Residence - question - (Huntsville, Madison, Providence: 2009, apartment complex, foreclose)

[the_huntsville]

I've been in Huntsville for about 5 years now.

When I moved here, I lived in a "ghetto" apartment complex so to say for 2 years.

Went to Walden @ Providence for 3 years (which was nice for 3 years), but I'm looking for change, now comes my next decision.


I don't have enough $$ for a 20% down payment on a $100-$120,000 dollar home. I've been looking at possible options for a house, or a condo without a down payment.

I would be a first time home buyer, so I could qualify for that $8,000 tax credit.

However, I'm not sure if I'm quite ready for it yet.


So I may end up just shifting to another apartment complex.

I toured Bridgewater, and I have to say that I am very pleased........

Madison Park Apartments - I prefer more then any I have been to in Huntsville, but they are FULL UP.....

I haven't looked at arche street yet, but they seem a tad pricey.

2bedroom, 2 bath at Bridgewater is 990/month (1073 sq feet ) with a sunroom in place of a balcony.


I may end up simply dumping more money into the infinite black hole called the rent void, and not building equity for another year.

Would anyone in my position do this, or engage in a no down payment mortgage for a home/condo, as long as a mortgage agreement you got in was legitimate, viable, and trusted. I have friends in town who are realtors, and own a reality business.


Discussions commence.

[friday13]

Originally Posted by the_huntsville

I've been in Huntsville for about 5 years now.

When I moved here, I lived in a "ghetto" apartment complex so to say for 2 years.

Went to Walden @ Providence for 3 years (which was nice for 3 years), but I'm looking for change, now comes my next decision.


I don't have enough $$ for a 20% down payment on a $100-$120,000 dollar home. I've been looking at possible options for a house, or a condo without a down payment.

I would be a first time home buyer, so I could qualify for that $8,000 tax credit.

However, I'm not sure if I'm quite ready for it yet.


So I may end up just shifting to another apartment complex.

I toured Bridgewater, and I have to say that I am very pleased........

Madison Park Apartments - I prefer more then any I have been to in Huntsville, but they are FULL UP.....

I haven't looked at arche street yet, but they seem a tad pricey.

2bedroom, 2 bath at Bridgewater is 990/month (1073 sq feet ) with a sunroom in place of a balcony.


I may end up simply dumping more money into the infinite black hole called the rent void, and not building equity for another year.

Would anyone in my position do this, or engage in a no down payment mortgage for a home/condo, as long as a mortgage agreement you got in was legitimate, viable, and trusted. I have friends in town who are realtors, and own a reality business.


Discussions commence.

Nothing much to discuss: whatever floats your boat. No downpayment=bigger montly mtg pay - lose your job (source of income) - can you still afford the montly payments? whether from "savings" or a lower paying job, for a period of time ...? Your numbers here... - what's the longest you have you been unemployed/between jobs? - financial advisors say "have a cushion for 6 months worth of monthly expenses" - and god forbid you incur somethin' unexpected.

So, it only takes a piece of paper, pencil and a 2 column budget (INs and OUTs), you do the math.

[DanInHSV]

You are not throwing money into a black hole / void by paying rent. Please do not, repeat do not, drink the Kool Aid on that one!

The "opportunity cost" of buying a house are the annual costs of taxes, insurance, upkeep, plus the cost of "renting" the money to buy the place (around 5-6% per year). If your apartment rent is less than that, you are SAVING money by renting.

If you borrow $150,000 to buy a house, you are paying $9,000 on interest each year just to break even, actually more like a lot more since you are looking at no money down... probably $12,000 a year since you will need PMI. Add in taxes and insurance and it "costs" you around $14,000 a year for the privelege of home ownership. How much is your annual appartment rent? probably around $12,000 or so given your numbers of $1,000 a month. You only make money if your home appreciates more than $14,000 a year every year. Highly unlikely in this environment.

Just remember, it costs money to borrow money. You only recoup it back if you can sell your house for more.

[jkratze1]

Originally Posted by DanInHSV

You are not throwing money into a black hole / void by paying rent. Please do not, repeat do not, drink the Kool Aid on that one!

The "opportunity cost" of buying a house are the annual costs of taxes, insurance, upkeep, plus the cost of "renting" the money to buy the place (around 5-6% per year). If your apartment rent is less than that, you are SAVING money by renting.

If you borrow $150,000 to buy a house, you are paying $9,000 on interest each year just to break even, actually more like a lot more since you are looking at no money down... probably $12,000 a year since you will need PMI. Add in taxes and insurance and it "costs" you around $14,000 a year for the privelege of home ownership. How much is your annual appartment rent? probably around $12,000 or so given your numbers of $1,000 a month. You only make money if your home appreciates more than $14,000 a year every year. Highly unlikely in this environment.

Just remember, it costs money to borrow money. You only recoup it back if you can sell your house for more.

Don't forget you get to deduct the interest on your home. This also allows myself and many homeowners to itemize on their tax returns instead of taking the standard deduction, which can lead to a bigger savings in taxes. The tax savings plus home appreciation makes homeownership much better than renting in my view.

[Southlander]

Well, you could buy a condo. Limited resale market, usually.

Or...you could buy a house in a good neighborhood that is in need of fixing. Make a killer deal on it. Do all or most of the repairs yourself. Re-sell in a few years when you've got it all fixed AND built some equity.

If you buy, there's no doubt you'll have to stay put a few years - 4 or 5, anyway - to get your money out of the house.

Something else to remember - pay off your mortgage as quickly as you can afford. That means less money spent on interest which, over 30 years, can amount to almost as much as the property itself.

[Charles]

Originally Posted by Southlander

Something else to remember - pay off your mortgage as quickly as you can afford. That means less money spent on interest which, over 30 years, can amount to almost as much as the property itself.

This sort of depends on a few things. If you have a low interest rate, like what are available these days in the 5% range, then paying if off may not be the best idea. Depends on how the money used to pay off the loan could be used in other ways.

Don't rush to pay off that mortgage - MSN Money

[friday13]

Originally Posted by jkratze1

Don't forget you get to deduct the interest on your home. This also allows myself and many homeowners to itemize on their tax returns instead of taking the standard deduction, which can lead to a bigger savings in taxes. The tax savings plus home appreciation makes homeownership much better than renting in my view.

The interest being a deduction, and not a credit, doesn't make a big of a difference - sounds like the "buy 2, get 1 free" sales, you have to really need/use those 3 of anything to really be worth expend your income from other (otherwise) necessary purchases. For a house, you get "stuck" with a big purchase, that may otherwise not make sense making (short-term) for only $500 tax saving. If you do not have other items to itemize up to the standard deduction, you may be better off just taking the standard. >>After 3 yrs of ownership with interest deduction, we are better off just taking the standard (we paid extra toward the principal-about 26% of the loan has been paid).

The home appreciation is a big unknown - it may very well not happen at the rate you would hope for- of course that includes a VERY educated (or crystal-ballish) decision at the beginning of the purchasing process - finding a house that would be sellable for your "profit" aspirations (recoup, break-even, not-much-of-a-loss etc).

Basically, to be able to compare rent vs. own you need to bring those two to a common denominator (apples to apples)

Own costs per year: closing costs (prorated) + mtg (5%) + PMI (if applicable) + property taxes + HOI + termite bond + maintenance and repairs + HOA (if applicable) + appliances (if applicable) + must-have tools (lawnmower, trimmer etc) + emergency funds (AC breaks in 90 degree summer, roof leaks etc) + time to tend to your "baby" + making your house pretty to sell it years down the road (updates) + utilities (this is a tricky one - when we rent, we tend to go for exactly the size we need, when we buy to own, we tend to overextend! - "yeah, I'll get a 3-bdr, for when my friends come to visit, or a playroom for jr., or a keep room etc.)
And this is only if you get a move-in ready. But more often than not, people get in a "spending frenzy" with the purchase of a home (at the very least changing the color of the walls) -sure, brand-new homes are more "livable" (don't need to be brought up-to-date), but they come at a price (that new paint is already in the price 3x)


Rent costs per year: rent+$300 deposit (prorated) + utilities (if not included in rent)

I'd say you need a heckava-nice appreciation rate to break even (another bubble maybe?) -

All this for a STEADY stream of income - do the budgeting wrong, and you find yourself in trouble: if you rent - you have the freedom to move out cheaper, if you own - you either sell, rent, or foreclose.

You gave us the impression you are single at the moment (mobility). Throw a wife and kids into the equation and you're set for life (more expenses eating at your income).

[skinem]

Having been in my house for quite some time, I'm out of the loop--

With the economy being what it is, and many pointing at the housing market as the trigger for it's downturn, are zero-down payment home loans even around any more?

[DanInHSV]

Yes, they're harder to get but still around.
If you can get someone to underwrite you PMI insurance then yes, you just pay a higher rate of interest. Or you borrow your 20% downpayment money at a higher interest rate - it's called a piggyback loan. Those are both zero down methods (which are much of the reason for the current mess, IMHO). Then there are government backed FHA loans, which require 3.5% downpayment and paying a small insurance fee into a pool for default.

[Seth Parker]

There are definitely a ton of pros AND cons to homeownership and renting.

On the ownership side of things, there are still programs that offer little or no money down. USDA has a program for $0 down if you purchase a home in a target area (which would be all of Limestone County and pretty much anywhere in Madison County that isn't in Madison or Huntsville City Limits. The most common loan program being used right now is FHA at 3% down. Conventional loans start at 5% down.

Buying a home is a HUGE decision, and not one to be taken lightly. If you don't think you're ready, just sit down and think about it. You don't want to make a decision to buy unless you KNOW you're ready.

The biggest advantages of homeownership are:

1. It's yours, do whatever you want. Change whatever you want to fit your personality.
2. $8,000 tax credit for the 1st timers if they close prior to November 30, 2009.
3. When you sell, any equity is yours to keep (and tax free if you wait to sell at least 2 years after purchasing, and sell for less than $250K as a single person or $500K as a couple) - The downside to this is the economy itself. Do we pull out of the recession? Do values go up? Does anything happen to the Huntsville market to cause trouble? On average, values always go up in the long run, but if you plan on being in the home for 2-3 years or less, buying may not be for you.
4. Like was mentioned above writing off the interest is a very nice deduction that helps with taxes.

There are definitely costs associated with homeownership that you don't have to worry about while renting, though. All the yard stuff like mentioned above are good examples. Maintenance is a biggie. While most of your home issues (like HVAC, roof, etc) can be taken care of by a good home warranty and insurance policy, there are always unknowns. Make sure to take into account some cushion room. If things would be "tight" for you to buy a home, don't do it. Friday gave a good breakdown above, though.

Of course, that house beside my name may make me a little biased....