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.
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,259 posts, read 24,752,651 times
Reputation: 3587
Advertisements
Quote:
Originally Posted by aamazing75
My husband and I recently moved from CA to TN. We are currently renting an apt., and have been renters in CA as well. My husband makes decent money in the IT field, we have 1 car payment, 1 low CC balance, & I am currently staying home with my 1 yr old son, and we do without a lot of nice things. I also have excellent credit. We have been trying to save money so that we can purchase a house soon. I still don't think it will be enough for a 5% down though.
My response to the quote is: How in the heck are you supposed to be able to save money with high rents, increasing gas prices, not to mention the prices for food & other goods. It's sad times when a husband has to work 2 jobs, or a mom has to go to work (having to pay for child care at that) to make a 5% down to buy a house.
I'm in my early 30's, and it is rough for us. Definately way worse than my parents had it.
I have always been very responsible with money matters, and it has gotten me nowhere!!! Just wanna say "thanks" to all the people who screwed everyone by buying houses they could not afford!
Hopefully things will get better instead of worse. I'm sick of renting!!!!
OK, I feel better now.............
My response to the quote is: How in the heck are you supposed to be able to save money with high rents, increasing gas prices, not to mention the prices for food & other goods. It's sad times when a husband has to work 2 jobs, or a mom has to go to work (having to pay for child care at that) to make a 5% down to buy a house.
It is not always "easy" but it can be done. You can do things like set your tax exemptions to 1 or 0 and get the 5% from your tax refund for that year and you won't even miss the money because it is taken out before you get paid! You can always cut out everything but the essentials too- including things like cable TV (yes it is still FREE with an antenna!)
Everyone who says "if you can't save that money you shouldn't be buying" does not, has not, and will not ever live in specific cities in California. Period.
If I were in Colorado making the money I make now, saving would be easy, because rental rates are reasonable.
Yes, but that is exactly why many of us choose not to live in specific cities in CA, South FL or Vegas. I am from Miami, I looked at going to Irvine (south of Los Angeles) or NC State University for graduate school. I realized that I could not afford to rent in Miami or Irvine, which influenced my decision to move to NC.
If you can not make enough to buy in CA, maybe the solution isn't 100% financing with low teaser rates but a move to CO where "saving would be easy, because rental rates are reasonable". If you prefer to live in CA, then not buying is a consequence of that decision. Also remember that people in CO aren't going to make the same amount of money as you do in CA. Here in NC income is often less than in NY or CA, but your money does go further because of the cost of living.
The problem in CA is NOT the lack of finacing... its that homes are priced too high for the incomes. That is what this correction is about, people buying homes without down payments, savings or adequate income. Over the long run, this decline will help because it will allow more people to buy homes at an affordable, sustainable price.
Once homes are affordable without the need for some crazy mortgage program, prices will stablize and then begin to increase at the roughly the same pace as income growth. That is until the next bubble.... which will eventually come.
Quote:
Originally Posted by revelated
To those saying "well just wait and buy later", it's more illogical to pay ever-increasing rent payments than it is to get into something more stable and fixed for the short/long term. There's also equity to consider which might help you get loan funds for debt consolidation - decreasing your monthly load and freeing up cash every month.
Its even more illogical to be buying a home you can notafford (if you can not save money when renting, then you won't save much when buying) and be 1 paycheck away from foreclosure. Homes need repairs and unlike apartments you can not move out or down grade if times get tough.
A 5% down payment is almost as meaningless as no downpayment. If you were going to sell in 1-2 years, you would STILL need to come to the closing with cash to cover closing costs and Realtor commissions. Renting is very logical in some markets and situations, people have just been sold on the "American Dream" and that renting is throwing money away.
Yes, but that is exactly why many of us choose not to live in specific cities in CA, South FL or Vegas. I am from Miami, I looked at going to Irvine (south of Los Angeles) or NC State University for graduate school. I realized that I could not afford to rent in Miami or Irvine, which influenced my decision to move to NC.
If you can not make enough to buy in CA, maybe the solution isn't 100% financing with low teaser rates but a move to CO where "saving would be easy, because rental rates are reasonable". If you prefer to live in CA, then not buying is a consequence of that decision. Also remember that people in CO aren't going to make the same amount of money as you do in CA. Here in NC income is often less than in NY or CA, but your money does go further because of the cost of living.
The problem in CA is NOT the lack of finacing... its that homes are priced too high for the incomes. That is what this correction is about, people buying homes without down payments, savings or adequate income. Over the long run, this decline will help because it will allow more people to buy homes at an affordable, sustainable price.
Once homes are affordable without the need for some crazy mortgage program, prices will stablize and then begin to increase at the roughly the same pace as income growth. That is until the next bubble.... which will eventually come.
Its even more illogical to be buying a home you can notafford (if you can not save money when renting, then you won't save much when buying) and be 1 paycheck away from foreclosure. Homes need repairs and unlike apartments you can not move out or down grade if times get tough.
A 5% down payment is almost as meaningless as no downpayment. If you were going to sell in 1-2 years, you would STILL need to come to the closing with cash to cover closing costs and Realtor commissions. Renting is very logical in some markets and situations, people have just been sold on the "American Dream" and that renting is throwing money away.
I'm sorry, but I don't agree. And this is coming from a 5 year renter. Again, I acknowledge other areas are likely different; I speak only of California...southern California, to be exact.
You can and will save money buying a house over an apartment. Think mathematically (and I'll give you real numbers to work with):
Monthly mortgage payment, fixed 6.25% FHA loan: approx. $1450, plus PMI and other expenses = approx. $1840/month PITI, for 30 years.
Assuming approx. $1200 of that is interest, give or take, you stand to save per year, at the most, approx. $24,000 in interest.
If your tax bracket yields $9,000 total tax liability, you get that back. More savings. Less spent per year. Since you didn't see that money from the jump, you really didn't require it to get through the year; ergo, you can just throw it into a long term CD at 1-year maturity, and just keep adding your tax to it. As your income goes up, eventually you'll get to the point of being able to save nearly 30% of your income every year. Exploit compound interest, and you can really make out like a bandit.
There is no financial benefit to renting vs. buying in San Diego, CA. None. The only benefit is for those who don't want to be locked down to one residence; for example, those who intend to relocate in the near future, or whose job requires it...unless you're one of those peeps who loves 8 pools and a central fitness room and BBQ grills, with someone else grooming your surroundings, then by all means.. But if you're stable in your employment and don't care about any of the rest, buying a house is the way to go. Renting has no back end ability to get money back. Buying does. That's where that savings comes from and it's an instant savings to boot, beginning with that first mortgage payment. Rental offices can put rent at whatever they choose, however high they want. There's nothing to stop them from double charging you for a 600 sqft apartment. Your positive rental payments are not reported to your credit, but better believe that you fall behind and you'll get reported negatively...whereas the mortgage payment will ramp your credit score something fierce for ontime payments.
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,259 posts, read 24,752,651 times
Reputation: 3587
Quote:
Originally Posted by rcarrillo
Yes, but that is exactly why many of us choose not to live in specific cities in CA, South FL or Vegas. I am from Miami, I looked at going to Irvine (south of Los Angeles) or NC State University for graduate school. I realized that I could not afford to rent in Miami or Irvine, which influenced my decision to move to NC.
If you can not make enough to buy in CA, maybe the solution isn't 100% financing with low teaser rates but a move to CO where "saving would be easy, because rental rates are reasonable". If you prefer to live in CA, then not buying is a consequence of that decision. Also remember that people in CO aren't going to make the same amount of money as you do in CA. Here in NC income is often less than in NY or CA, but your money does go further because of the cost of living.
The problem in CA is NOT the lack of finacing... its that homes are priced too high for the incomes. That is what this correction is about, people buying homes without down payments, savings or adequate income. Over the long run, this decline will help because it will allow more people to buy homes at an affordable, sustainable price.
Once homes are affordable without the need for some crazy mortgage program, prices will stablize and then begin to increase at the roughly the same pace as income growth. That is until the next bubble.... which will eventually come.
Its even more illogical to be buying a home you can notafford (if you can not save money when renting, then you won't save much when buying) and be 1 paycheck away from foreclosure. Homes need repairs and unlike apartments you can not move out or down grade if times get tough.
A 5% down payment is almost as meaningless as no downpayment. If you were going to sell in 1-2 years, you would STILL need to come to the closing with cash to cover closing costs and Realtor commissions. Renting is very logical in some markets and situations, people have just been sold on the "American Dream" and that renting is throwing money away.
Many people think the cost of owning a home is "fixed". It is FAR from fixed! It is even less fixed than renting is sometimes! When the roof starts to leak, the furnace goes out in December, water pipes break, the toilet clogs and appliances quit working, you will WISH you had a landlord to call on! But when you own a home, YOU pay for all that too! And it ain't cheap!
Many people think the cost of owning a home is "fixed". It is FAR from fixed! It is even less fixed than renting is sometimes! When the roof starts to leak, the furnace goes out in December, water pipes break, the toilet clogs and appliances quit working, you will WISH you had a landlord to call on! But when you own a home, YOU pay for all that too! And it ain't cheap!
Amen! My point exactly. If you can't afford to save for a down payment, you can't afford the maintenance that goes with owning a house. Never ever underestimate the expenses that come along with home ownership. With no savings, all you need is for the heat or air conditioning or roof to go and you will be in deep, deep trouble! For the poster that he can't afford to save and then said his car payment was $320.00 a month, why not buy a used car and put that money into savings. Thats what I did for 10 years. Sure, it wasn't nice and shiny like my friends and neighbors but it got me to work and back. In the mean time we have saved more than enough for a good down payment and now drive a nice new shiny car. See - you CAN SAVE IF YOU REALLY WANT TO. That $320.00 over 5 years would equal $19,200.00. Thats enough for a FHA - even in California.
Amen! My point exactly. If you can't afford to save for a down payment, you can't afford the maintenance that goes with owning a house. Never ever underestimate the expenses that come along with home ownership. With no savings, all you need is for the heat or air conditioning or roof to go and you will be in deep, deep trouble! For the poster that he can't afford to save and then said his car payment was $320.00 a month, why not buy a used car and put that money into savings. Thats what I did for 10 years. Sure, it wasn't nice and shiny like my friends and neighbors but it got me to work and back. In the mean time we have saved more than enough for a good down payment and now drive a nice new shiny car. See - you CAN SAVE IF YOU REALLY WANT TO. That $320.00 over 5 years would equal $19,200.00. Thats enough for a FHA - even in California.
You're using circular logic. It doesn't work. You can't go back in time!
I already have the car loan. There is no "well I'll just buy a used car and make this car disappear" - it doesn't work that way. And oh by the way, the last used car I bought - a previous version of my current vehicle - ended up needing $4,000 worth of work. Considering I bought the car for $6,000, that means I ended up paying $10,000 anyway - the amount of my current car loan, for a car that has not needed any repairs. No savings gained by paying outright cash.
Now would I recommend a kid fresh out of high school do what I do? Absolutely not. There were a lot of opportunities to scrimp, unfortunately they were not used, as other issues came up. Murphy's Law, if you will.
All I'm hearing people say is "when you have a house crap breaks down and you gotta fix it and that's money and blah blah blah" - so what? How is that any different from car repairs? It's not. Things break no matter what. The bottom line is, that's what warranties are for. You get warranties for your stuff and minimize the amount of money you have to pay when/if it breaks. The problem comes when people assume they don't need a warranty.
The tax breaks far outweigh anything you can say about renting over buying referring specifically to San Diego, CAand the fact that there are no financial benefits to renting out here. It's not worth it in the long run, unless you rent downtown and your job is also downtown. But that's rare.
So are you hoping that there is a down payment assistance program for people who chose to live in high priced San Diego? Obviously there is a cost to living in paradise. And in San Diego it's housing.
So are you hoping that there is a down payment assistance program for people who chose to live in high priced San Diego? Obviously there is a cost to living in paradise. And in San Diego it's housing.
There shouldn't be any additional DPA other than that which is already offered. However, the existing DPA terms need to be adjusted to remove the seller from the process. As I went back and forth on another thread, money is money. Who cares where it comes from?
The other problem is that lenders are afraid to make loans. That has to end. That's what they're there for.
There shouldn't be any additional DPA other than that which is already offered. However, the existing DPA terms need to be adjusted to remove the seller from the process. As I went back and forth on another thread, money is money. Who cares where it comes from?
The other problem is that lenders are afraid to make loans. That has to end. That's what they're there for.
Whoa... lenders are there to make a profit, not to make loans. It just so happens the way they make a profit is by lending money. However it has to be done wisely and with regard to risk. Lenders are not there to make loans to someone simply because they want the money!
Lending 100% of the price of an asset to someone with thin reserves and maxed out on budget is not a good risk. If anything we are learning this the hard way right now.
Seller funded DPA are NOT the only option. There are many charities and government programs that offer DPA. The whole seller funded DPA is not even what FHA intended, its a loophole that has been exploited. I think where the money comes from maters a lot to the person giving it. When its a lender they are concerned about their risk and reward, thats where guidelines and requirements come in to hedge those risks.
Also, your previous analysis about buying being better than renting includes a big assumption. That is that home prices will always increase. I think many of the people that bought in 2005-2006 will look at your increases in rent and rather have that than losing 20-40% in the value of their home since then.
This is the assumption IndyMac and many lenders used to justify their programs. They felt 100% financing with little regard to income/assets was okay because prices would always increase, allowing owners an option to "tap into the equity" to pay their other debts, refinance or sell if they needed it. That assumption proved to be false... income, assets and down payment were important.
Whoa... lenders are there to make a profit, not to make loans. It just so happens the way they make a profit is by lending money. However it has to be done wisely and with regard to risk. Lenders are not there to make loans to someone simply because they want the money!
The second half is a given. All I'm saying is, lenders are there to lend. Risk management is their job, I'm just saying, you don't mitigate risk by not making loans at all except to the most affluent, which is what some lenders are doing (Wells, I'm looking at you). You mitigate risk by making the loans with due diligence: collect docs, verify all information, ask questions of the credit history and don't just accept it at face value. Instead of what the banks really want to do which is plug some digits into a computer and have it decide. That's faulty processing, IMO.
Quote:
Originally Posted by rcarrillo
Lending 100% of the price of an asset to someone with thin reserves and maxed out on budget is not a good risk. If anything we are learning this the hard way right now.
I never said anything about lending 100%, I simply said they should lend. Reserves are a definite plus, cash out of pocket to me is irrelevant if reserves are plentiful.
Quote:
Originally Posted by rcarrillo
Seller funded DPA are NOT the only option. There are many charities and government programs that offer DPA. The whole seller funded DPA is not even what FHA intended, its a loophole that has been exploited. I think where the money comes from maters a lot to the person giving it. When its a lender they are concerned about their risk and reward, thats where guidelines and requirements come in to hedge those risks.
The problem is the way the charity/government DPA works. A seller has to "credit" the buyer the difference and then apply for the funding. That's a broken system. The price should never change, period. The seller shouldn't have to apply for the DPA on the buyer's behalf, the buyer's lender should.
Quote:
Originally Posted by rcarrillo
Also, your previous analysis about buying being better than renting includes a big assumption. That is that home prices will always increase. I think many of the people that bought in 2005-2006 will look at your increases in rent and rather have that than losing 20-40% in the value of their home since then.
This is the assumption IndyMac and many lenders used to justify their programs. They felt 100% financing with little regard to income/assets was okay because prices would always increase, allowing owners an option to "tap into the equity" to pay their other debts, refinance or sell if they needed it. That assumption proved to be false... income, assets and down payment were important.
You're mixing up oil and vinegar.
Consumers who are hell bent on "I'm losing value!!" are foolish and short-sighted, clearly only interested in the 'Equity ATM' school of thought. That's different from the consumers who could care less about the value drop, they're more concerned about the ARM adjusting and ramping their monthly payment x3. Those are the true victims, and those guys are the ones who deserve a bailout, not the idiots who only care about lost value.
Someone once said that owning a home is little different than playing the stock market, and I agree with that. Value is going to go up, value is going to go down, it happens. That's the reality of economy. When some people try to treat their house like a stock, that's when trouble starts. Those gambling on home equity deserved to get burned, I'm sorry, but that's the way I feel on it.
Regarding rent, you have to keep in mind: There is no rent control. When I do my finances, I look month to month before I look annual. If I can say with confidence that I pull $4 grand every month free and clear, I add up all of my monthly expenses to make sure I'm under that mark. With a rental arrangement, you can only do that for the term of the lease - usually a year. Then they'll increase it. And keep on increasing it. And there's nothing you can do about it, nor is there any financial gain from it. It's money you're effectively burning, because you don't get it back. You can rant about repairs and all that but in reality, the amount of repairs in a normal apartment are nearly null and void.
IN a fixed rate mortgage, your monthly does not change. As long as you accept that mortgage as-is, you won't get shocked with a $600/month increase in your mortgage payment like you can with your rent payment.
Take home equity out of the equation as a reason to own a home, positive or negative, and what are you left with? Tax break. A break large enough to actually overshoot any money you might get from a home equity line within three years. Better deal if you ask me.
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.
