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I don't care how many homes you've owned, that is nowhere close to being accurate at today's interest rates.
It was accurate in 2005 when I bought my first two houses, it was accurate in 2007 when I bought my third, it was accurate in 2010 when I almost bought my fourth, and it was accurate in 2014 when I did buy my fourth. I have a college degree in physics and mathematics, and a good memory when it comes to numbers.
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Originally Posted by MadManofBethesda
Even with absolutely no down payment,
You ain't getting a mortgage with no down payment, so this is irrelevant. Even the mortgages through USDA that talk about no down payment have tons of closing costs and origination fees which are, in essence, a down payment that doesn't reduce your principal balance. I've done the research.
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Originally Posted by MadManofBethesda
the principal and interest portion of a 4%, $150,000 mortgage would be $716.12/month.
If you can find a 4% mortgage, go for it. But if you can't do a large down payment, and/or you don't have stellar credit, you will not get a 4% mortgage. I have an 800+ credit score and I still couldn't do better than 6.25% because I couldn't produce a large down payment. And then don't forget about private mortgage insurance either. When your loan-to-value ratio is 80% or greater, PMI is required. That adds to the payment to a level commensurate with the size of the mortgage.
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Originally Posted by MadManofBethesda
If we assume 1% annual property taxes, that would add another $125/month to the mortgage payment.
Few areas have property taxes that low. It's usually 1.5% to 2%... and in certain regions property tax can be even higher than that. Take a state like New York or New Jersey where the politicians salivate over taxes like I salivate over pizza... property taxes are high. New Hampshire, where there is no income tax nor sales tax, they have high property taxes to compensate. Louisiana has low property taxes but they make up for it with their other taxes. The only state that has low taxes across the boards is Alaska - some towns in Alaska have no income tax, no sales tax, AND no property tax... but that's because of the oil money up there.
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Originally Posted by MadManofBethesda
Finally, if we add another 1% for insurance (which would be quite high), that adds another $125. All told, the total PITI comes to $966.12.
You can't figure on 1% for insurance. For me it was almost 2% and most of the insurance companies I called gave me a figure of darn near 3%. Their reasoning was that because my house is an old house, purchase price notwithstanding, the actual cost of reconstruction using modern-day equivalents of the old materials with which these houses were built would be several times what I was paying for the house.
And then you have to figure that the only ingredients in that PITI payment that won't increase as the years roll on, assuming you have a fixed-rate mortgage and never refinance, are the principal and interest. Property taxes will always go up, as will insurance premiums. Furthermore, you don't know when they'll increase nor by how much. So even if you are fortunate enough to start out with a total monthly payment substantially under that 1% of the purchase price that I stated, such will not remain the case indefinitely and could very easily change for the worse "soon".
Interesting how a thread title about 43% of first quarter home sales being cash also has a component about people not being able to afford a large enough down payment. Years ago we were use to 10-20% percent down payments and lower debt ratios to qualify. However with the glut of failed easy entry loans before the bust we now have a different climate of expectations. Sorta like current college tuition costs. Expensive for some not so expensive for others. Even a bargain for some who pay full boat with nothing borrowed in a high demand major who do well in the program and graduate in demand. That 45K a year tuition with no added cost for debt can be like a bargain if you start out close to or over six figures. Whether it be housing, or college the higher percentage you borrow the less you have to spend on something else while paying it back. So will the next it isn't fair cry be about those college graduates with no debt being able to buy a house while another grad with debt can't and who should buy it for them?
It was accurate in 2005 when I bought my first two houses, it was accurate in 2007 when I bought my third, it was accurate in 2010 when I almost bought my fourth, and it was accurate in 2014 when I did buy my fourth. I have a college degree in physics and mathematics, and a good memory when it comes to numbers.
What part of at today's interest rates did you not understand?
Few areas have property taxes that low. It's usually 1.5% to 2%... and in certain regions property tax can be even higher than that. Take a state like New York or New Jersey where the politicians salivate over taxes like I salivate over pizza... property taxes are high. New Hampshire, where there is no income tax nor sales tax, they have high property taxes to compensate. Louisiana has low property taxes but they make up for it with their other taxes. The only state that has low taxes across the boards is Alaska - some towns in Alaska have no income tax, no sales tax, AND no property tax... but that's because of the oil money up there.
There's quite a bit wrong with this paragraph. But that's what happens when you try to extrapolate from your own limited anecdotal experience. Especially if that experience is limited to areas in the N.E. Pretty much every place I've ever lived with the exception of Florida has had property taxes of 1% or less, so I have no idea where you came up with the comment that it is "usually" 1.5% or 2%. BTW, on a related matter, Nevada has no income tax and also has low property taxes.
Timing really is "everything" and if not "everything" -- it sure as hell has an impact, lolol!!!
If they would have stayed a few years more their home would have sold for a couple hundred thousand more. Then again the home they bought would also have been more money. LOL. 11 years ago I don't know if anyone realized what was happening with the market. I remember each year people were buying homes and then refinancing them between 2003 and 2007 because they had made so much money. That party came to an end in 2007. Then again in my area we have seen a big recovery, still not to the 2007 numbers but closing in on 2003. Our home increased in value over $100,000 in the past 3 years.
What part of at today's interest rates did you not understand?
Are you seriously trying to say that today's interest rates are dramatically different than interest rates were four months ago when my wife and I closed on our house?
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Originally Posted by MadManofBethesda
There's quite a bit wrong with this paragraph. But that's what happens when you try to extrapolate from your own limited anecdotal experience. Especially if that experience is limited to areas in the N.E. Pretty much every place I've ever lived with the exception of Florida has had property taxes of 1% or less, so I have no idea where you came up with the comment that it is "usually" 1.5% or 2%. BTW, on a related matter, Nevada has no income tax and also has low property taxes.
It could be that I have lived mostly in high property tax states such as New Jersey, Pennsylvania, and Texas. (Texas gets a reputation for being a low tax state because it has no state income tax and low state gas taxes, but the sales taxes are quite high and the property taxes are high to make up for the income that is not generated by income tax.)
There could also be something in the fact that I have always bought very low-cost houses... as in, my current $36,000 house is the most expensive of the four I have bought. Could newer houses with newer construction materials cost a lower percentage of purchase price for insurance? Yes. Could certain areas have low property taxes? Yes. Could interest rates vacillate a bit such that the monthly payment drops before you close? Yes. There are LOTS of variables.
But there are also variables in the opposite direction too. When considering how to transition from renting to buying, which is what got this part of the discussion started to begin with, you have to figure on the costs that a homeowner will incur which a renter will not. For example - appliance replacement. My wife and I rented our house in Texas before buying in Ohio. While we were there (only 2 1/2 years), the dishwasher failed and had to be replaced (a who-knows-how-many-hundred-dollar expense we didn't incur), the stove failed and had to be replaced (ditto), and we had issues with the sewer lines which we didn't have to pay to repair. Such repair costs and more will fall upon a homeowner. Thus, to simplify all of this and estimate that your cost of homeownership, especially compared to renting, will be easily estimable at 1% of the total purchase price monthly, is in no way absurd.
You and I both understand math, it seems, well enough to know that there are many variables. But if the general American population understood math that well, we never would have had a housing crisis to begin with. Thus, it cannot be assumed that the average American will think that much about the numbers. Hence, when talking with others whose mathematical comprehension is unknown to me, I tell them that they should figure on 1% of the purchase price monthly as their payment. If it turns out to be lower, great, then they have a cushion for those extra random costs of homeownership.
No, not at all to the contrary and very high income. Developments on land fills in high end areas tend to have state of the art engineering and draw well educated clientele. Depending on targeted audience and who did the development defines my comfort zone.
My opinion about filled land depends entirely on what the land is filled with. My lot was demucked and filled with some clean fill dirt and a lot of sand. The issue where I live isn't whether the ground is/was toxic. It's that muck (what you get when vegetation decomposes) isn't a particularly stable foundation. Robyn
I don't care how many homes you've owned, that is nowhere close to being accurate at today's interest rates.
Even with absolutely no down payment, the principal and interest portion of a 4%, $150,000 mortgage would be $716.12/month. If we assume 1% annual property taxes, that would add another $125/month to the mortgage payment. Finally, if we add another 1% for insurance (which would be quite high), that adds another $125. All told, the total PITI comes to $966.12.
IOW, anifani was correct.
I agree the post you responded to wasn't accurate. But what you're saying isn't totally accurate either. I don't know about anyone else - but our property taxes here are in excess of 1% of assessed valuation. About 1.5% for us - but higher for people who buy today and lose the protection of the Save Our Homes amendment (and aren't porting some of that protection with them after they've sold another place in Florida). Our total property insurance bill is less than 1% - but almost $3k/year - and that is low by Florida standards for the amount of insurance we have. Were we to incur a windstorm related loss - our deductible would be low 5 figures. Also - there are other costs of ownership. Ranging from condo to HOA fees. To utilities. To maintenance and repairs and replacements.
Then there's another cost if you're a cash buyer (in whole or in part). The loss of income on the equity you have in your house. Which of course varies - depending on what you invest in/might invest in as opposed to buying a piece of residential real estate. And the period of time you're looking at.
This is of course looking at things from a somewhat investor oriented POV. On my part - my home is a consumption/lifestyle item - not an investment item. And I'm not well suited to be a real estate investor - because I go by the old saw "don't invest in anything that eats or requires maintenance". OTOH - the mileage of others may vary. But I'd never confuse buying residential real estate as a place to live - as opposed to investing in it. Although I was sorely tempted to pick up my father's old place a few years ago (he sold it for $1.5 million in 2006 and the next sale was a foreclosure sale for < $700k) - I resisted. Probably would have done well with that particular purchase. But - if you haven't been a successful real estate investor by the time you're almost 70 - it's not a good time to start learning the ropes ("a man's got to know his limitations"). And I can't complain about financial markets returns since then (I understand financial markets a lot better than real estate - and never have to worry about my investments there being impacted directly by hurricanes ). Robyn
...In re: to your aunts and uncles and size of homes . . . yes, that is an observation I have made, as well...
I'm not sure your observations about housing sizes and the like are at all accurate when it comes to a lot of people. Except perhaps when you're comparing most people in my parents' generation (dead or in their 90's) with people 2 generations younger (people in their 30's or so). My husband and I (no kids) bought our first place - a condo in the Miami area - when we were in our 20's. It was 1400 sf - 2 bedrooms - 2 baths - and brand new and oceanfront. Didn't cost a lot then compared to today (about $65k). But it sure wasn't a fixer-upper or anything like it. It was really nice. My husband grew up in a house in New Jersey that had 1 functional bathroom for 2 adults and 3 kids. I haven't lived in a place with one bathroom since I was in school. The mileage of other people may vary. Robyn
...If a person has chosen wisely as far as location, they should have no problem making money off their home in this market, currently. The assumption is, of course, that they have had the home for long enough to accumulate a nice tidy equity in the property.
I think if someone keeps honest records about the total costs of owning - especially over a period of many years/decades - it's hard to make money for the most part. Some areas - like where my father's old house is (where the land value is huge because of the boating access) - are the exception - not the general rule. Robyn
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). Robyn
