some questions about Pittsburgh neighborhoods and relocation (price, versus)

[The King of Um]

Originally Posted by juliegt

If you were unemployed for a long time you'd sell the house if the value hadn't plummeted or you'd walk away from it if you had. You'd stay with friends and relatives just like you would if you were renting and lost your job, and then burned through all your unemployment insurance and savings. People who had the financial cushion you have were unlikely to face foreclosure in the mortgage meltdown. It primarily affected people with little to no equity whose home value plummeted. I understand your concerns, but Pittsburgh did not have the bubble like other places did. That's not to say it could never happen there. I was suggesting that you consider perhaps a small mortgage that would be less than a rent payment and give you more options, including the mortgage interest deduction. I completely understand wanting to avoid a mortgage at all costs. My concern was that you weren't even researching the pros and cons of a mortgage. And to be devil's advocate, if you pay cash for a home and the value plummets, you're losing your money as opposed to the money you borrowed. I'm not arguing the right or wrong of that, simply pointing out that there is a different kind of risk when you own your home outright. You're from Florida. There are many people there who own their homes free and clear but are stuck because the value has dropped so much (which contradicts what I said earlier about people with little to no equity ). Not a problem if they don't need to sell in their lifetimes, but a BIG problem otherwise. There are pros and cons to every scenario, but owning outright, generally speaking is low-risk, but not no-risk.

You have to do what allows you to sleep at night. I'm glad to hear you're spending what it takes to search for a home. You may have to make multiple trips before you find the right place. I hope you find the perfect spot on your first trip. Even though the trip where I found my home was technically my 2nd trip to house hunt, my two visits were six years apart. So in essence it was a first trip - again if that makes sense. Happy house hunting! I wish you the best of luck.

On my income, Julie, if I were to have a mortgage, I wouldn't be able to save nearly as much as I'd like. Last year, I made almost $29,000. I want to save as much as possible for two reasons: Firstly, I want to have the financial security that a significant amount of savings and investments brings; secondly, it's my goal to retire by the time I'm 45 (I'm 33 now). It's much, much easier to attain these goals if I don't have to worry about a mortgage payment. Living as frugally as I do, I've figured out that I should be able to save and invest approximately $800 per month even after I become a homeowner. I currently save and invest $1,300 per month.

[The King of Um]

Originally Posted by sealie

Ask your agent for a breakdown of closing costs by category so you can see how many of them you are still going to have to pay. You do not know what you think you know. You've been telling a lot of people who are older and more experienced than you how this stuff works, and I am telling you now, you have no idea how nutty Pennsylvania gets. This will help you a little.
Pennsylvania Closing Costs 2012 | Bankrate.com

My buyer's agent said mine should be right around $2,000. But you're right, I have no idea how crazy PA gets--I imagine it gets pretty complicated. Since I'm not getting a mortgage, I hope it's not too complicated or expensive, though.

[Goodjules]

Couple of things. Based on the location of my home I did not need to get either flood or mine subsidence insurance. I paid cash for my home and the closing costs were still significant.

You've never answered my question about whether you've gotten advice and/or crunched the numbers for paying all cash for your home vs. say putting 20% down on a $60k home and investing the money you don't tie up in the house, as well as factoring in the mortgage interest deduction? Considering the historically low interest rates that are available now and the strength of the stock market, you may be surprised.

[sparrowmint]

Someone who makes as little as he claims to wouldn't benefit from the mortgage interest deduction unless he was buying one hell of a house (which he couldn't afford). Especially with rates being as low as you mention. Someone making that little is extremely, extremely unlikely to itemize their deductions. Only a pretty small minority of American households take that deduction for a reason, the vast majority of filers (70%) take the standard deduction because it works out to be more than everything they can itemize.

[Goodjules]

Originally Posted by sparrowmint

Someone who makes as little as he claims to wouldn't benefit from the mortgage interest deduction unless he was buying one hell of a house (which he couldn't afford). Especially with rates being as low as you mention. Someone making that little is extremely, extremely unlikely to itemize their deductions. Only a pretty small minority of American households take that deduction for a reason, the vast majority of filers (70%) take the standard deduction because it works out to be more than everything they can itemize.

Good point. I forgot that he mentioned his income in a recent post.

[The King of Um]

Originally Posted by juliegt

Good point. I forgot that he mentioned his income in a recent post.

To answer your question, no, I haven't met with a financial planner, Julie, but I don't think taking out a mortgage would be financially advantageous. Like the previous posted said, I don't make enough to benefit from the mortgage interest deduction.

If I may ask, what percentage of the cost of your home were your closing costs? What's the composition of closing costs? I think they're made up of taxes, legal fees, transfer fees, title insurance, and a few other things I'm not aware of, but I'm not sure--I'm a complete novice when it comes to buying a home and all the specifics involved.

[Goodjules]

Originally Posted by Hip Priest

To answer your question, no, I haven't met with a financial planner, Julie, but I don't think taking out a mortgage would be financially advantageous. Like the previous posted said, I don't make enough to benefit from the mortgage interest deduction.

If I may ask, what percentage of the cost of your home were your closing costs? What's the composition of closing costs? I think they're made up of taxes, legal fees, transfer fees, title insurance, and a few other things I'm not aware of, but I'm not sure--I'm a complete novice when it comes to buying a home and all the specifics involved.

I'm in SF right now visiting family so I don't have the docs with me. But I think the mix you mentioned is about right. Talk to John about it. He can tell you what to expect. I'd guess the mix of fees might be slightly different depending on where you buy.

BTW, I was thinking less of the benefits of the mortgage interest deduction and more about investing a rather large lump sum (and still investing a very small amount monthly after you buy the house) vs. a smaller amount on a monthly basis and tying up such a large amount in the house. Thought you should crunch the numbers for both scenarios just to see. I know you'd end up choosing no mortgage because you won't be comfortable any other way. I thought it would be beneficial for you to see how another choice might play out. Let's just say that I'm a lot older than you and I had a worst case scenario legal and financial nightmare happen to me during the meltdown. There is something to be said for having a big chunk of your money invested in something more liquid than a house. Liquid assets and home ownership are not mutually exclusive. I know that you understand a diversified portfolio. And I can tell that you plan to make owning the home one part of your investment strategy. My concern is that you're making the decision without exploring all options simply because the other options make you uncomfortable. If anything, looking at the other options may make you even surer of your decision to own outright.

[The King of Um]

Originally Posted by juliegt

I'm in SF right now visiting family so I don't have the docs with me. But I think the mix you mentioned is about right. Talk to John about it. He can tell you what to expect. I'd guess the mix of fees might be slightly different depending on where you buy.

BTW, I was thinking less of the benefits of the mortgage interest deduction and more about investing a rather large lump sum (and still investing a very small amount monthly after you buy the house) vs. a smaller amount on a monthly basis and tying up such a large amount in the house. Thought you should crunch the numbers for both scenarios just to see. I know you'd end up choosing no mortgage because you won't be comfortable any other way. I thought it would be beneficial for you to see how another choice might play out. Let's just say that I'm a lot older than you and I had a worst case scenario legal and financial nightmare happen to me during the meltdown. There is something to be said for having a big chunk of your money invested in something more liquid than a house. Liquid assets and home ownership are not mutually exclusive. I know that you understand a diversified portfolio. And I can tell that you plan to make owning the home one part of your investment strategy. My concern is that you're making the decision without exploring all options simply because the other options make you uncomfortable. If anything, looking at the other options may make you even surer of your decision to own outright.

In all honesty, I'd probably make more money leaving the approximately $60,000 I've designated for the house in the market, where it currently is, as the S&P is, and will remain, stronger than the Pittsburgh housing market. However, if I were to do that, I would have to take on a great deal of risk, the risk of having a mortgage. Risk is, of course, commensurate with reward; more risk, more reward; less risk, less reward. At this point in my life, I'm becoming more risk averse. I'll still have a money, a few tens of thousands in investments; even though I'll most likely buy the home outright, I won't be broke. I just won't have as much in liquid assets as I currently have.

Yes, the S&P is most probably a better investment than a home in Pittsburgh. But I can't have my cake and eat it too. I can't have $60,000 in various stocks and stock mutual funds and ETFs, and a house paid for in cash. That being said, one cannot live in the S&P. Moreover, the S&P doesn't have the charm and character than an old house in Pittsburgh has. So, even though I thoroughly believe the stock market to be a superior investment in terms of future return, I'd rather put the money into a home, a place to make my own--a modest yet charming dwelling that retains at least at little of its original character.

[Stijl Council]

Originally Posted by Stijl Council

Apparently this is new on the market: 328 Taylor St.

This is a really low price for the neighborhood, and that coupled with the lack of interior pictures would make me awfully wary, but the neighborhood itself is exactly what you're looking for: reasonably safe, very walkable, and along a big public transit artery to boot.

I'm necromancing the thread because East End Housing Crisis.

Check out what's new on the market in Bloomfield: 328 Taylor St.

ETA: The old link goes to the new listing, but at the time of the original post this was under or around $60K.

[sealie]

What I always find interesting is, considering how people claim to disdain greedy flippers, how long a house like this sits on the market (months/years) at 60k versus how long the fancy version at 3x the price (weeks/months). I have no problem with it, this investor deserves what they make, but this house went on the market in January and it's already contingent.