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Old 06-12-2009, 10:41 AM
 
Location: Columbia, MD
553 posts, read 1,700,833 times
Reputation: 400

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OP, tough decision.

On 1 hand, there's a strong possibility Congress will change the 8k credit for new homebuyers to a 15k credit for all homebuyers. I'd wait a few weeks or months at least until they make a decision on this.

Likewise, do your own research on this, but there's a strong possibility interest rates are going to hold steady or go up. So if you're interest rate sensitive, which from your finances it sounds like you are, it may be wise to buy this year.

On the other hand...

There's no reason to rush to buy. Your finances sound fragile enough that anything saved would need to go towards a down payment and your debt servicing. It sounds like you would be one disaster away from losing the home if you bought one.

Likewise, if interest rates go down, home prices will at best, hold steady. If rates continue to rise, you're going to see more inventory and lower prices. So if you can pay off your debts and save up a lot of cash, what you do save should go further in buying a home.

The worst thing you could do is rush to make a decision. And given the market, there are no pressures or incentives to buy now vs. in a few months or in a year. I would stew on it for a while and allow time to make a sound financial decision, whatever it may be.
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Old 06-12-2009, 08:11 PM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 38,056,097 times
Reputation: 2661
Guys...this is not rocket science.

What on earth has his debt load or anything else got to do with this. These libertarian puritans rise from nowhere to smite around.

Simple question. Does he pay less to buy or to rent?

No other stuff about what he owes or what his credit card balance is or what student loans or whatever.

If he can buy cheaper than he can rent...why on earth would the OP not do it?

Sheesh...Sure if the OPs job goes away the house is lost. You think the LL is going to let OP stay if the job goes away? OP will do a lot better by the bank than the LL.

If someone has some sound reason for suggesting OP rent let us hear it. But so far pure BS.

If OP can buy cheaper than renting do it...
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Old 06-14-2009, 03:37 PM
 
Location: Columbia, MD
553 posts, read 1,700,833 times
Reputation: 400
Quote:
Originally Posted by olecapt View Post
Guys...this is not rocket science.

What on earth has his debt load or anything else got to do with this. These libertarian puritans rise from nowhere to smite around.

Simple question. Does he pay less to buy or to rent?

No other stuff about what he owes or what his credit card balance is or what student loans or whatever.

If he can buy cheaper than he can rent...why on earth would the OP not do it?

Sheesh...Sure if the OPs job goes away the house is lost. You think the LL is going to let OP stay if the job goes away? OP will do a lot better by the bank than the LL.

If someone has some sound reason for suggesting OP rent let us hear it. But so far pure BS.

If OP can buy cheaper than renting do it...
You don't seem to have a firm grasp on the economics of a decision like this one, or the politics of the US lately. What is BS? I would like to see your formula for making a decision to buy or not. If it as simple as you outline, I hope you aren't getting others to use it.

First, you can't turn around a sell a home quickly like you can move to a more or less affordable rental unit. So you must account for your future before you make a dollars to cents decision about buying now.

Second, you must account for pricing trends for both moving forward. Part of that assumes rents can go up or down, and home prices can go up or down.

Third, if you are paying for college, or carrying credit card balances, these things are EXTREMELY interest rate sensitive. If they go up, and you can't stretch your budget to pay a higher amount each month to pay down the same amount of principal. And if you're watching the bond market, you should see the trend for both of these is clearly UP.

Fourth, if you don't have cash reserves or can't accumulate them, what the heck are you going to do if your roof needs to be repaired, or your AC unit dies, or your windows need to be replaced, or pick your home maintenance issue. Where is the $ to pay for this going to come from

And anecdotally, in a difficult economy, many people are hurt by the lack of mobility owning a home comes with. You can break a lease rather easily and inexpensively and move someplace, even if it's in the same metropolitan area for a job. Not so if you own a house.

By your logic, even if you know something has a STRONG possibility of being worth less or costing less tomorrow, you should still buy something (a house, a computer, whatever) it is today if it's replacement or budget impact is the same or less than it is before you. That is BS.
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Old 06-14-2009, 03:43 PM
 
2 posts, read 4,849 times
Reputation: 12
Default Don't wait any longer.

Real estate prices will be higher in two years time.
Mortgage rates will be higher.
For the rent you are paying, you can purchase something in the 200k range.
This is an ideal time to buy home!!!
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Old 06-14-2009, 03:48 PM
 
Location: Denver, CO
3,135 posts, read 11,818,968 times
Reputation: 2484
Wow 7 years in the same place, over $80,000 towards someone elses mortgage!

Go buy your dream house and live life to the fullest. Stop living in the future, live now!


You can use the $8k to pay your closing costs but not towards your down payment. I'd use the $8k to pay off your credit card debt ASAP.

Get yourself a broker and they will let you know if it's feasible with 10 minutes on the phone. If you gave us your location, we could point you to the right people!
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Old 06-14-2009, 08:01 PM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 38,056,097 times
Reputation: 2661
Quote:
Originally Posted by trickymost View Post
You don't seem to have a firm grasp on the economics of a decision like this one, or the politics of the US lately. What is BS? I would like to see your formula for making a decision to buy or not. If it as simple as you outline, I hope you aren't getting others to use it.

First, you can't turn around a sell a home quickly like you can move to a more or less affordable rental unit. So you must account for your future before you make a dollars to cents decision about buying now.
Under most circumstances in most of the US it is far quicker to turn a house around than a lease. LL are seldom as flexible as your own decision to sell.

You can get trapped in an underwater house. And if you expect to move in the next year or two I would also recommend against buying. But if you are going to be there a while go for it.

Worse case you can walk away from either. The house causes the worst damage to your credit but may make you a pile of cash on the way out.

The morality of either situation is comparable.

Quote:
Second, you must account for pricing trends for both moving forward. Part of that assumes rents can go up or down, and home prices can go up or down.
Silliness. As the present fiasco has demonstrated experts are unable to make that judgement. If you presume both are likely to go up from this kind of a bottom you will likely prove correct. Make the rational decision based on present facts. It will pay off more often than any other.


Quote:
Third, if you are paying for college, or carrying credit card balances, these things are EXTREMELY interest rate sensitive. If they go up, and you can't stretch your budget to pay a higher amount each month to pay down the same amount of principal. And if you're watching the bond market, you should see the trend for both of these is clearly UP.
And you handle this better by having less funds to pay to it? That is simple inane. You make the decision so you have the most income available for other things. At this point that likely favors buying in most of the US. But look at it locally. If it is not better to buy...don't.

Quote:
Fourth, if you don't have cash reserves or can't accumulate them, what the heck are you going to do if your roof needs to be repaired, or your AC unit dies, or your windows need to be replaced, or pick your home maintenance issue. Where is the $ to pay for this going to come from
The same place the money would come from tho get another car after the car accident or to pay the hospital for the emergency appendectomy...

You will be better off to buy and then bank the savings to build some money for the rainey day fund. An extra 100 or 200 a month can help. And turning it down will never help.

Quote:
And anecdotally, in a difficult economy, many people are hurt by the lack of mobility owning a home comes with. You can break a lease rather easily and inexpensively and move someplace, even if it's in the same metropolitan area for a job. Not so if you own a house.
Varies. over most of my relatively long life and multiple addressess selling a home might well have been easier than breaking a lease.

There are occassions when breaking a lease is easier...but there are also times when it is very hard. Right now in Las Vegas a long term apartment lease is a terrible thing if you have good income. They can and will come after you. Probably more strongly than a bank on a foreclosure.

If it is easy to rent...different story.


Quote:
By your logic, even if you know something has a STRONG possibility of being worth less or costing less tomorrow, you should still buy something (a house, a computer, whatever) it is today if it's replacement or budget impact is the same or less than it is before you. That is BS.
If you have a choice today of lowering your cost $200 a month or not doing so you generally should...even if next month you might make $250 a month. Particluarly if both committiments have legs...the differential is going to be with you for a while.

Don't try for the bottom...it is a fools errand. Try to get close though. And where I am we are close. So figure out where you are and then do the right thing.
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Old 06-14-2009, 11:55 PM
 
4,536 posts, read 10,580,183 times
Reputation: 4068
Quote:
Originally Posted by mississauga View Post
Real estate prices will be higher in two years time.
Mortgage rates will be higher.
For the rent you are paying, you can purchase something in the 200k range.
This is an ideal time to buy home!!!
Aren't you aware your species went the way of the dodo around mid 2006?
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Old 06-16-2009, 11:24 AM
 
1,227 posts, read 2,057,355 times
Reputation: 1023
Quote:
Originally Posted by SunGreen22 View Post
My husband and I have been renting the same place for 7 years at $1095/month. Our scores are 720 me, 760 him as of last week. We make $92,000/year. We would like to buy a home and get the tax credit. However, we are currently paying for his daughter to go to college. She will be done in 2 years and that will open up around $1200/month that we are spending towards her tuition, room, child support we have to pay her until she is 22, etc. We also owe on credit cards in the amount of apx $15,000 that we are paying off due to a jobless situation a few years ago and should have paid off in 2 years at the rate we're going. We own 2 cars paid off.

Would it be foolish to try to buy now to take advantage of the tax credit and the low interest rates, or would you advise we wait 2 years to have the burden of tuition off us and pay our cards down? Of course, I'm not even sure we could get a mortage with owing on credit cards though we always pay on time--just owe a lot. We would be looking at buying in the range of $150,000. Thanks for any insight into this.
First, are your jobs secure? Is anyone of you planning to stay at home if you have kids? What if one of you becomes disabled? Second, don't focus on the tax credit and low interest rates. That won't save you from losing your home should something happen to you. Make sure you can afford it first before buying it. Do you have a downpayment?

Do you have an 8-month emergency fund? I personally think you should pay off all debt before buying a home. You will sleep better at night. Is there any way you could cut back even more and pay your debt off quicker?

Owning is not the same as renting. It comes with increasing property taxes, increasing insurance, sometimes HOAs, maintenance and repairs. We all have to be careful here based on past mistakes that caused this recession. Having a mortgage twice your gross salary is safe, 2.5-3 times being the top. Best of luck!
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Old 06-16-2009, 03:26 PM
 
Location: Central Florida
800 posts, read 3,077,598 times
Reputation: 315
Quote:
Originally Posted by Silverfall View Post
Lenders look at your debt to income ratio.

If you make 92,000 a year, then no more than $27,600 should go towards debt per year (that is 30%). Lenders will go higher, but they shouldn't with a few exceptions, IMO.

If you pay $900 a month in credit card debt and $1200 a month in child support then that is a total of $25,200 a year that you are paying in debts. That would leave you $2400 to dedicate to a mortgage per year.

Wait two years and get your debts paid off. If you try and dive into the real estate market with those numbers, you may end up being one of the many facing foreclosure.

Anyway, that is my .02 worth.
This is a good rule of thumb and explaination. More should listen to your advise on this topic.

I have someone wanting to buy with debt ratios without rent or mortgage of 51%. It just won't work! It is not what they want to hear but they won't get a loan with that kind of debt.
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Old 06-17-2009, 04:41 PM
 
5,453 posts, read 9,247,251 times
Reputation: 2141
Well as weird as this may sound to some, I don't see a reason to buy at all...why add the extra expenses in taxes, insurance etc.....plus when something breaks...You have to fix it!

We owned in the past and the more we talk about it the more it makes little to no sense to buy again! if you have been able to rent one place for the last 7 years, I would continue to rent it....my brother's been renting a place for the last 15+ years and he couldn't be more happy. He is able to use the extra money for entertainment, trips etc....which is what we are planning to do as well. My 0.2s
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