Did anyone read the D magazine housing issue? (Dallas, Rule: mortgage, refinance)

[Made_it_To_the_Metroplex]

Originally Posted by deftones

The premise of the article is Dallas is a seller's market: home sales (volume) are up 30% in some areas, inventory is down, and average home prices are up in high single digit percentages.

We're about 6 months from acting on buying a place here and are having the same apprehensions!

Originally Posted by HockDad

I agree. I would also add to buy less house than you can afford. You might miss a little appreciation, and at times you will wish you had a little nicer house, but not having to stress about a large monthly payment is priceless.

VERY good advice!

[TurtleCreek80]

Originally Posted by frenzyrider

I don't completely agree. It is not like house prices are going to start going down all of a sudden because that will shake the market again. In my mind, they will settle to a new "normal". I think today is still a good time to buy given you do it the 'ole fashioned way. For example, for every 1% increase in interest rates, your purchasing power reduces by 10% for a house. My 2 cents!

Exactly! Rates would have to go to 7-10% overnight to cause values to drop... and that isn't going to happen.

I think the more likely scenario is, instead of seeing the +5-15% value increases over LY we've seen this spring, values will stabilize (no increase) or only go up with historical averages (2-5% per year, depending on area of metroplex). The BIG difference is that at 5-6% rates, it's going to cost several hundred dollars MORE per month to buy that $250k or $400k or $600k house than it did last year when rates were in the 3% range -> thus making NOW still a very good time to buy.

Bottom-line, with hundreds of people moving to DFW every single day, most of them will need to purchase a home at some point in the near-term future. That alone will fuel the housing market as long as the influx of newcomers continues.

[GreyDay]

Originally Posted by frenzyrider

^^^ This. Lot of people in this day are opting to get ARM as well. Seriously at this low interest rate why will you want ARM? Most people I spoke to said so that they can afford a nicer home ( didn't 2008 recession ring a bell)

I was actually quoted an ARM that was higher than the fixed rate...I suppose it could always go down?

Skip the 30, get a 15-year fixed.

[synchronicity]

Originally Posted by GreyDay

I was actually quoted an ARM that was higher than the fixed rate...I suppose it could always go down?

Really? Who the heck thinks rates will be lower on average over the next 5-10 years than they are now? I get that it's possible, but likely?

Originally Posted by GreyDay

Skip the 30, get a 15-year fixed.

If one can afford it, yes, assuming the interest rate differential makes it worthwhile.

Re: ARMs, similar thing - if you KNOW you'll be moving in 5-10 years, then a 5/1 or 7/1 ARM may be worthwhile. That assumes the rate differential is enough - general rule of finance is that if you're going to take on risk, you need to be paid adequately to do so. Or to quote the Joker from Dark Knight "If you're good at something, never do it for free"

[TX75007]

Stay under .2/.3 on your front/back ratios and live close to work and you will be OK. I would not sweat anything else.

[BeenThereDunThat]

As one who deals with financial matters, I would strongly recommend getting a conventional 30 yr mortgage and stay away from 15 yrs and any ARMs. I know too many people who got into the ARM situation and screwed themselves financially because they bought ALL the house they could qualify for AND when their paychecks dipped (one was on commission sales...another got laid off)... their rate changed enough to squeeze them financially and lost their homes in short-sales.

So you think 15 yr mortgage is the way to go? You can achieve the same thing with a 30 yr mortgage ...just add a little more towards principal and you can cut your mortgage term to 20 yrs or even 15 with more aggressive principal only payments. But if this is a first home...chances are you won't be in it for the entire 30 yr term. The good thing about paying more towards principal is getting more equity however...home values (on average) don't outperform most investments. Do you want to put all your money in a house or have a good balanced ROTH account that will probably average 7 to 9% annually? The thing is...when you're just starting out...you can't see the future (no one can) and unforeseen expenses or life circumstances that can really stress your finances. I've seen it too many times...and it isn't pretty.

But I will add that it's often better to have a good balance of home equity, personal retirement accounts and insurance. So keep that in mind.

Get at least 20% down payment and you'll avoid home mortgage insurance which a lender will require if you put down anything less. Conduct your due-diligence and really, really, really research your market. Buying when a market heats up can alter better judgement. Don't get scared and try to step back, take a breath and relax.... real estate in metro areas will vary by zip code and you can run the risk of buying into the wrong house by being too hasty. Of course there's always the deal too good to pass up... and yes they do exist...BUT.... that's today, you won't know what tomorrow will bring and remember: Nobody can predict the future.

Good Luck.

[BigDGeek]

Originally Posted by BeenThereDunThat

As one who deals with financial matters, I would strongly recommend getting a conventional 30 yr mortgage and stay away from 15 yrs and any ARMs. I know too many people who got into the ARM situation and screwed themselves financially because they bought ALL the house they could qualify for AND when their paychecks dipped (one was on commission sales...another got laid off)... their rate changed enough to squeeze them financially and lost their homes in short-sales.

So you think 15 yr mortgage is the way to go? You can achieve the same thing with a 30 yr mortgage ...just add a little more towards principal and you can cut your mortgage term to 20 yrs or even 15 with more aggressive principal only payments. But if this is a first home...chances are you won't be in it for the entire 30 yr term. The good thing about paying more towards principal is getting more equity however...home values (on average) don't outperform most investments. Do you want to put all your money in a house or have a good balanced ROTH account that will probably average 7 to 9% annually? The thing is...when you're just starting out...you can't see the future (no one can) and unforeseen expenses or life circumstances that can really stress your finances. I've seen it too many times...and it isn't pretty.

But I will add that it's often better to have a good balance of home equity, personal retirement accounts and insurance. So keep that in mind.

Get at least 20% down payment and you'll avoid home mortgage insurance which a lender will require if you put down anything less. Conduct your due-diligence and really, really, really research your market. Buying when a market heats up can alter better judgement. Don't get scared and try to step back, take a breath and relax.... real estate in metro areas will vary by zip code and you can run the risk of buying into the wrong house by being too hasty. Of course there's always the deal too good to pass up... and yes they do exist...BUT.... that's today, you won't know what tomorrow will bring and remember: Nobody can predict the future.

Good Luck.

In some circumstances the 15 year is a no-brainer. At least it is for me. I'm in the midst of a refi from a 30 year conventional (26 years left on the loan) at 5.5% to a 15 year fixed at 2.75%. It ups my monthly payments by about $70-$80.

No brainer.

[BeenThereDunThat]

That's true if you're in a refinance from a higher rate to a lower rate. But if you're doing a first-time mortgage, I say get a lower monthly payment that would be more easily managed if something hits the fan financially and you can handle it better.

The personal flexibility in adding an extra $70-$80 bucks towards principal each month basically achieves the same thing providing that the spread on the 15 or 30 yr mortgage is less than 2 pts.

[TX75007]

If you are a Veteran, be sure to look into the VA loan.

[BigDGeek]

Originally Posted by BeenThereDunThat

That's true if you're in a refinance from a higher rate to a lower rate. But if you're doing a first-time mortgage, I say get a lower monthly payment that would be more easily managed if something hits the fan financially and you can handle it better.

The personal flexibility in adding an extra $70-$80 bucks towards principal each month basically achieves the same thing providing that the spread on the 15 or 30 yr mortgage is less than 2 pts.

I know what you're saying; I just don't want people to think in black and white and assume that a 15-year mortgage is a poor financial decision for everyone. Most people are served well by a 30-year fixed mortgage but if you can pay off a house more quickly and have no immediate plans to leave the area in the next 10+ years, I think a 15-year is worth considering. My goal is to pay the house off before I turn 50 (12 years from now) and to never have a mortgage again. If I buy another house, I intend to pay cash unless there's an option that makes more sense.