Home Buying Thread - Page 4

Cad · 02-17-2009, 01:10 PM

Make sure you underbuy. Take your annual salary and multiply it by 2, and thats the most your mortgage should be, especially if it is your first house. Similarly, take your annual salary and divide it by 2, and thats about how much you could spend on a car. So if you made $100k, you should live in a $200k house and have a $50k car. (If you finance it). If you have some cash for a down payment, you can add that on to the multiplied-by-2 price.

This will allow you to pay off your purchase quickly and not end up paying the purchase price of the house in interest to the bank, and instead use this money for your own enjoyment.

Heylel Teomim · 02-17-2009, 01:12 PM

Quote:

Originally Posted by Cad

Make sure you underbuy. Take your annual salary and multiply it by 2, and thats the most your mortgage should be, especially if it is your first house. Similarly, take your annual salary and divide it by 2, and thats about how much you could spend on a car. So if you made $100k, you should live in a $200k house and have a $50k car. (If you finance it). If you have some cash for a down payment, you can add that on to the multiplied-by-2 price.

This will allow you to pay off your purchase quickly and not end up paying the purchase price of the house in interest to the bank, and instead use this money for your own enjoyment.

The nature of the housing market in Atlanta fudges this somewhat. I'm unlikely to find a house in a decent part of town for precisely double my income, but it should be possible for about 2.5x. On the other hand, my vehicle is paid off. So it evens out in the end.

Cad · 02-17-2009, 01:14 PM

Quote:

Originally Posted by Heylel Teomim

The nature of the housing market in Atlanta fudges this somewhat. I'm unlikely to find a house in a decent part of town for precisely double my income, but it should be possible for about 2.5x. On the other hand, my vehicle is paid off. So it evens out in the end.

2.5 should be okay, it's all guesswork anyway. The point is, make sure you get something you can pay off in under 5 years through careful budgeting. If your payment is 50% of your gross salary for example, there's no fucking way. When I bought my house, my payment was something like $1300/mo on a 15-year mortgage and I was earning like 12k/mo net. Obviously I made a few extra payments and..

Heylel Teomim · 02-17-2009, 01:41 PM

Quote:

Originally Posted by Cad

2.5 should be okay, it's all guesswork anyway. The point is, make sure you get something you can pay off in under 5 years through careful budgeting. If your payment is 50% of your gross salary for example, there's no fucking way. When I bought my house, my payment was something like $1300/mo on a 15-year mortgage and I was earning like 12k/mo net. Obviously I made a few extra payments and..

12,000/month? Heh, that's considerably beyond my means.

I'm in my mid-20s at the start of my career. I make about 3k a month. I'm planning to keep my house note to between 900-1000, and rent out a room or two.

GrobbeeTrull2.0 · 02-17-2009, 01:53 PM

Oh, Cad. You just lost all of your middle-class clout.

Heylel Teomim · 02-17-2009, 02:00 PM

Quote:

Originally Posted by GrobbeeTrull2.0

Oh, Cad. You just lost all of your middle-class clout.

Well, I guess 12,000 a month is technically still middle class. Upper UPPER middle, but it should still qualify. A net like that puts his gross salary at what, 180-200k a year? That'd doctor/lawyer range, which is basically upper middle.

Honestly, the terms need to change. It's far too broad a range.

Cad · 02-17-2009, 02:05 PM

Quote:

Originally Posted by Heylel Teomim

12,000/month? Heh, that's considerably beyond my means.

I'm in my mid-20s at the start of my career. I make about 3k a month. I'm planning to keep my house note to between 900-1000, and rent out a room or two.

I'd find a smaller place or rent for a little longer until you can save a considerable down payment.. I'd shoot for your house payment being 20% of your bring-home, that way you can make substantial extra payments and get it paid off quickly..

Heylel Teomim · 02-17-2009, 02:13 PM

Quote:

Originally Posted by Cad

I'd find a smaller place or rent for a little longer until you can save a considerable down payment.. I'd shoot for your house payment being 20% of your bring-home, that way you can make substantial extra payments and get it paid off quickly..

Why throw money away on rent when I can spend the same amount on a mortgage and be building equity? That seems to counteract all advice I've ever heard. I already pay 1050 a month split with a single roommate. A house note on a 3 bedroom house would cost me slightly less, I can rent two rooms out and save each month while not having to share walls.

I sense you're of the "pay everything off as quickly as possible" camp. While in a general sense I agree with you, there are circumstances that make buying rather than renting an attractive option even without a substantial down payment (it's why the FHA loan even exists). Take, for instance, the tax credit available this year. Even in fantasy land where I can squirrel away 500 a month towards a higher down payment, it would still take me 16 months to equal the value that the government is willing to give me free of charge now. It also gives the market more time to rebound and interest rates to rise.

Cad · 02-17-2009, 02:27 PM

Sure, building equity is great, and as soon as it is feasible, I'd buy in order to do that and not throw money away on rent. In order to be financially independent though, you need to be able to not have to rely on your job income to survive - if your house payment is costing you 33-50% of your net income (count property tax, homeowners insurance, and utilities you'll have to pay that you don't pay when renting along with that) and you're not expecting any large jumps in your income anytime soon, then you'll be stuck paying that loan off over the life of the loan. Check out how much interest you end up paying doing it that way, it offsets any equity you'll build. On a normal $200k house, you could buy the house, pay it off in 5 years, and then buy a lamborghini to go along with it.... or you could pay the house off in 20 years and pay interest. Which is smarter?

Find a house that is somewhat below your means (whatever that is) and get it paid off, then you can do the same for a bigger house, and stepping-stone your way into the lifestyle you want. You just can't have it right now, and be financially responsible at the same time.

chaos · 02-17-2009, 07:46 PM

That's one thing I never really considered, is the extra utilities that come along with ownership. Now I'm paying for water, trash, sewage, security system, I'm commuting farther. It adds up.

I managed to get a place in NOVA for just over twice my annual salary. Also, the work the house needs should be added in. I could probably have it entirely fixed up for like 20k-30k so it's not so bad.

bofa · 02-18-2009, 06:05 AM

I just got raped pretty much overnight. First time home buyer here, when I bought my home in '07 they based the assessed value on $130,000 from an assessment back in 2005, so I was paying my taxes based on $130k which was around $1,184.00 per month including PMI, homeowners and my principal + interest.

Come to find out the county comes out a year after the purchase and re-asses...bam it got assessed at $180,000. Up went my monthly mortgage payment from $1,184 to $1,440 fucking overnight. Needless to say...I'm in search for a roommate as we speak. I guess it's one of those "life lessons" you have to learn the hard way, because I for one had no idea

It's a pretty fucked up racket out there how my home is losing value and my property taxes STILL go up. Death and taxes

Heylel Teomim · 02-18-2009, 06:54 AM

Yeah, your taxes are going to be based on the county assessment, which doesn't update nearly often enough to keep pace with home value. I'm having to be very careful to note the taxes on each home I'm looking at, and they definitely vary widely. Sometimes on the order of a thousand dollars right in the same neighborhood.

Cad · 02-18-2009, 07:08 AM

Quote:

Originally Posted by bofa

I just got raped pretty much overnight. First time home buyer here, when I bought my home in '07 they based the assessed value on $130,000 from an assessment back in 2005, so I was paying my taxes based on $130k which was around $1,184.00 per month including PMI, homeowners and my principal + interest.

Come to find out the county comes out a year after the purchase and re-asses...bam it got assessed at $180,000. Up went my monthly mortgage payment from $1,184 to $1,440 fucking overnight. Needless to say...I'm in search for a roommate as we speak. I guess it's one of those "life lessons" you have to learn the hard way, because I for one had no idea

It's a pretty fucked up racket out there how my home is losing value and my property taxes STILL go up. Death and taxes

You can protest the valuation, especially if it is inflated and doesn't reflect the true value of the house. Look into it.

Sharmai · 02-18-2009, 09:35 PM

I'll just add that my current mortgage is about 40% of of my monthly paycheck. That's is pretty damn high I know but my fiancee is still in school for 4 more months and hasn't started working. Once she starts working it will be less then 20% or OUR net income which is much much better but as a piece of advice don't hedge your bets on the income of two people.

It doesn't always work and it is a gamble. If she left I could still afford it but it wouldn't be the most pleasant experience until I could add another 10grand or so to my yearly gross.

Tallyn · 02-18-2009, 10:34 PM

While I'm generally in the "live debt-free camp" it's important to take inflation into account when considering the merits of borrowing money over the long term. Interest rates are retardedly low right now if you have cash/equity and good credit. I refinanced my mortgage last week at 4.5% on a 30-year fixed. That's going to look damn good in a few years when we're seeing the 10+% inflationary backlash from the monetary policy of recent months. Yeah, I'm paying nominal interest for a long time but the real value of that will be closer and closer to zero the more the Fed keeps increasing the money supply and the government keeps engaging in massive panic-driven deficit spending. Worst case, as the economy recovers investments will start yielding > 4.5% returns again and there's money to be made by investing vs paying off cheap debt.

02-17-2009, 01:53 PM	#50 (permalink)
GrobbeeTrull2.0 Registered User Join Date: Sep 2007 Location: Dayton, Ohio Posts: 4,174	Oh, Cad. You just lost all of your middle-class clout. __________________ "When the last tree has died; and the last river been poisoned; and the last fish been caught, we will realise that we cannot eat money." - Cree proverb

Thread Tools
Show Printable Version Email this Page
Display Modes	Rate This Thread
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode	Rate This Thread:

02-17-2009, 01:10 PM	#46 (permalink)
Cad Registered User Join Date: Jan 2005 Location: Dallas Posts: 6,678 -38 Internets	Make sure you underbuy. Take your annual salary and multiply it by 2, and thats the most your mortgage should be, especially if it is your first house. Similarly, take your annual salary and divide it by 2, and thats about how much you could spend on a car. So if you made $100k, you should live in a $200k house and have a $50k car. (If you finance it). If you have some cash for a down payment, you can add that on to the multiplied-by-2 price. This will allow you to pay off your purchase quickly and not end up paying the purchase price of the house in interest to the bank, and instead use this money for your own enjoyment.

02-17-2009, 02:27 PM	#54 (permalink)
Cad Registered User Join Date: Jan 2005 Location: Dallas Posts: 6,678 -38 Internets	Sure, building equity is great, and as soon as it is feasible, I'd buy in order to do that and not throw money away on rent. In order to be financially independent though, you need to be able to not have to rely on your job income to survive - if your house payment is costing you 33-50% of your net income (count property tax, homeowners insurance, and utilities you'll have to pay that you don't pay when renting along with that) and you're not expecting any large jumps in your income anytime soon, then you'll be stuck paying that loan off over the life of the loan. Check out how much interest you end up paying doing it that way, it offsets any equity you'll build. On a normal $200k house, you could buy the house, pay it off in 5 years, and then buy a lamborghini to go along with it.... or you could pay the house off in 20 years and pay interest. Which is smarter? Find a house that is somewhat below your means (whatever that is) and get it paid off, then you can do the same for a bigger house, and stepping-stone your way into the lifestyle you want. You just can't have it right now, and be financially responsible at the same time.

02-17-2009, 07:46 PM	#55 (permalink)
chaos Registered User Join Date: Jun 2003 Location: NoVa Posts: 7,162 +29 Internets	That's one thing I never really considered, is the extra utilities that come along with ownership. Now I'm paying for water, trash, sewage, security system, I'm commuting farther. It adds up. I managed to get a place in NOVA for just over twice my annual salary. Also, the work the house needs should be added in. I could probably have it entirely fixed up for like 20k-30k so it's not so bad.

02-18-2009, 06:05 AM	#56 (permalink)
bofa Registered User Join Date: Dec 2008 Posts: 417	I just got raped pretty much overnight. First time home buyer here, when I bought my home in '07 they based the assessed value on $130,000 from an assessment back in 2005, so I was paying my taxes based on $130k which was around $1,184.00 per month including PMI, homeowners and my principal + interest. Come to find out the county comes out a year after the purchase and re-asses...bam it got assessed at $180,000. Up went my monthly mortgage payment from $1,184 to $1,440 fucking overnight. Needless to say...I'm in search for a roommate as we speak. I guess it's one of those "life lessons" you have to learn the hard way, because I for one had no idea It's a pretty fucked up racket out there how my home is losing value and my property taxes STILL go up. Death and taxes

02-18-2009, 06:54 AM	#57 (permalink)
Heylel Teomim The Educated Fool Join Date: Aug 2002 Location: Atlanta, GA Posts: 2,989 +19 Internets	Yeah, your taxes are going to be based on the county assessment, which doesn't update nearly often enough to keep pace with home value. I'm having to be very careful to note the taxes on each home I'm looking at, and they definitely vary widely. Sometimes on the order of a thousand dollars right in the same neighborhood.

02-18-2009, 10:34 PM	#60 (permalink)
Tallyn None Given Join Date: Nov 2006 Posts: 580	While I'm generally in the "live debt-free camp" it's important to take inflation into account when considering the merits of borrowing money over the long term. Interest rates are retardedly low right now if you have cash/equity and good credit. I refinanced my mortgage last week at 4.5% on a 30-year fixed. That's going to look damn good in a few years when we're seeing the 10+% inflationary backlash from the monetary policy of recent months. Yeah, I'm paying nominal interest for a long time but the real value of that will be closer and closer to zero the more the Fed keeps increasing the money supply and the government keeps engaging in massive panic-driven deficit spending. Worst case, as the economy recovers investments will start yielding > 4.5% returns again and there's money to be made by investing vs paying off cheap debt.