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Rent or Buy?

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Old 03-29-2005, 10:23 AM   #16
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Re: Rent or Buy?

Two words of advice from somone who just spent the last 3 months looking for a home in fairfax.

1. Be prepared to bid over 25k over the asking price.

2. Don't worry about selling your house before you buy your house. Equity is good, but look at it this way, most people can't afford the house they are living in now, and if they want to move out they couldn't afford to live in the same 20 mile radius of there current home...most people.

What ever you buy, plan to stay awhile, if your the averarge person making average $$.
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Old 03-29-2005, 10:30 AM   #17
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Re: Rent or Buy?

TAFKAS,
Always buy if you can swing it. You will be able to deduct the interest you pay on your mortgage, giving you a bigger tax return each year. You will build up equity on your home which you will retain when you sell your home. And as your home appreciates, you take all the profit.

Here is a table showing what your monthly payments would be if you bought a home. So the monthly payment on a $100,000 mortgage is about $600. Now you'll have a monthly escrow payment in addition to that. Escrow typically covers your homeowner's insurance, real estate taxes, township fees and other crap like that.

$ Borrowed - Mortgage Payment - Escrow - Total Monthly
$100,000 - $600 - $150 - $750
$120,000 - $720 - $200 - $920
$140,000 - $840 - $250 - $1090
$160,000 - $960 - $300 - $1260
$180,000 - $1080 - $350 - $1430

Lenders have all kinds of options for you. You may be able to get 100% financing, meaning you won't need to make any down payment. Or you can put 5% down, or if you can put 20% down you'll get the cheapest rate/PMI expenses. Thing is, in addition to the down payment, you will have to pay "closing costs" on the transaction up front. This means that even if you're making no down payment on the home, you'll have to pay $3000 - $10,000 (depending on the price of your home) in closing costs. There's no getting out of closing costs, at least not to my knowledge.

If you're going to buy, make sure you shop around for a mortgage company with low closing costs, there are a wide range. A lot of the times, smaller mortgage companies have to hit you with bigger closing costs to help cover their expenses. A bigger mortgage firm can offer lower closing costs. I went with Chase, I was pleased with them. Plus with a big company like that, you know they won't sell your mortgage to another bank or something crazy like that. Canthetuna can probably shed more light on mortgage companies since his wife does that stuff.
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Old 03-29-2005, 10:32 AM   #18
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Re: Rent or Buy?

Quote:
Originally Posted by gortiz
Two words of advice from somone who just spent the last 3 months looking for a home in fairfax.

1. Be prepared to bid over 25k over the asking price.

2. Don't worry about selling your house before you buy your house. Equity is good, but look at it this way, most people can't afford the house they are living in now, and if they want to move out they couldn't afford to live in the same 20 mile radius of there current home...most people.

What ever you buy, plan to stay awhile, if your the averarge person making average $$.
#1 actually depends a lot on what the initial price is, the condition the house is in, the time of year, etc etc etc... normally sellers here get their price or slightly higher, but not always.

#2 make use of contract contingencies, if you NEED your old house sold before buying a new one you can codify it into the contract... it makes the contract look less appealing to the seller, but if its what you gotta do... (more important is when you sell first to make the salle contingent on getting the new house, or else you could end up without a house and unable to afford to move back into the neighborhood you just left).
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Old 03-29-2005, 10:39 AM   #19
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Re: Rent or Buy?

Quote:
Originally Posted by Schneed10
TAFKAS,
Always buy if you can swing it. You will be able to deduct the interest you pay on your mortgage, giving you a bigger tax return each year. You will build up equity on your home which you will retain when you sell your home. And as your home appreciates, you take all the profit.

Here is a table showing what your monthly payments would be if you bought a home. So the monthly payment on a $100,000 mortgage is about $600. Now you'll have a monthly escrow payment in addition to that. Escrow typically covers your homeowner's insurance, real estate taxes, township fees and other crap like that.

$ Borrowed - Mortgage Payment - Escrow - Total Monthly
$100,000 - $600 - $150 - $750
$120,000 - $720 - $200 - $920
$140,000 - $840 - $250 - $1090
$160,000 - $960 - $300 - $1260
$180,000 - $1080 - $350 - $1430

Lenders have all kinds of options for you. You may be able to get 100% financing, meaning you won't need to make any down payment. Or you can put 5% down, or if you can put 20% down you'll get the cheapest rate/PMI expenses. Thing is, in addition to the down payment, you will have to pay "closing costs" on the transaction up front. This means that even if you're making no down payment on the home, you'll have to pay $3000 - $10,000 (depending on the price of your home) in closing costs. There's no getting out of closing costs, at least not to my knowledge.

If you're going to buy, make sure you shop around for a mortgage company with low closing costs, there are a wide range. A lot of the times, smaller mortgage companies have to hit you with bigger closing costs to help cover their expenses. A bigger mortgage firm can offer lower closing costs. I went with Chase, I was pleased with them. Plus with a big company like that, you know they won't sell your mortgage to another bank or something crazy like that. Canthetuna can probably shed more light on mortgage companies since his wife does that stuff.
those payment figures are on the money... a fixed rate loan is usually the best bet, since it can never go up and you can always refinance if the fed rate goes down. (and getting a place, i get calls for a 1.25% refinance all the time, problem is its 1.25% for 6 months then jumps to 7-10% and can't be paid off early - ALWAYS ignore those calls, its indian call centers being paid to look for suckers)

sometimes sellers will pay closing costs (not usually in a sellers market though) and the buyer just pays more into the price (this is another thing you can add to the contract but it'd make it less likely to win in a competition)...
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Old 03-29-2005, 10:54 AM   #20
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Re: Rent or Buy?

Quote:
Originally Posted by That Guy
those payment figures are on the money... a fixed rate loan is usually the best bet, since it can never go up and you can always refinance if the fed rate goes down. (and getting a place, i get calls for a 1.25% refinance all the time, problem is its 1.25% for 6 months then jumps to 7-10% and can't be paid off early - ALWAYS ignore those calls, its indian call centers being paid to look for suckers)

sometimes sellers will pay closing costs (not usually in a sellers market though) and the buyer just pays more into the price (this is another thing you can add to the contract but it'd make it less likely to win in a competition)...
Agreed. In the mortgage business, if it sounds too good to be true, it ALWAYS is. There are lots of creative ways to finance a home at a very low rate initially. That initial rate is the one mortgage companies will advertise, but the rate will change on you. This type of financing can be good in certain situations, but you really have to make sure you identify the risks. Like if the rate is set to jump up to 10% after 5 years, then the deal may make sense for you if you're CERTAIN that you'll move within 5 years. But if you don't move, and you stay past 5 years, you get crushed with that 10% rate (or you're forced to refinance). I prefer a plain, vanilla, 30-year fixed mortgage. You know exactly what you're going to be paying as long as you own the house. Lots of stuff can happen in life: getting laid off, spouse dying (God forbid), taxes raised, etcetera. I'd rather know what my payment will be.
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Old 03-29-2005, 10:57 AM   #21
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Re: Rent or Buy?

alot of great info here guys, damn the parking lot is becoming quite the hangout!
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Old 03-29-2005, 10:59 AM   #22
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Re: Rent or Buy?

I guess that's what happens when there is lack of Redskins news.
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Old 03-29-2005, 11:00 AM   #23
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Re: Rent or Buy?

Quote:
Originally Posted by Mattyk72
alot of great info here guys, damn the parking lot is becoming quite the hangout!
Yeah, there's a total lack of significant Redskins news lately. Dull offseasons, what the heck is that about? I don't even know what a dull offseason is!
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Old 03-29-2005, 11:02 AM   #24
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Re: Rent or Buy?

Honestly, I think I would flip if they would do something crazy like release the season schedule early. At least THAT would give us something to analyze for another couple months.
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Old 03-29-2005, 11:07 AM   #25
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Re: Rent or Buy?

TAFKAS, you know if you have any questions you can always hit me up on IM or PM me.
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Old 03-29-2005, 11:21 AM   #26
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Re: Rent or Buy?

This is great info guys! I really appreciate it. I just need to digest it all and start making some decisions
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Old 03-29-2005, 12:09 PM   #27
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Re: Rent or Buy?

TAFKAS,

I own two moderately priced homes in the Baltimore area (one is a rental) - I am a firm believer in owning real property, so long as it is in a stable decent area. If you can afford to buy, now is the time w/ interest rates low with only caution being don't buy into an overpriced market - Hard to do right now. Just be sure that what is driving the prices is the excess desire for houses in your chosen location and not an artificial bump given to already expensive properties.

In terms of figuring out loans - here is a great site: http://www.mortgages-loans-calculators.com/

If you put in the amount being financed and the interest rate it tells you your monthly payment. It also will give a year to year interest/principal breakdown that lets you see just how much of a tax deduction you can take.

Just remember that in addition to any principal and interest payment you will need to escrow taxes and insurance which will probably add about $200-$300 depending on your tax rate and purchase price. (That figure is a true shot in the dark - for my homes in the Baltimore area each @175K that is the amount).

The only other consideration is the length of the mortgage: A 30 year is builds equity SLOWLY but you will have a larger tax deduction for a longer period of time (b/c you are paying A LOT more interest) and your monthly payments will be much smaller.

A 15 year builds equity pretty quick but is more expensive. A lot depends on how long you plan to stay in the home.

I bought my current home without the use of an agent and we drafted up the contract of sale and took care of all the paperwork ourselves with the help of our mortgage brokers and title agents. So I am, actually, pretty familiar with the process.

I also have two VERY good mortgage brokers who do a really good job of finding good rates w/o paying points or sticking in "ghost" charges.

I also work for the Maryland Insurance Admin which regulates title insurers so if you want to check out your title agent, let me know and we can run him/her through our system to be sure they are on the up and up.

PM me if you want to talk more about it. It can be quite stressful the first time through.
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Old 03-29-2005, 12:14 PM   #28
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Re: Rent or Buy?

Quote:
Originally Posted by NY_Skinsfan
canthetuna,
I have a question about loans. My wife and I are expecting our second child in July. My wife works in a school so she wants to take at least five months off which would be through next January (summer not included). What I am looking for is a loan that will give us enough cash to get us through January so I can pay all our bills regularly and then when my wife goes back to work we can start paying the loan off then. Is there anything out there that will fit our needs.

Im assuming you're talking abouit a re-financing loan? It would depend on the equity you have in your home, and how much of that you want to take out. I wouldnt ever take out more than 60%, but thats just my opinion. There are delay payment loans available, however ive never seen one go past ninety days. I'll call my wife when i get a chance and double check, but shes in meetings until 3.
Congratulations on the baby, & best of luck to you.
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Old 03-29-2005, 12:27 PM   #29
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Re: Rent or Buy?

This may have already been answered, but for a first time buyer what kind of cash do I need to have up front? My Dad is always telling me to look at FHA loans, anyone know about these and what they're about??
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Old 03-29-2005, 12:49 PM   #30
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Re: Rent or Buy?

Quote:
Originally Posted by Schneed10
Agreed. In the mortgage business, if it sounds too good to be true, it ALWAYS is. There are lots of creative ways to finance a home at a very low rate initially. That initial rate is the one mortgage companies will advertise, but the rate will change on you. This type of financing can be good in certain situations, but you really have to make sure you identify the risks. Like if the rate is set to jump up to 10% after 5 years, then the deal may make sense for you if you're CERTAIN that you'll move within 5 years. But if you don't move, and you stay past 5 years, you get crushed with that 10% rate (or you're forced to refinance). I prefer a plain, vanilla, 30-year fixed mortgage. You know exactly what you're going to be paying as long as you own the house. Lots of stuff can happen in life: getting laid off, spouse dying (God forbid), taxes raised, etcetera. I'd rather know what my payment will be.
Well if you opt for a low rate intrest only loan through a reptuable lender, they will put a life cap on the loan usually arount 2% through the short term. (meaning a 3yr arm, the intrest rate wont go over 2% above the original rate) at the end of the 3 yrs (or 1yr or 5yrs depending on the term u decide on), you do refinance, but what you're banking on is building equity in the house during those 3 yrs and then at the end of the three yrs applying that equity towards your refinancing. This option is great for first time buyers in a market where house prices exceed appraisal values. Most of these loans allow for 6%over the appraised price, whereas most conventional financing options allow for only 3%. So when you do refinance later its like locking in on the price of the house now, not paying the principal, but building equity and allowing for the market to advance well beyond your purchase price. And even though the rates do change, they are capped and dont change the monthly payment. Usually they just add an additional payment on the end of the loan, so the term changes, not the monthly payment.

Again this is how most reputable lenders operate. There are lenders that will try to sucker people. You have to watch out for that.

It is also possible to get an arm like that for 3yrs with only a 1 yr early payback penalty. Theyre available, but hard to find because mortgage officers get offered incentives (thousands of $) to lock people in for the full term, wether they work for one lender or a broker.
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