Rent or Buy?
 

So the lease on my apartment expires in a couple of months. After three years of renting an apartment I think it might be time to own.

I'm thinking of renewing my lease for another six months to give me some time to find a place.

Here's what I'm hoping you guys could help me with (Redskins_P, I know you are pretty knowledgable in this area), how do I go about determining how much I can afford (factoring in mortgages, property taxes etc.)

Also, if there's any other advice you homeowners out there have I'd greatly appreciate it. I'm probably looking at getting a condo or maybe a townhome

Re: Rent or Buy?
 

The only thing that I can suggest is to escrow(SP) your home owners ins and taxes in to one monthly payment. That way you dont have to worry about making insurance payments and paying your realestate taxes.

Re: Rent or Buy?
 

owning is the way to go

Re: Rent or Buy?
 

Hey tafkas, my wife actually does mortgages for a living. She has access to over 650 lenders (though she usually only uses about 6 or so) and Im sure she would be willing to meet with you and discuss your options without obligation. There are literally hundreds of ways to structure loans to suit someones needs...

80-20 second trusts to avoit pmi

first time buyer programs offering 100% financing

Intrest only loans at low rates to make payments on usually unaffordable homes affordable

The qualification formula for someone based on income usually looks something like this:
Mortgage Qualification Calculations based on Annual income of 65555

Inputs

Gross annual income:
$65,555.00

Monthly debt payments:
$650.00

Down payment:
$5,000.00

Annual interest rate:
5.250%

Monthly Private Mortgage Insurance (PMI %):
0.00%

Monthly insurance:
$40.00

Monthly property tax:
$73.00

Length of the mortgage:
30

Maximum mortgage payment to income ratio (%):
28.00%

Maximum debt payments to income ratio (%):
36%

Results

Downpayment:
$5,000.00

Loan Amount:
$217,972.10

Home Price:
$222,972.10

Monthly Payment:
$1,203.65

Dont know if that helps but email me if you have any more questions & Ill get my wife to talk to you.

Re: Rent or Buy?
 

BTW with the housing market in the area the way it is if you are able to buy, no matter what it is, you should buy. Every month you pay rent you just piss your money away... and i just plugged in some b.s. #s to a formula to show you an example up there.

Re: Rent or Buy?
 

I'm renting til December then hopefully my girlfriend will FINALLY be back in Lexington and we can buy. We should have like a combined income of around 75k.

Would you say we could afford about a 135-140k house comfortably? I have a 350 dollar a month car payment.

Re: Rent or Buy?
 

With 75k you could easily get approved for 735-140 conventionally, or you could look in a higher range with an interest only loan depending on your credit...generally how they work is you are only obligated to pay the interest on the loan and the interest rate is discounted below prime, however they're usually structured as a short-term arm (adjustable rate mortgage) with a cap around 2% above original rate. this does not always change your payment, but may add a balance at the end of the loan, but what you're banking on is the equity you build in the house to use toward the new mortgage when u refi, or sell the home.

Conventional financing in your case malcom wouldnt be a prob. as long as your credit is decent, and you could easily get into more than that if you needed to, depending on your credit rating.

Re: Rent or Buy?
 

135-140 not 735-140... sorry

Re: Rent or Buy?
 

That's great. Thanks for the advice!

I also forgot to mention that W&L University where I work offers a 1.6% interest rate to its employees, so that pumps me up even more!

Re: Rent or Buy?
 

1.6?? hell are they hiring.. lol

Re: Rent or Buy?
 

Actually my wife just informed me that she just did a re-fi @ 1.25% from washington mutual, and another @ 1.3% from chevy chase. both are interest only option arms, and thats probly what you're looking @ with your credit union.

Re: Rent or Buy?
 

The only thing about buying right now is it's a seller's market. Sure, interest rates are low, but the prices of homes right now are inflated - there are so many people looking to buy. On the other hand, it sucks paying rent when you never see that money again.

Best of luck.

Re: Rent or Buy?
 

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.

Re: Rent or Buy?
 

A lot of your urgency to buy should depend upon the property values in your area. I live at the beach, so while everything is expensive, the values have almost no chance of dropping. In fact, in two years, my house has been appraised 35% higher than the purchase price.

With almost all mortgage interest being deductable, and a likelihood of your property increasing in value, it's a pretty easy decision to make.

Re: Rent or Buy?
 

my condo iss worth 50k more than when i got it 6 months ago i believe... fairfax/burke property is insane :/

I don't know where you're located, but my mother does a lot of real estate in N Va and if you're looking up here she knows a lot about the market.

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 $$.

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.

Re: Rent or Buy?
 

[QUOTE=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 $$.[/QUOTE]

#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).

Re: Rent or Buy?
 

[QUOTE=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.[/QUOTE]

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)...

Re: Rent or Buy?
 

[QUOTE=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)...[/QUOTE]

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.

Re: Rent or Buy?
 

alot of great info here guys, damn the parking lot is becoming quite the hangout!

Re: Rent or Buy?
 

I guess that's what happens when there is lack of Redskins news. :(

Re: Rent or Buy?
 

[QUOTE=Mattyk72]alot of great info here guys, damn the parking lot is becoming quite the hangout![/QUOTE]

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!

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.

Re: Rent or Buy?
 

TAFKAS, you know if you have any questions you can always hit me up on IM or PM me.

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

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: [url]http://www.mortgages-loans-calculators.com/[/url]

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.

Re: Rent or Buy?
 

[QUOTE=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.[/QUOTE]


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.

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??

Re: Rent or Buy?
 

[QUOTE=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.[/QUOTE]

Well if you opt for a low rate intrest only loan through a [u]reptuable[/u] 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 [u]reputable [/u] 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.

Re: Rent or Buy?
 

[QUOTE=Mattyk72]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??[/QUOTE]

The amount you come out of pocket depends on how much you spend on a house, the kind of market you are in, and what kind of financing options you decide on. But suppose you put no down payment on a house, and the house costs $200,000. You'd probly look at paying 5-6k in closing costs.

Like I said before, most lenders allow up to 3% back in cash/closing above the appraised price if you go conventional financing.

Re: Rent or Buy?
 

when i bought my condo 2 years ago, i was able to secure a 102% loan through the bank because I was a first time home buyer. I ended up putting like $450 down on a 80K condo. My interest rate is locked for the 1st 5 years of the loan, and can only go up a single percentage point from year to year. I make very modest monthly payments (which includes escrow), and am able to make double payments from time to time.

the biggest thing when purchasing is to make sure you are not living beyond your means. i know people not making as much as I am getting loan offers for much more than they can afford.

Re: Rent or Buy?
 

If anyone needs professional advice away from this site, please private message me. I am a licensed realtor, licensed settlement and title agent, and a marketing rep for a large Settlement company in Northern VA. We have 24 offices. I can answer any question you may have about specifics. And I love to give free advice to fellow skins fans. -eric

Re: Rent or Buy?
 

[QUOTE=BDBohnzie]
the biggest thing when purchasing is to make sure you are not living beyond your means. i know people not making as much as I am getting loan offers for much more than they can afford.[/QUOTE]

Great point. Rule of thumb that I often hear is that your monthly payment on mortgage or rent should not exceed 35% of your take-home monthly pay. You can certainly go higher than the 35%, but for most people it starts to become a cash crunch when you get up to the 40% range.

Great to know so many mortgage experts are on this site. I know some about the subject, being a financial type guy, but it's great to know we have so many professional mortgage experts here for advice. I might seek you guys out a few years down the road to check into refinancing options. Thanks!

Re: Rent or Buy?
 

I don't know if I qualify as a mortgage expert, but I've had few, so that puts me in the right category.

You're right Schneed, this is much better than at a Cowboys forum, where they debate "Chaw or Dip?"

Re: Rent or Buy?
 

I like dip and if anyone says chaw is better I'm going to finish kissing my sister, bring my shotgun and my entire trailer park and come and getcha!!!

Re: Rent or Buy?
 

It's great. We have deep political, mortgage and Question 3 discussion...

Re: Rent or Buy?
 

[QUOTE=TheMalcolmConnection]I like dip and if anyone says chaw is better I'm going to finish kissing my sister, bring my shotgun and my entire trailer park and come and getcha!!![/QUOTE]
Well, I say Chaw - and if you don't like it, my uncle, my brother-in-law, and my nephew and I are coming to get you. And the two of us will kick your ass!

Re: Rent or Buy?
 

[QUOTE=TheMalcolmConnection]It's great. We have deep political, mortgage and Question 3 discussion...[/QUOTE]

Don't forget we also discuss who the hottest women out there are!

Re: Rent or Buy?
 

Cowboys forums also discuss the hottest women but normally that is limited to their own gene pool.

BrudLee, my uncle/brother can kick your sister/aunt/mother's ass! CHEVY RULES!!!