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Old 05-02-2015, 06:22 PM
 
Location: Cary, NC
31,716 posts, read 55,574,517 times
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2 questions. 2 replies.

Can you "afford" it.

1. Yes, you can "afford" it. Today.

Should you afford it?

2. That gets a whole lot more interesting, as we bring tommorrow and "If, if, if" into play.

I think it is smart to buy what you can qualify for on one income. $420,000 is very aggressive, IMO. $250,000 may be very conservative.
Your entire financial profile, reviewed by a good lender, will help you assess the risks you will assume.

SHOULD you do 20% down?
Should you do an 80/10/10 and conserve your cash on hand? Maybe. Even the 10% second note is low priced currently, and you can pay it off at your convenience while maintaining your cash hoard.

Last edited by MikeJaquish; 05-02-2015 at 06:37 PM..
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Old 05-03-2015, 07:38 AM
 
Location: Raleigh NC
3,159 posts, read 6,984,927 times
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Quote:
Originally Posted by pdocstr View Post
Buying a house with intention of staying only 5 years is a bad plan all the way around. No doubt it has worked out well for some, when the market is such that significant equity is gained, but overall odds are in favor of renting being a better deal for short-term stays.

If the goal is to stay 10 years or less, then making major improvements is definitely something to avoid, unless the reason for the improvement is to address some serious flaw that would affect the ability to sell it.

Staying in a home for any period of time and not maintaining it is a pretty stupid move all the way around, and should be something like a last resort for the unemployed and downtrodden who have no other choice. Allowing a home to fall into disrepair is only going to result in some inspector catching all the flaws when it comes time to sell, ultimately affecting the sales price and time on market (which of course go hand-in-hand).

This can be a serious problem for folks who have said "we're going to sell in 10 years", but find that their timing coincides with some unfortunate market condition like a strong buyers market. They are then stuck with a poorly maintained home they can't sell and escalating costs due to neglect.

It's a particularly risky strategy once you get too far above the average home price (which I think in the triangle is probably somewhere around $275k or so right now), because homes above average selling price are much harder to sell in a bad economy, and of course cost a lot more to own.

Please know in case you missed it I was using that as an example and would never recommend it.
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Old 05-03-2015, 07:54 AM
 
304 posts, read 286,992 times
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Quote:
Originally Posted by underPSI View Post
Please know in case you missed it I was using that as an example and would never recommend it.
I only thought you were conveying what some people do and not recommending it, I mainly wanted to highlight what a bad idea it was for the benefit of the type of folks who are inclined to do that who may be reading. The reply was directed at you only to quote what you had said because you described the scenario well.
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Old 05-03-2015, 08:30 AM
 
Location: Raleigh NC
3,159 posts, read 6,984,927 times
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^Cool. Just didn't want people to think I was condoning irresponsibility because I know a lot of people think it's a great idea to own a new house every 10 years and don't maintain anything.
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Old 05-04-2015, 12:12 AM
 
2,242 posts, read 2,206,496 times
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Quote:
Originally Posted by lancers View Post
Lock in the 30.
The break even between a typical 5/5 ARM (Penfed, etc) and a 30 yr fixed is 11 years. They used to be better when they covered closing costs for everyone - now they tie it to using their realty service. They are notoriously slow to close, but are an option for someone with a 5-10 yr time horizon.
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Old 05-04-2015, 05:15 AM
 
Location: Durham NC
1,126 posts, read 1,187,393 times
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Quote:
Originally Posted by cheapdad00 View Post
The break even between a typical 5/5 ARM (Penfed, etc) and a 30 yr fixed is 11 years. They used to be better when they covered closing costs for everyone - now they tie it to using their realty service. They are notoriously slow to close, but are an option for someone with a 5-10 yr time horizon.
What happens if you get stuck and end up in the home in perpetuity? Best to lock in near historic lows and pay the loan down. Having no debt makes everything easier.
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Old 05-04-2015, 08:09 AM
 
3,088 posts, read 5,016,937 times
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I'm no financial planner but I have owned three different homes in my life, and so here's my advice. Your mortgage should never exceed 150% of your gross annual income. I've deviated from that one time and regretted it within months. Home ownership always becomes more expensive over time, not less. If you enter into ownership with it being financially challenging it's more of a burden than a residence.

And I realize in many real estate markets that more or less means you shouldn't buy a house, but that's likely the right course of action.

Also, your numbers don't work. At $96k per year you should be taking home over $5k per month, even with benefits and 401k deductions.
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Old 05-04-2015, 08:47 AM
 
9,198 posts, read 21,237,635 times
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Quote:
Originally Posted by steveklein View Post
For most middle-class Americans, a house is the investment here much of their net worth is being built through equity.
And, on average over time, a bad investment at that.

Why your home is not a good investment

Quote:
From 1890 -- just three decades after the Civil War -- through 2012, home prices adjusted for inflation literally went nowhere. Not a single dime of real growth. For comparison, the S&P 500 increased more than 2,000-fold during that period, adjusted for inflation. And from 1890 to through 1980, real home prices actually declined by about 10%.
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Old 05-04-2015, 12:11 PM
 
236 posts, read 180,427 times
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Quote:
Originally Posted by math_p View Post
Hi,

I wanted to make sure that I have my bases covered before purchasing a home. I was considering buying a 8 yr old 420K home in Cary with 8k/month gross salary. My thp is 4500/month. I have enough money to make 20% down payment and enough savings after downpayment to cover for 2 years of mortgage. My monthly debt is a car loan of 500$. My question is will I be able to afford this home with just my income, assuming we have my wife's savings/monthly earnings to fall back on?

I am planning to take a 7/1 ARM or a 5/5 ARM to lower my monthly mortgage payments considering I do not wish to stay in this house for more than 10 years.

Any recommendations on mortgage lenders ?

Thanks
Check out https://www.drcalculator.com/mortgage/

If you put 20% down, with today's rates you can expect to pay $1550 - $1600 in mortgage. Another $500 - $600 in property taxes, insurance & hoa.
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Old 05-04-2015, 12:15 PM
 
10,755 posts, read 20,237,295 times
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Probably more appropriate responses available in the housing or financial forums...
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