Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I am hoping to buy in the Nashville area, only if I can identify a home for sale that I would like to live in for many years that is also what I would consider a good price for these tumultuous times (my internal benchmark is 10% to 20% below listing price). I make a good salary $80K and have extra income of about $20-25K a year through consulting. I currently pay $950 in rent in a great part of town. I love my current place but it is tiny (750 s.f.). I'm recently divorced and have worked hard over the past 2 years to pay off debt ($50K) and save money. I plan to buy in the $200-240K range, including seller-paid closing costs.
My bank has pre-qualified me for an 80-15 so no PMI. I aim to keep my PITI on the primary at around $1450 per month, about 22% of my primary income. I plan to pay off the second loan (at a high interest rate) over 2-3 years with my extra income. I know I have the discipline to do this. I have $24K in the bank and only debt is $7K on a credit card with 1.9% interest rate. I'm paying $200 per month toward that since the rate is so low.
I have been researching the current housing market and mortgage rate trends until I'm dizzy, so thought I would ask for some advice.
1. I believe that Nashville is not immune to the housing bubble and will see prices fall between 4-9% through next summer. Is this reasonable?
2. I'm trying to figure out if mortgage rates are going to trend upwards over the winter (thus, I should buy now) or if I should just wait it out.
3. If I wait another year to buy, I can have 20% down. Is it worth the risk to leverage now given that my bank will give me an 80-15? My bank has told me they probably won't continue to do these types of loans for much longer.
Bottom line: I truly want a home to live in to raise my child that is in a good school district (he starts kindergarten next year) and feel that security/sense of belonging in my own place. At the same time, I must make a good financial decision. I have owned 2 previous homes and did not fare well financially on either one. Lots of changes since then, primarily taking control of my finances largely through becoming single again.
I would wait if I were you. It used to be that people were required to have at least 10-20%down. That extra down means a lot less interest payment on each payment. This really adds up quickly. At 5% down, your equity will grow much more slowly.
At any rate, get those credit cards paid off first. That 1.9 % interest sounds good, but if it's like most credit cards, that PER MONTH, not year. On a yearly figure, it's over 20%. Get used to paying off everything on the CC each month.
Figure out what you paid in CC interest last year and pretend that you had that much more to put towards home ownership.
Banks will offer you a good deal today because they want your business TODAY. If they thought that they would be able to charge higher interest rates next year, they wouldn't push so hard now. They are gambling that the rates are going to go down. Maybe they will, maybe they won't. I would gamble the same way. Waiting a year will help you get more saved, more paid off on the credit card and in generally better shape.
Great advice, thank you. I actually haven't used credit cards at all for several years now (long story about bad financial decisions that I've turned around after becoming single again). The interest is about $12 per month on the one balance I still carry. I put about $750 per month toward savings and retirement. And, I can pay off that 15% loan in 2 years with extra income--so in 2 years I'd have 20% equity in the house.
It really comes down to my concern that we'll see inflation over the next few years with mortgage rates higher than 7%. I'm trying to weigh current opportunity cost with short-term risk v. making sound financial decisions. I also know myself well enough that I'm trying to be logical while also my non-logical side (dare I say emotional?) is wanting a place to call home. If only someone had a way to NOT be emotional about a home buying decision!
Great advice, thank you. I actually haven't used credit cards at all for several years now (long story about bad financial decisions that I've turned around after becoming single again). The interest is about $12 per month on the one balance I still carry. I put about $750 per month toward savings and retirement. And, I can pay off that 15% loan in 2 years with extra income--so in 2 years I'd have 20% equity in the house.
It really comes down to my concern that we'll see inflation over the next few years with mortgage rates higher than 7%. I'm trying to weigh current opportunity cost with short-term risk v. making sound financial decisions. I also know myself well enough that I'm trying to be logical while also my non-logical side (dare I say emotional?) is wanting a place to call home. If only someone had a way to NOT be emotional about a home buying decision!
In my opinion, I would buy now. Home prices are low, rates are low.
I am not to sure about your statement that home prices will fall in Nashville. Tennessee, like where i am in Texas, never experienced the huge price gains that Cali and Florida saw, so unlikely to fall that month.
You are right about if inflation heats up, rates will rise as interest rates on mortgages follow inflation. If our economy goes into recession, then inflation risks will moderate considerably.
Lastly, there is many benefits to buying a home. You will get a tax deduction for the interest you pay. Also, it is a great feeling to own a home vs renting, so that has to be factored in as well.
Good luck, and get out there and buy a home. The more consumers that buy a home the quicker this correction to values and our economy will happen.
So should I keep a general rule of thumb for mortgage rates? If we head into recession, which seems likely, that lowers rates?
Also, please help me understand why Nashville wasn't hit with the housing bubble. I understand that Nashville isn't like CA or other places--but when you look at pricing trends over the past 10 years, at least for zip codes like 37212, you see housing prices going way up. There are a zillion "housing bubble" sites ou there--and the message seems to be until median house price reaches 3x income, prices will continue to fall. I don't think prices will drop as much as in other places, but they should drop some given the national and local economic indicators?
I actually put in an offer on a house yesterday with a low initial offer--I'm hoping that the seller will be willing to negotiate. I've got the comps for the neighborhood. There are only 6 houses sold since March--and this has been an area that has seen huge price jumps and investment potential (and lots of sales) over the past few years. It's incredibly hard to figure out how to use the comps, since it seems there are only 2 houses that are similar that sold for wildly different prices.
So should I keep a general rule of thumb for mortgage rates? If we head into recession, which seems likely, that lowers rates? This is correct in normal times but we are not in normal times. You should be able to get a rate in the upper 5% range today, rates could go lower but that is still a great rate.
Also, please help me understand why Nashville wasn't hit with the housing bubble. I understand that Nashville isn't like CA or other places--but when you look at pricing trends over the past 10 years, at least for zip codes like 37212, you see housing prices going way up. There are a zillion "housing bubble" sites ou there--and the message seems to be until median house price reaches 3x income, prices will continue to fall. I don't think prices will drop as much as in other places, but they should drop some given the national and local economic indicators? You are right prices could drop some more, the problem is you dont know when prices have bottomed out until after they start rising again so then it is too late. Also, you could wait for prices to drop a little more, but then if rates rise you have a higher cost of mortgage which would offset the price savings on the purchase price.
I actually put in an offer on a house yesterday with a low initial offer--I'm hoping that the seller will be willing to negotiate. I've got the comps for the neighborhood. There are only 6 houses sold since March--and this has been an area that has seen huge price jumps and investment potential (and lots of sales) over the past few years. It's incredibly hard to figure out how to use the comps, since it seems there are only 2 houses that are similar that sold for wildly different prices. I hope your offer is accepted and you get the house you wanted.
i would certainly wait until after the election to get any new mortgage. things will change substantially in this country after the election and you will be able to ascertain what direction that will be at that time, but not now. just save your money now and you can keep adding it to the house that you want to buy. it is not like all the houses will be sold by election day.....
i would certainly wait until after the election to get any new mortgage. things will change substantially in this country after the election and you will be able to ascertain what direction that will be at that time, but not now. just save your money now and you can keep adding it to the house that you want to buy. it is not like all the houses will be sold by election day.....
I think this is bad advice. Here is why, poster says things will change substantially after the election. What if they get worse, then what do you do. I am sure you heard the phrase a bird in hand....
Take advantage of the low rates and the low sales prices. You can definitely wait, but waiting might result in a higher rate and maybe a higher purchase price.
Either way, poster is right that there will still be houses available, but the question will be whether rates are higher or lower.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
