First Time House Buying - what should I know, what should I do?
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PostPosted: Fri Sep 14, 2018 3:23 pm    Post subject:

PROPHET wrote:
yinoma2001 wrote:
My wife and I bought our first house in 2006. My wife said, "oh we'll flip this bad boy in like 2-3 years."

12 years later we're still here.



I'm in the same boat I bought in 2006 and have been locked in ever since. I would not buy a home right now. Wait for the adjustment in market and then poach one.

We bought a house in October of 2011 for 455k and the price right now according to Zillow is 1.2M. We got really lucky and we live in the Bay area.
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PostPosted: Fri Sep 14, 2018 4:26 pm    Post subject:

Lamar's Bud wrote:
ringfinger wrote:
- Make sure you have 20% of the purchase price set aside for your down payment to avoid paying PMI. PMI will cost you several hundred dollars per month and you won't be able to get out of it, ever, without a refinance and 20% minimum equity

- Lower your DTI (debt-to-income) ratio to as much as possible, preferably zero, meaning no debt. This will help ensure you pre-qualify for the largest possible loans at the best rates

- Only if you absolutely need to (for instance, to get to 20% down payment), consider you can take $10,000 out of your 401K with no penalty if you are a first time homebuyer. You will still have to pay taxes on it, but no penalty. I would advise against it from a financial perspective but it's an option you should be aware of.

- For most people, I would recommend buying a home that is move-in ready. Sometimes, it is tempting to buy an older, fixer upper style home but the costs to update are significant ($50K+ depending on size of home) and you'll probably never get to everything.

- In general, if you can afford it, I would recommend buying an SFR (single family residence), and if possible, in a neighborhood without an HOA. This will allow you to make modifications to your home without having to get approval from the association. Added bonus: you won't pay HOA dues which can run $400/month or more and are not deductible

- After you buy your home, work with your tax guy and adjust your withholdings. You'll get to deduct your mortgage interest, so if you need/want it, that can be put right back into your paycheck each month so you can avoid giving Uncle Sam an interest free loan

- Buy a home that leaves you with enough available income to do the things you enjoy. I know a lot of people who bought a much bigger home they can "grow into" and, many have had to take second part-time jobs to afford the mortgage payment. To me, what's the point of that? You're going to have to sacrifice, whether it is nice cars, vacations, etc, but, make sure it isn't to the point where you have to sacrifice on your happiness.


That's some good advice, but I think it really depends on the person and maybe even their situation. Buying a house that needs updating (but not necessarily major modifications) can be a huge money saver. If buying a home from someone who flips houses, it may be a nice move-in ready home, but it also means paying a premium on their time and money to upgrade that house. So that $500k house that they put $50-$60k of upgrades in is suddenly like $700k+ on the market. On top of that, property taxes and mortgage interest will be on the higher purchase price.

It's great for a first time buyer to buy a fixer-upper because they don't have any property they need to sell, so no sale contingencies to deal with, and therefore have a "luxury" of time. This means they can continue renting while the house is remodeled (if they are financially able to continue renting after closing). The downside is having to "do the dirty work" and put in time dealing with contractors, but the buyers can get far more bang for their buck on their home - both short and long term - by going that route. On top of that, they can pick and choose what they want done to the home. By not living there while the remodel is being done, there's no inconvenience on daily life and it also gives the contractors complete freedom to work in the house.


Don’t disagree. Different strokes for different folks. But I know more people who were thrilled at getting a good deal on a fixer upper only to end up in tears at the costs associated with it. Also, a lot of people get excited and move right in and then don’t want to take everything back out for renovations.

So yeah, if you have the money, discipline, and patience, I think a fixer upper is the way to go personally. But I have found most people think they do, then can’t stomach not having a kitchen for 2-3 weeks and being $30K+ poorer and then feel down about an old kitchen, for instance.

I watched a lot of HGTV before I bought my house and thought yeah I’m gonna make it my own! And then, you get bids for the work and reality hits. So for the average first time homebuyer, I think something at least semi move-in ready is likely better.
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PostPosted: Fri Sep 14, 2018 4:44 pm    Post subject:

LakerSanity wrote:
I'd wait two years. I think we are on the cusp of another housing bubble that's going to burst. I was about to buy an investment property but was advised against it and now am investing my money waiting until that burst actually happens.

Other than that, avoid an adjustable rate mortgage, put at least 20% down and don't get into mortgage insurance.


I had a teacher, who was ... well brilliant as a supply chain manager and timing real estate. He used to own 30 total properties.

Basically, everything goes in 8 year increments. Time it right, and everything is great.
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PostPosted: Fri Sep 14, 2018 5:22 pm    Post subject:

Mike@LG wrote:
LakerSanity wrote:
I'd wait two years. I think we are on the cusp of another housing bubble that's going to burst. I was about to buy an investment property but was advised against it and now am investing my money waiting until that burst actually happens.

Other than that, avoid an adjustable rate mortgage, put at least 20% down and don't get into mortgage insurance.


I had a teacher, who was ... well brilliant as a supply chain manager and timing real estate. He used to own 30 total properties.

Basically, everything goes in 8 year increments. Time it right, and everything is great.


i'd like to buy a primary home and a rental property, but definitely waiting it out. there's no way income can keep up with the current homes prices.

i don't expect more than a 10% downturn.
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PostPosted: Fri Sep 14, 2018 10:15 pm    Post subject:

Best to buy a home as early as you can in life. Think of your home as a bank account which you pay into.

Also I would try to pay extra each month against the principle, that will greatly reduce the amount of years and the amount of interest you pay.

Then when it's paid off - All that money is YOURS...!

Bought my home for $195k and in 5 years it will be paid off and worth nearly 800k...

If I wanted to, I could cash out and retire to a place out of So. Cal. for about 1/2 that amount and have a nice chunk of cash to live on, but if not, then our kid will eventually inherit a fully paid-off house..
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PostPosted: Sat Sep 15, 2018 5:59 am    Post subject:

unleasHell wrote:
Best to buy a home as early as you can in life. Think of your home as a bank account which you pay into.

Also I would try to pay extra each month against the principle, that will greatly reduce the amount of years and the amount of interest you pay.

Then when it's paid off - All that money is YOURS...!

Bought my home for $195k and in 5 years it will be paid off and worth nearly 800k...

If I wanted to, I could cash out and retire to a place out of So. Cal. for about 1/2 that amount and have a nice chunk of cash to live on, but if not, then our kid will eventually inherit a fully paid-off house..


There was a thread about this own vs rent argument couple months back... people put their calculation on $ (mortgage, tax, repairs vs other investment income), some favor own like me, some favor rent, good thread if you can find it
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PostPosted: Sat Sep 15, 2018 6:22 am    Post subject:

governator wrote:
unleasHell wrote:
Best to buy a home as early as you can in life. Think of your home as a bank account which you pay into.

Also I would try to pay extra each month against the principle, that will greatly reduce the amount of years and the amount of interest you pay.

Then when it's paid off - All that money is YOURS...!

Bought my home for $195k and in 5 years it will be paid off and worth nearly 800k...

If I wanted to, I could cash out and retire to a place out of So. Cal. for about 1/2 that amount and have a nice chunk of cash to live on, but if not, then our kid will eventually inherit a fully paid-off house..


There was a thread about this own vs rent argument couple months back... people put their calculation on $ (mortgage, tax, repairs vs other investment income), some favor own like me, some favor rent, good thread if you can find it


I remember that thread. There's no actual financial argument on rent vs own. Owning puts you ahead every time.

The only argument in favor of renting would be a non-financial one where factors like flexibility (i.e. ability to move or re-locate for a job) would be more difficult as a homeowner.

The same is true even for a depreciating asset like a car. The best financial decision is to buy your car and own it for a long time.
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PostPosted: Sat Sep 15, 2018 7:40 am    Post subject:

unleasHell wrote:
Best to buy a home as early as you can in life. Think of your home as a bank account which you pay into.

Also I would try to pay extra each month against the principle, that will greatly reduce the amount of years and the amount of interest you pay.

Then when it's paid off - All that money is YOURS...!

Bought my home for $195k and in 5 years it will be paid off and worth nearly 800k...

If I wanted to, I could cash out and retire to a place out of So. Cal. for about 1/2 that amount and have a nice chunk of cash to live on, but if not, then our kid will eventually inherit a fully paid-off house..


That is awesome! Well done.
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PostPosted: Sat Sep 15, 2018 12:33 pm    Post subject:

ringfinger wrote:
governator wrote:
unleasHell wrote:
Best to buy a home as early as you can in life. Think of your home as a bank account which you pay into.

Also I would try to pay extra each month against the principle, that will greatly reduce the amount of years and the amount of interest you pay.

Then when it's paid off - All that money is YOURS...!

Bought my home for $195k and in 5 years it will be paid off and worth nearly 800k...

If I wanted to, I could cash out and retire to a place out of So. Cal. for about 1/2 that amount and have a nice chunk of cash to live on, but if not, then our kid will eventually inherit a fully paid-off house..



There was a thread about this own vs rent argument couple months back... people put their calculation on $ (mortgage, tax, repairs vs other investment income), some favor own like me, some favor rent, good thread if you can find it


I remember that thread. There's no actual financial argument on rent vs own. Owning puts you ahead every time.

The only argument in favor of renting would be a non-financial one where factors like flexibility (i.e. ability to move or re-locate for a job) would be more difficult as a homeowner.

The same is true even for a depreciating asset like a car. The best financial decision is to buy your car and own it for a long time.


can't say i agree with owning puts you ahead every time. Factors include:

1. purchasing at the top, bottom, or middle of the housing cycle
2. what the rent to home value ratio is in your area
3. how often you decide to move
4. expected maintenance costs on your home

If you purchased in the summer of 2008, you've likely just recently got back to a home value of where you purchased a decade ago.

When you factor in what you could have done w/ the extra funds you had (buy more real estate, buy equities, etc), you would be well behind where you could have been.
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PostPosted: Sat Sep 15, 2018 2:54 pm    Post subject:

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can't say i agree with owning puts you ahead every time. Factors include:

1. purchasing at the top, bottom, or middle of the housing cycle
2. what the rent to home value ratio is in your area
3. how often you decide to move
4. expected maintenance costs on your home

If you purchased in the summer of 2008, you've likely just recently got back to a home value of where you purchased a decade ago.

When you factor in what you could have done w/ the extra funds you had (buy more real estate, buy equities, etc), you would be well behind where you could have been.


If you're going to make the choice to rent or own, then you have to look at that decision, in context of the rest of your adult lifetime. Not a 1-day or a 5-year window because that doesn't answer the question.

Also, your statement about 2008 is wrong. If you bought in 2008, versus, rented the same place until now, you'd be ahead in particular because rents have risen 50% in that time. Using basic numbers:

Average Rent in 2008: $982/month
Average Rent in 2018: $1,400/month
Average Rent Paid over 10 Year Period: $1,191/month

Total Cost to Rent over Last 10 Years:: $142,920

Average Home Price in 2008: $181K
20% Down: $36K
Mortgage Payment on $145K Loan (@ 6% in 2008): $868/month
Average Home Price in 2018: $218K

Total Mortgage Payments Made over Last 10 Years: $104,160 + $36,000 = $140,160

So pretty close. Let's call it even. But there's a big difference. In the ownership scenario, you still have an asset worth $218K and a mortgage balance of around $121K. If you sell the place, you'd be up just shy of $100,000 instead of down $143,000 which is a quarter million dollar swing in favor of ownership.

Did this all pretty quick, so if I got some math wrong, let me know.
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PostPosted: Sat Sep 15, 2018 4:35 pm    Post subject:

Ring, I’m not checking math since I’m on the go but at first glance I think you’re missing out on things like maintenance, HOA, insurance, and property taxes. On the flip side you might miss out on some tax deductions. I’d say in your instance you’re missing out on about $500 a month for those categories.

If reference to 2008, I was just touching on home prices.

But the rent vs buy question varies significantly based on what city/state you are in. As of today, I’d be more inclined to buy in the Midwest as opposed to A big city.
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PostPosted: Sat Sep 15, 2018 4:35 pm    Post subject:

Ring, I’m not checking math since I’m on the go but at first glance I think you’re missing out on things like maintenance, HOA, insurance, and property taxes. On the flip side you might miss out on some tax deductions. I’d say in your instance you’re missing out on about $500 a month for those categories.

If reference to 2008, I was just touching on home prices.

But the rent vs buy question varies significantly based on what city/state you are in. As of today, I’d be more inclined to buy in the Midwest as opposed to A big city.
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PostPosted: Sat Sep 15, 2018 6:22 pm    Post subject:

HOF Rookie wrote:
Ring, I’m not checking math since I’m on the go but at first glance I think you’re missing out on things like maintenance, HOA, insurance, and property taxes. On the flip side you might miss out on some tax deductions. I’d say in your instance you’re missing out on about $500 a month for those categories.

If reference to 2008, I was just touching on home prices.

But the rent vs buy question varies significantly based on what city/state you are in. As of today, I’d be more inclined to buy in the Midwest as opposed to A big city.


None of that matters. Take the same property, live in it for an average adult lifetime, say 50 years. Do the math on renting it every month for 600 months vs ((the original purchase price of the house + interest paid) - equity)

Doesn’t matter which city we’re talking about. Ownership wins by a mile.
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PostPosted: Sat Sep 15, 2018 7:33 pm    Post subject:

Or be like me - own 2 trailer homes, one is under my sister's name. Rent the rooms out, pay the rent for land. Usually I make $425 each home each month. It's illegal to rent trailer homes in Florida but hey, how do they keep track of it with no paperwork and plus no taxation. Own few properties and land in Honduras, so I'm set and as well my mom's land and parent's home in the U.S.'
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PostPosted: Sat Sep 15, 2018 8:32 pm    Post subject:

ringfinger wrote:
HOF Rookie wrote:
Ring, I’m not checking math since I’m on the go but at first glance I think you’re missing out on things like maintenance, HOA, insurance, and property taxes. On the flip side you might miss out on some tax deductions. I’d say in your instance you’re missing out on about $500 a month for those categories.

If reference to 2008, I was just touching on home prices.

But the rent vs buy question varies significantly based on what city/state you are in. As of today, I’d be more inclined to buy in the Midwest as opposed to A big city.


None of that matters. Take the same property, live in it for an average adult lifetime, say 50 years. Do the math on renting it every month for 600 months vs ((the original purchase price of the house + interest paid) - equity)

Doesn’t matter which city we’re talking about. Ownership wins by a mile.


It’s a hard decision but I agree that for avg folks (like me) owning is the way to go in the long run unless you can turn that 20% down payment into double digit % growth each year (u gotta be good) then the math gets close
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PostPosted: Sat Sep 15, 2018 9:03 pm    Post subject:

governator wrote:
ringfinger wrote:
HOF Rookie wrote:
Ring, I’m not checking math since I’m on the go but at first glance I think you’re missing out on things like maintenance, HOA, insurance, and property taxes. On the flip side you might miss out on some tax deductions. I’d say in your instance you’re missing out on about $500 a month for those categories.

If reference to 2008, I was just touching on home prices.

But the rent vs buy question varies significantly based on what city/state you are in. As of today, I’d be more inclined to buy in the Midwest as opposed to A big city.


None of that matters. Take the same property, live in it for an average adult lifetime, say 50 years. Do the math on renting it every month for 600 months vs ((the original purchase price of the house + interest paid) - equity)

Doesn’t matter which city we’re talking about. Ownership wins by a mile.


It’s a hard decision but I agree that for avg folks (like me) owning is the way to go in the long run unless you can turn that 20% down payment into double digit % growth each year (u gotta be good) then the math gets close


To make that comparison fair, you have to subtract the amount of rent paid over the investment period of what would have been your down payment.

If you choose not to own, then you’ve chosen to rent whilst investing that down payment. We don’t get to remove the cost to live from the equation on either side.
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PostPosted: Sun Sep 16, 2018 5:19 am    Post subject:

ringfinger wrote:
governator wrote:
ringfinger wrote:
HOF Rookie wrote:
Ring, I’m not checking math since I’m on the go but at first glance I think you’re missing out on things like maintenance, HOA, insurance, and property taxes. On the flip side you might miss out on some tax deductions. I’d say in your instance you’re missing out on about $500 a month for those categories.

If reference to 2008, I was just touching on home prices.

But the rent vs buy question varies significantly based on what city/state you are in. As of today, I’d be more inclined to buy in the Midwest as opposed to A big city.


None of that matters. Take the same property, live in it for an average adult lifetime, say 50 years. Do the math on renting it every month for 600 months vs ((the original purchase price of the house + interest paid) - equity)

Doesn’t matter which city we’re talking about. Ownership wins by a mile.


It’s a hard decision but I agree that for avg folks (like me) owning is the way to go in the long run unless you can turn that 20% down payment into double digit % growth each year (u gotta be good) then the math gets close


To make that comparison fair, you have to subtract the amount of rent paid over the investment period of what would have been your down payment.

If you choose not to own, then you’ve chosen to rent whilst investing that down payment. We don’t get to remove the cost to live from the equation on either side.


you're right, there so many variables on both sides
Investment - rent vs home value - (down payment, mortgage, tax, repair/maintenance, other fees)

Like I said, for avg folks, own is the way to go cause you're not that good of an investor
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PostPosted: Sun Sep 16, 2018 4:43 pm    Post subject:

governator wrote:
ringfinger wrote:
governator wrote:
ringfinger wrote:
HOF Rookie wrote:
Ring, I’m not checking math since I’m on the go but at first glance I think you’re missing out on things like maintenance, HOA, insurance, and property taxes. On the flip side you might miss out on some tax deductions. I’d say in your instance you’re missing out on about $500 a month for those categories.

If reference to 2008, I was just touching on home prices.

But the rent vs buy question varies significantly based on what city/state you are in. As of today, I’d be more inclined to buy in the Midwest as opposed to A big city.


None of that matters. Take the same property, live in it for an average adult lifetime, say 50 years. Do the math on renting it every month for 600 months vs ((the original purchase price of the house + interest paid) - equity)

Doesn’t matter which city we’re talking about. Ownership wins by a mile.


It’s a hard decision but I agree that for avg folks (like me) owning is the way to go in the long run unless you can turn that 20% down payment into double digit % growth each year (u gotta be good) then the math gets close


To make that comparison fair, you have to subtract the amount of rent paid over the investment period of what would have been your down payment.

If you choose not to own, then you’ve chosen to rent whilst investing that down payment. We don’t get to remove the cost to live from the equation on either side.


you're right, there so many variables on both sides
Investment - rent vs home value - (down payment, mortgage, tax, repair/maintenance, other fees)

Like I said, for avg folks, own is the way to go cause you're not that good of an investor


Even if you’re a great investor, owning is better than renting. Because even if you decide not to own, you still have to pay for rent then. I mean, the best investors in the world aren’t renters, they are property owners. And for good reason.
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