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07-09-2007, 09:00 AM
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#1
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Dryer sheet aficionado
Join Date: Feb 2005
Posts: 39
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What would you do?
I make slightly over $100,000/yr excluding bonuses and am now interested in purchasing a home.
While beginning to explore the market, I'm noticing that my tastes gravitate to homes in the $280,000 to $400,000 range. The lower end being foreclosures.
I have no other debt obligations and given that this is a buyer's market:
1) Would I be over-extending myself purchasing in this range? *I hate owing someone money, so the fact that this would be "good debt" still doesn't appease me psychologically*
2) Get the most I can afford (guidance), and wait for the housing wave to pick back up.
I live in East Atlanta, am single, and 42.
Thanks,
Mary
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07-09-2007, 09:13 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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How much do you have as a downpayment and what is your total net worth? Would taking on a mortgage of this size mpact your otehr financial goals?
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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07-09-2007, 09:19 AM
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#3
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Recycles dryer sheets
Join Date: May 2007
Posts: 216
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Good questions from Brewer. Also, how much are you paying in rent right now?
__________________
"...I'm the kind of guy who if he can't have too much of a thing doesn't want any at all."
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07-09-2007, 09:20 AM
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#4
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Dryer sheet aficionado
Join Date: Feb 2005
Posts: 39
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Quote:
Originally Posted by brewer12345
How much do you have as a downpayment and what is your total net worth? Would taking on a mortgage of this size mpact your otehr financial goals?
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0 - 3% for down payment (I could do up to 10% easily).
Shouldn't affect my other goals. Would still max out 401-K, etc.
My hope though, is that the return on the house would be good after 5 years. If not, I wouldn't lose sleep. In fact, I would have slept in what would have been close to a dream home---for me at least.
Mary
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07-09-2007, 09:21 AM
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#5
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Dryer sheet aficionado
Join Date: Feb 2005
Posts: 39
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Quote:
Originally Posted by GatorBuzz
Good questions from Brewer. Also, how much are you paying in rent right now?
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$950
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07-09-2007, 09:30 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Hmmm...
Zippo down for a big honkin' mortgage and a huge ramp up in monthly obligation (mortgage plus taxes plus upkeep plus utilities plus...). And all this with a hope for a good return on the house in a declining RE market.
If you really, really want a "dream house" and you are willing to make the many sacrifices this will require, then I would save up a 10 to 20% downpayment and then start looking for a house. But be aware that you will likely be delaying any hope of retiring early for quite a few years in order to buy this house and you should not count on earning any return on the house. And I think you would be wise to keep your mortgage to $250k or less, based on your income.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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07-09-2007, 09:39 AM
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#7
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Dryer sheet aficionado
Join Date: Feb 2005
Posts: 39
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Quote:
Originally Posted by brewer12345
Hmmm...
Zippo down for a big honkin' mortgage and a huge ramp up in monthly obligation (mortgage plus taxes plus upkeep plus utilities plus...). And all this with a hope for a good return on the house in a declining RE market.
If you really, really want a "dream house" and you are willing to make the many sacrifices this will require, then I would save up a 10 to 20% downpayment and then start looking for a house. But be aware that you will likely be delaying any hope of retiring early for quite a few years in order to buy this house and you should not count on earning any return on the house. And I think you would be wise to keep your mortgage to $250k or less, based on your income.
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One final note. My company will purchase your home for at least 105% of your purchase price if the market turns otherwise, so it's really a matter of how much cash flow I'd want. Is this the right way to look at it?
Thanks for the helpful responses.
Mary
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07-09-2007, 09:49 AM
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#8
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Full time employment: Posting here.
Join Date: Mar 2004
Posts: 688
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Your comment about 'good debt' being not appealing to you psychologically needs to be explored. Owning a house can be great, but it can also be a colossal PITA, especially with a hefty mortgage payment every month. Seems to me you need to do some soul searching regarding how much house-expense you really want. I think Brewer's comment is headed in the right direction, but ultimately it's up to you.
__________________
Diggin' my way to financial freedom, one buck-at-a-time
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07-09-2007, 09:54 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by Mary_From_Georgia
One final note. My company will purchase your home for at least 105% of your purchase price if the market turns otherwise, so it's really a matter of how much cash flow I'd want. Is this the right way to look at it?
Thanks for the helpful responses.
Mary
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How long is the offer to repurchase the house good for? I presume they have the right to yank or change their offer and that you could also change jobs, correct? I wouldn't feel comfy depending on such an offer to bail me out.
On the subject of cashflow, I would compile a list of the expenses that would come from owning such a home. A local homeowner could tell you more specifics, but at a minimum I would expet it to include:
- mortgage
- RE taxes
- Homeowners' insurance
- Gas/water/sewer/electric/heating/phone/cable
- HOA dues, if any
- at least 1% of the purchase price annually for upgrades, repairs and rennovations
- Some amount for periodic upgrades and remodelling
- landscaping/lawn service
No doubt there are others. Then compare this total amount to your current income and budget. Would you feel comfy with the reduced amount of free cash flow? Is this amount over what you pay in rent worth the privilege of living in a "dream home"?
If I didn't have kids I would just own a townhouse or even be a renter.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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07-09-2007, 09:57 AM
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#10
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Full time employment: Posting here.
Join Date: Jun 2007
Posts: 567
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We put 8% down on a 260k five years ago. If I had known then what I know now, I would have waited until I could at least hit 20%
Also, don't be bashful about offering really low when you're looking at houses. The worst thing you can do to yourself is to get emotionally attached.
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07-09-2007, 10:12 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Oh yeah. If you think that you will get good returns on a house.... Well, you might. But I bet all the people whose properties are listed here thought the same thing: Real Estate Disposition Corporation
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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07-09-2007, 11:09 AM
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#12
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Administrator
Join Date: Apr 2006
Posts: 22,973
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Quote:
Originally Posted by brewer12345
How long is the offer to repurchase the house good for? I presume they have the right to yank or change their offer and that you could also change jobs, correct? I wouldn't feel comfy depending on such an offer to bail me out.
On the subject of cashflow, I would compile a list of the expenses that would come from owning such a home. A local homeowner could tell you more specifics, but at a minimum I would expet it to include:
- mortgage
- RE taxes
- Homeowners' insurance
- Gas/water/sewer/electric/heating/phone/cable
- HOA dues, if any
- at least 1% of the purchase price annually for upgrades, repairs and rennovations
- Some amount for periodic upgrades and remodelling
- landscaping/lawn service
No doubt there are others. Then compare this total amount to your current income and budget. Would you feel comfy with the reduced amount of free cash flow? Is this amount over what you pay in rent worth the privilege of living in a "dream home"?
If I didn't have kids I would just own a townhouse or even be a renter.
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Don't forget PMI if you put down less than 20%.
__________________
Living an analog life in the Digital Age.
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07-09-2007, 11:38 AM
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#13
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gone traveling
Join Date: May 2006
Posts: 1,036
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MFG
Do you know what the average annual appreciation rate has been for the homes/area where you are looking? Has that been reasonably constant or has it been just because of the recent boom. I know when I vacationed in Alanta in the mid 70's everyone I talked to had just moved there so there must be a good history of home appreciation. A good Realtor should be able to provide this. Then question why this would increase/decrease over time.
If you are aware of all the costs of home ownership and feel comfortable that you can meet them over at least a 5 year term and determine that the increase far outweighs that extra cost over renting then I think you should purchase your dream home.
3% of $400K = $12,000. 5% increase in value per year (mine has been 9-11% in two different states) for 5 years= $110,000 increase in home value.
At your salary range I can't imagine NOT being invested in real estate for financial reasons. I do know some people are not psychologically prepared for home ownership no matter their income.
Also in looking at foreclosures you should determine if it is the result of the borrower or the house. Even if a borrower falls on hard times he should be able to sell his house unless he purchased in an undesirable area. Why would you buy there? Or it may be that the house has defects and the owner chooses to walk away. Buy smart. Question why your home will sell 5 years from now before another home in another neighborhood or another house in your area.
Good luck.
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07-09-2007, 12:07 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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BTW, mary, I hope we didn't scare you off.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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07-09-2007, 12:31 PM
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#15
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Full time employment: Posting here.
Join Date: Jun 2005
Posts: 761
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I don't know your tastes but with the market the way it is in Atlanta you should be able to find a dream home for much less than 280k.
The inventory of homes on the market in Atlanta is at record levels. I think Brewer recently posted a message about foreclosures in Atlanta. Also, get a good real estate agent. One that is willing to bargain hunt. Some homeowners are willing to accept offers significantly lower than the asking prices of homes in Atlanta due to so much competition.
__________________
You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes.
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07-09-2007, 12:48 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,203
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Quote:
Originally Posted by Webzter
We put 8% down on a 260k five years ago. If I had known then what I know now, I would have waited until I could at least hit 20%
Also, don't be bashful about offering really low when you're looking at houses. The worst thing you can do to yourself is to get emotionally attached.
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yes... this is important.... if you do not put 20% or more down you have to pay PMI... and that can be a lot... also, with less than 20% they want to have an escrow for you taxes etc... less and you can save the money and keep the interest...
BTW, I agree 105% with Brewer.. very good advice... don't overextend.. (he must have been a mortgage broker.. but then again, he has good ideas on stocks, so I also think he was a stock broker..)
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07-09-2007, 12:51 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by Texas Proud
(he must have been a mortgage broker.. but then again, he has good ideas on stocks, so I also think he was a stock broker..)
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Since I consider mortgage brokers to vy for last place in the ethical sweepstakes with used car salesmen, annuity hucksters, televangelists, and former Intel middle managers, I will assume you meant taht as a compliment...
Really, it is just my experience of having been at about the same income level and carrying a $240k mortgage.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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07-09-2007, 01:27 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Aug 2006
Posts: 2,433
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Quote:
Originally Posted by Webzter
We put 8% down on a 260k five years ago. If I had known then what I know now, I would have waited until I could at least hit 20%
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I'm surprised. Over the past 5 years, most homes have appreciated enough that I would think you made a pretty good return on that 8%.
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07-09-2007, 01:33 PM
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#19
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gone traveling
Join Date: May 2006
Posts: 1,036
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Quote:
Originally Posted by Arif
Some homeowners are willing to accept offers significantly lower than the asking prices of homes in Atlanta due to so much competition.
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This may just be a quibble but I assume MFG is a first time home buyer. Any home buyer should realize that asking price is a ficticious number unless there is analysis to back it. I have seen people brag that they bought $50K under asking price and further research shows that the asking price was $60K over market value! Not quite the deal they thought they had.
Think about it. Why would someone sell you a home 10% below market value?
A good Realtor should provide a CMA to support any purchase offer. If they can't or won't I would not deal with that person.
"I'll wait until I have 20% down or until the market settles" Famous last words of perpetual renters. I purchased in 2003 for just over $200K and it would sell for $400K+. In 2004 I purchased $270K+ and can sell for $450K+. I had 20% down but even if I had to pay PMI for a bit the appreciation clearly outweighs the extra costs. If you're ready to buy now I would use the "buyers market" in your area to get the best house you can NOW. Why wait for a frenzy when people are throwing money at anything to get in the market?
I think generally the impact of forclosures is minimal on an otherwise healthy economy. I've never seen an impact of more that 1-2% on market values. How many people on the Atlanta foreclosure list do you think make $100,000?/max their 401K?/participate in an early retirement forum? I wouldn't give it much thought.
If you can find your dream home at market or slightly under at terms that don't overextend your resources (by your definition) then you should definitely go for it!!
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07-09-2007, 01:51 PM
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#20
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Full time employment: Posting here.
Join Date: Jun 2007
Posts: 567
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Quote:
Originally Posted by FIRE'd@51
I'm surprised. Over the past 5 years, most homes have appreciated enough that I would think you made a pretty good return on that 8%.
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Factor in closing costs when we bought, closing costs when we sell, realtor fees (our guy is a broker so we're being charged between $500 and 5%, depending on how the buyer comes to us), and our net walk-away profit from the house after five years is a $10k loss at the best case scenario.
If you include the material improvements (made for our benefit, not to try and capture some sort of return) and we're out another $12k.
And, we live in one of the more desirable suburbs in the metro area.
Of course, we didn't know nearly as much about real estate then (this was our first house) as we do now. (bought and sold two rental properties and made several other offers on many houses)
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