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I talked to a realtor on the phone the other day and in explaining my situation he started babbling about how I should go no money down. Sort of surprised me but honestly I'm not very good at the financial ins and outs. So what do you guys think?
My situation....
Renting for 780.00 a month which is nice and comfy budget wise.
53 years old.
Hope to retire at 60 (fingers crossed, its not a slam dunk money wise)
I won't be retiring in this location - i.e. I will sell in 7 years
This is just north of Dayton Oh, the RE market had no bubble and now its flat, maybe struggling just a little. I don't see that changing ever honestly. Add into that the constant new home building.... There will be some people coming into the base due to BRAC but in 7 years that will have leveled out and who knows there may be BRAC that takes away. Plus base people really like new houses and the house I was talking to the realtor about was an older house.
I have a 20% down payment
I have a good credit rating
So I think this guy thought that I could go VA and 0 down and since I would sell in 7 years that 0 down = reduced risk of losing money
I'm not sure I get that. Does he think that because I might walk away from the mortgage if I can't sell or what?
Thoughts?
He also brought up the 8,000 thing but since I sold a house in Sept 2007 before moving here from a different state I don't think I'm eligible for anything (how does that make me feel but he kept saying "oh I think someone might make it work" I don't see how?
More info - I feel pretty strongly that its not in my best financial interests to buy here and will most likely cost me far more than just renting. I told myself I would only buy here if it was a lifestyle sort of thing (small acreage, garden, etc.) and someplace I would enjoy living vs. my apt which is not bad but not my preferred thing.
I don't like the sound of this realtor. Talk to another one for a "second opinion."
I have no idea about the market in Dayton, but making money on a sale 7 years from now (after you factor in inflation, 6% commission to cover real estate agents, various fees, plus any money you spend on major maintenance that a landlord would usually cover) is not a sure thing. The economy isn't out of the woods yet, nor is the employment issue, so if you're counting on those gains to cover retirement, think twice.
I also question the wisdom of taking a 0% down loan. Doesn't this mean higher interest payments? When you sell, you're going to have to pay back the principal regardless. Whatever interest you paid in the meantime is gone, so I would think you'd want to go with whatever the lowest interest rate loan is (most likely, one with some money down). [Edit: Missing a cup of coffee in bloodstream, didn't factor in tax deduction. Need coffee in me to run that equation.]
Zero down leaves you with more cash on hand, and previously some would've argued that you could invest that money for "a better return." But, 1. You're not a financial wiz and even the hot shots have been getting burned lately, 2. Interest rates are in the toilet, 3. Nobel prize winners can't even agree where the best place is right now to earn a return.
Others, please chime in with counter-arguments, but I just don't see how zero down is going to help unless the buyer is planning on defaulting.
As for the housing credit, depending on how long you lived in your previous home, you may qualify for the "move up" buyer credit of 10% of the purchase price if you "owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date" (quoting the government website on this).
If you're going to buy, buy strictly for lifestyle, acknowledging that the choice may cost you financially in seven years.
Lastly, here's a tool that may come in handy in terms of giving you at least some idea of the financial implications of your choice:
Most people who dispense free advice ( except of course, the fine folk who frequent this forum ) do so in connection with selling you something.
If instead of calling a real estate agent, you called a travel agent, you would likely receive validation of your interest in travel and some advise on how to spend all your money to see the world, while you are 53.
If instead of calling a real estate agent, you called someone who sold furniture, they would likely tell you about their deferred payment plan and be glad to help you spend your life savings, in their store.
Most real estate agents are not remotely qualified to dispense financial planning advice.
Putting aside the whole Zero Down thing.....I do not sense a strong motivation, on your part, to own anything, right now.
Yes I said I recognize that I probably won't make money on a purchase in my particular locale and situation and I feel that its the same for many many places in the Midwest where manufacturing was once king but is not coming back.
Telling people that the only financial reason for owning a home in places like this is if you plan on living there for most of your life doesn't go down well but that's what I believe.
So - yes, its what I think of as an expensive lifestyle choice.
No I did not own the previous home for 5, I owned it for two (moved for family and job reasons much sooner than expected).
So no 8000 govt $ incentive for me to buy
I have never investigated a VA loan (I'm eligible but never did) so I don't know if there is something part of that equation.
IF the VA offers 0 down at competitive interest rates for what a bank would give you for a w/downpayment rate and you don't have to pay mortgage insurance with the VA (been googling but not 100% sure)....then I suppose that you could put your downpayment money in a 2% CD and be ahead. Not much but no reason not too....hm. Maybe.
Putting aside the whole Zero Down thing.....I do not sense a strong motivation, on your part, to own anything, right now.
You are right. I do not want to own. I do however strongly desire to live a certain lifestyle. And that seems to mean I have to own.
I have never seen a rental that allows me to have a fenced in small acreage for a couple of dogs, huge vegetable garden, and a couple of chickens. Well not within my rent range or within any reasonable commuting distance.
Here's a link w/info on the VA loans. It actually looks like a fairly decent deal (caveat: one online article does not a good deal make, so check further.)
Nothing wrong with a VA loan. I used my entitlement three times. I currently have two houses under a VA loan.
VA loans used about 85% of the time in our RE market.
The main advantage is not tying up your downpayment that could be invested a a decent rate of return. But, you will incur a higher monthly payment by financing the whole cost of the house plus the VA funding fee.
You just have to decide wich fits better with your 7 year plan.
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but he kept saying "oh I think someone might make it work" I don't see how?
) do so in connection with selling you something.
