can avoid that you are ahead of the game. Unfortunately it seems you are in a market that will force you to take on a lot of debt if you choose to buy a home. I personally think a 15 year amortization is ideal, but I live in a market that is still reasonable.
A house needs to be part of an overall financial plan. This is most important. A mortgage affects how much insurance you require, how much you can save for retirement, etc. If you don't have a plan, you will probably overbuy. The first thing to consider is whether or not you want to live in SF for the long term. If not, then buying a house may not be the best decision.
get something at a reasonable price.
SF prices are stoops, LA same, Seattle is a bit better but the median is still $300.000 plus,
and that's for a postage stamp next to a crack house.
Expect to pay at least $400,000-$500,000 for something in an "decent" hood.
Portland has blown up too but not as fast, so I'd say that's your best bet as far as cities on the West Coast go.
We have a 30 year fixed mortgage at 4.85%, which is the lowest rate I've ever heard of.
We qualified for a no money down 1st time buyer program, so we got in for $0 which was perfect since we
had nada to put down.
Look for a program or a lender who specializes in 1st time buyers, that can be a great way to get started.
Hey Dan I like your house and your neighborhood, don't be so hard on yourself.
that is the most incredible thing I have ever heard.....that low a rate for 30 years is silly nice!!!!!
As a homeowner here in Toronto for the last 7 years, I would say that it is a mixed blessing. Home ownership is damn expensive. It is quite suprising how so many things can go wrong, and need fixing pronto like. In addition to all of the things that other strutters have already mentioned, don't spend every penny you have on a down payment, as within the first 2 years some shit will go wrong and you will want the cash to pay for it. My first month here it rained in my dining room when i was taking a shower upstairs.......that shit cost a grand to fix.
I would suggest putting down nothing less than %25 on the initial cost of the house. I completely realise that this is a whopping amount of dough, but in the long run so incredibly worth it. Makes the total interest that you pay on the property soooo much less. Also, you have much more in the way of mortgage options. Do you have a mortgage broker??? I would also highly suggest getting one. They work for you at the expense of the institution that eventually gives you mortgage. Makes a hell of a lot of sense, and gets companies fighting over your business.
Also, try to purchase in an emerging area in your city. I know that this can be like pulling a rabbit out of a hat, but a totally established area you will pay dearly for. I also would not buy a totally new fabricated cookie cutter hosue, as everyone I know who has got such a low rating from their home inspector due to shoody construction and hastily assembled bathrooms, kitchens etc...
Being th owner of you own house is a tough run....but there is nothing quite like the feeling of "woah....this shit is mine".
I wouldn't call these scams but I think a lot of people don't really take into account the long-term consequences of entering into financial commitments like these. With an "interest only" loan, for example, your payments will be deceptively low for 3-5 year "interest only" period but after that, expect to get your ass kicked unless you can refinance at a lower rate and even then, still expect to get your ass kicked. Personally, I don't understand why anyone would try to accept a loan where they're paying off the interest but not the principal.
10-30% is "normal" for a downpayment, it all depends on what you can afford but in general, the more you can put down, the better in the long term since it reduces both your principal and thus, the interest. Of course, you shouldn't clean out your savings just to make a downpayment if that means you have nothing less as "back-up" in case of an emergency. An accountant who did my taxes last year suggested that, in general, $10,000 in easily liquidated funds (cash or otherwise) is a good idea PER ADULT (i.e. $20,000 for you and a spouse). That's not exactly chump change and it's a suggested "safety net" rather than necessity, but you get the idea.
The interest payments you make are tax-deductible in most cases. Paying down your principal IS NOT. In other words, if you take out a loan for $300,000 to buy a house, it's not like that $300,000 suddenly becomes tax deductible. However, the interest you pay on that loan CAN BE deductible under most circumstances. This is an important distinction.
This is just a personal opinion but while I wouldn't call home ownership "overrated" I don't think it should be rushed into just for the sake of owning a home, esp in a bubble market (which the Bay Area is still in the midst of). My wife and I talked about trying to buy in L.A. but we decided to chill for another year or so, stack our chips so we can slap down a better downpayment and try to see where interest rates go.
Real talk. After buying our house we had to hook up to city sewer because the city was just getting around to bring sewer to our neighborhood. That cost a fortune. We also fixed a leaky roof. We lived with a galley kitchen, 2 burners under counter fridge, for 6 years before we could afford to remodel.
We bought a condo in SF (Noe Valley) six months ago. Because we had good credit, we were able to get in for 0 down. That's right: no down payment.
We'd be renting for a very, very long time if we had to put down 20%.
And yes, your monthly mortgage payments will be lower if you put 5% down, but when we looked at all the numbers, it was only going to drop the payments by $100 or so (if that) each month, so we opted to keep our money in savings.
BTW, if you need a good realtor, holler!