is this a reasonable scenario? (years)

[rjrcm]

Originally Posted by campmom123

...So I "overguessed" that it'd be possible to fix up the place and ask in the future what everybody else seems to be asking now. ...

Are they actually selling for their asking price? You should look at recent similar sold homes, not what's actively listed to get a better idea of your home's value. If the sold price trend is stable or going up, then you are in a better situation than most.

[crazyma]

Ole crazyma's 2010 real estate advice
-don't buy anything these days expecting to make a profit
-only buy a house to have a home
-don't upgrade, remodel, or heck ,even fix it if it ain't broke unless it is for your own satisfaction and comfort- you may not recoup the expenditure
- and for goodness sake, if you do changes, don't get all crazy and over do for your neighborhood!! If carpet is the norm don't do exotic brazilian peepfrogtree hardwood...and good quality laminate can be your friend, and stainless is a pain in the whohaa to keep clean

Have fun and enjoy your house!! And don't worry about selling it until you are a lot closer to doing so.

[campmom123]

Rjrcm-- I dont know how much things are selling for, I just know they are selling quickly. and we put offers on two houses before this one and didnt get them, we were outbid.

we've been told a few examples of what things actually sell for, and it's not too far off the asking prices. some are listed at high prices, and they just sit and sit and sit and realtors tell us what the seller SHOULD be asking instead. But many homes are priced right I suppose, because they do sell.

Crazyma, thanks for the advice and the smile We DO want to enjoy this place as a home, we just also want to be realistic that our kids might not want to live in such cozy quarters as teens, and if we can afford to move up at that point we would want to try it. You're right, can't worry too much about that until it's closer, but at the same time I want to be always thinking ahead and know what our goals and purposes are.

[Pilgrim21784]

To the OP:
Basic data per your posts: $141,000 Purchase Price, 30% down - $42,300, mortgage = $98,700 (additional costs of purchase, transfer tax, loan origination fees, whatever applicable for Laramie, WY is excluded from this estimate, although a ballpark estimate would be around 3% of sales price - $4,230 from separate funds. I suspect you qualify for the 1st time buyers tax credit.

15 year mortgage at an assumed 4.75%, no points. P&I on $98,700 @ 4.75%/15 = $767.72/month plus RE taxes (no PMI). Close 1/22/10 - 1st payment 3/01/10;
The 4.75% rate assumption is current for excellent credit/stable employment/loan amount meeting lender's ratios, etc. in Laramie, WY.

2010 interest = $3,839, 2011 - $4,402, 2012 - $4,169, 2013 - $3,924, 2014 - $3,667, 2015 - $3,398.
The above data is just my take based on what you stated and my assumptions as noted, any variances to your real information can be easily recomputed.

The 2010 standard deduction for married joint is $11,400; the sum of your mortgage interest deduction and all other deductions itemized on Schedule A would have to exceed the $11,400 amount for your mortgage interest to have any impact on your tax situation. Give a shout if you want help walking through your numbers. I can easily show you how and where to find the appropriate information.

PS - your appreciation assumption at 5%+ per year is very, very optimistic and not something I would recommend. JMHO

[campmom123]

pilgrim, we're actually getting a 90k mortgage, I just rounded on the 1/3 down figure. The rest of your figures are pretty close,

as you can see in a follow up post I did, we aren't currently in a tax bracket to pay any taxes, we always get a refund. I asked my tax person and she said yeah, the itemizing interest doesn't really do much for people like us.

But yes, we are getting the 8k tax credit. I guess I can always remember that when I "dont get all my money back out"-- I got that freebie and so can't complain.

So if 5% is too much to shoot for, what IS normal (my original question). 3%? Do people just hope to get their equity back and the interest is a loss? if so, boy am I glad I'm at 4.75% interest, how do people stomach doing this at a high interest rate? If rates are terrible in 5 years I'll be staying here

[cleasach]

Originally Posted by campmom123

So if 5% is too much to shoot for, what IS normal (my original question). 3%? Do people just hope to get their equity back and the interest is a loss? if so, boy am I glad I'm at 4.75% interest, how do people stomach doing this at a high interest rate? If rates are terrible in 5 years I'll be staying here

I don't think there's a crystal ball available, especially at this time, to define normal in terms of returns. The neighborhood could tank or skyrocket or stay the same. No one knows. It matters not what the neighborhood is doing now, it's what it's doing when you are ready to sell that is the question.

As far as other homes being small and/or ugly, that is all subjective and of little to no value in making comparisons as different people are looking for different things.

My guess is that people who are not investors but simply people looking to buy a home are buying it to live in and enjoy and as long as they can comfortably pay for it, they don't sweat the unforeseen future.

[Pilgrim21784]

Old normal, yeah, 3% was a generic and workable number ON A MACRO level, e.g., for ball parking the broad RE trend overall. BUT - as previously pointed out, these are not "normal" times and all the usual variables are greatly amplified. In addition, RE always will be an area/location specific item, the current situation just amplifies that fact even more so, as cleasach accurately pointed out.

To give you a broader view, I purchased my current home in 1983 at a then excellent mortgage rate of 13.5%. Yep, that bit quite a lot but was the going rate for excellent credit, 20% down, etc. way back then. I paid $71,500, it's latest appraisal for tax purposes is $275,000, down 23% from a previous high of $362,000. It really isn't important to me as we're not moving anytime soon. Live long enough and you can expect to experience similar situations. Depending on one's income level, the mortgage interest deduction can be much more bearable than it appears. High rates and loan amounts can translate into reducing one's tax bracket and
provide significant leveraging benefits (using other people's money for your profit). It all depends on the financial reality at a point in time.

Your best shot at a best available estimate going forward is to brain drain your local experienced realtors about their view. I know its not a satisfying answer but it is what it is - RE is currently a huge crap shoot in terms of appreciation/further depreciation trends and predictions, no one really knows. Your Laramie location is small enough that hard (and reliable) data should be much easier to get than for larger areas, a small consolation.

In the final analysis, "ya gotta live someplace" and ownership usually beats renting in terms of financial and non-economic factors over the longer term (don't beat me up, I know there are contrary situations where renting is cost beneficial). Congratulations on your new home, be happy you have one, make improvements keeping resale cost/benefit factors in mind and most importantly --- enjoy life each and every day. Best of luck.

[DMenscha]

Originally Posted by campmom123

Explain the tax thing to me, Dmenscha. People keep telling us that we can deduct the interest but I don't see how that helps me. I am in the lowest tax bracket and haven't had to pay taxes for years.

You may not have had to write a check to the IRS on April 15 and you get a refund each year, but each paycheck you have taxes withheld. You are paying income taxes. Perhaps the mortgage interest deduction wouldn't help you as you may not itemize deductions. Good on you for having a tax professional!

Thanks to Pilgrim for doing the math and throwing the 1st time buyer credit in.

[middle-aged mom]

Originally Posted by campmom123

as you can see in a follow up post I did, we aren't currently in a tax bracket to pay any taxes, we always get a refund. I asked my tax person and she said yeah, the itemizing interest doesn't really do much for people like us.

I have been shoveling for 2 days so forgive me for being brain dead, at the moment. You are saying:

You are poor and yet managed to save $30K. Have you considered writing a book on how you managed to do this?

You do not pay any income taxes, which is not the same thing as getting a refund.

As an aside, what might it cost to rent a similar house and how much do rents typically increase each year? Let's assume a similar place would rent for $1000 a month, that's probably in the ballpark of at least $90,000, or 64% of your original purchase price, over 7 years time.

Sounds like you are investing $30,000 in an opportunity to recoup some or all of the $90,000 that would otherwise be money out the door in rent.

[campmom123]

Middle aged mom- my book would be called "spend less than you earn, and put any and all windfalls in the bank and leave them alone." I lucked out/was blessed by some gifts, investments coming due at just the right time, etc. etc. and I just saved it all up for a while. Now we're hoping putting it into a house is a good idea instead of it gathering dust in a savings account at such low interest. You're right that ultimately we decided to buy because renting would be more expensive. It wasn't when I didn't have 3 kids, I would've rented forever. but to provide enough beds/baths and a safe yard for a family of 5, well buying it is! It's just that we don't feel comfortable being "mortgage poor" so the bedrooms and yard we got here aren't "perfect" (the house is actually on a somewhat busy corner, it's fenced so it's safe but it's not exactly secluded of course, and the yard is pretty small), Like you said it's better than what I could rent for this price, and it's a balance to find if something can become "home" and if you really need the "perfect" house or if it's not worth chasing that pipe dream.

PS- we have as little withheld from our paycheck as we are allowed to do, DMenscha, because who wants to give the gov't a free loan? We pay SS and Medicare and that's prettymuch it. I don't think I have to explain to you all how much we make in a year, but it's true that I've never itemized anything because it won't make a difference for us right now. Maybe now that we're buying a house things will be different? We'll see.

As for making the house home, we're working on that. I rearranged furniture all morning and Im feeling a bit better now