Should I buy a house???

[cercis]

Re: Should I buy a house???

Russell, I hadn't heard anything about it. I wouldn't be surprised though. At one point (or so I've been told) all interest was tax deductible, even interest paid for a car loan or credit card debt. Of course, I've never checked the validity of that factoid. How it is relevant though, is that it shows congress has no qualms about removing tax deductions just about anyone can take, regardless of their income level.

Of course, I've always bought houses which were so cheap that it was never worth it to itemize, I was always just under the standard deduction.

[Russell]

Re: Should I buy a house???

Considering the avg town-homes in my area are $500k and the houses are $800k+ this could be very bad new for the buyers here.

For a $500k mortgage with 6% interest the amortization table shows interest payments of $30k for the first year! That's a huge tax deduction.

[flash]

Re: Should I buy a house???

PMI -- required unless 20% downpayment, or, if jumbo loan, required no matter what the downpayment until you are under the jumbo loan. And the bank will NOT remove it until you qualify and specifically ask, in writing, for them to reevaluate it and do so.

[Ima saver]

Re: Should I buy a house???

We sold our log home on the river 10 years ago for $110,000. Now the lot alone is worth $250,000, so the house would be worth at least $350,000. I never seem to make money on real estate but everyone else does. My husband build a cabin with view and sold it for $115,000 three years ago. He just built a smaller one right next door and got $190,000. I don't see how young couples can afford to buy houses and make the payments!

[cercis]

Re: Should I buy a house???

Ima - they do interest only loans and just hope that their income will increase and/or the housing market won't decline.

I know that we were pushed to buy a much more expensive house (by the mortgage broker and the realtor) because on paper we could afford it and "there are all these programs to get you into these houses". But, doing foreclosure work, I see the end result of those loans and know they aren't for me.

[Ima saver]

Re: Should I buy a house???

Well I bought my first house at age 21 for $13,000 and it was brand new, 3 bedrooms and 2 baths. We sold it several years later and made a real good profit, so we built another house. I always had pretty low payments ( under $200 a month) About 10 years ago, we built this real big house and I had to borrow $50,000 to finish it. The payments were like $500 a month and that blew me away that people would spend so much on a house payment. I hated all that interest, so I scrimped and paid it off in 2 years.
I can't imagine having to come up with over $1000 a month for a house payment. It is all interest.
And to have an interest only loan? That is terrible.
If I were young, I would buy the littlest cheapest house i could find , and fix it up. My husband built a cute cabin that he sold for $115,000 3 years ago. The people have to move and they are asking $225,000 for it. good profit!

[cercis]

Re: Should I buy a house???

Ima, it's great to say that, but most of us don't have the ability to fix up a house, or the time, or (the biggie) the proper licenses to get the permits and pass inspection from the city.

We spent a lot of time looking at houses before we bought this house (well within our price range). What we found was that the fixer-uppers/little houses were less than $20k less than this house. Considering that they would need significantly more than $20k in work (in many cases, just to be liveable - one house had mold on every interior wall), we took the higher initial payment. I love our house, it needs very little work at all. What it does need is strictly updating and/or cosmetic (we do need to pull out the open flame heater in the bathroom and the wall heater in the hall) or more energy efficient (new windows, doors and water heater).

Now, we could have built a brand new house for only a little bit more, but we would have had to live in the boonies and drive 20-30+ miles to work and school every day.

[Ima saver]

Re: Should I buy a house???

You are right cercis, I forget that most people can not do all the things that my husband can do. Also, we can build a house cheaper than most people because we don't pay him for doing all the work.
I have been lucky and always have had a new house to live in. We are thinking about selling this one and building a new one, even tho this house is just perfect for us.

[34saving]

Re: Should I buy a house???

cercis -- what kind of foreclosure work do you do? (I'm really interested to figure out the process that banks go through with a foreclosure. It seems they're losing a lot more money than they might have to . . )

[cercis]

Re: Should I buy a house???

34, I'm in Texas which is an extremely easy foreclosure state. We don't have to go through a judicial process.

In Texas (and some other states, the trick is whether the lien on the house is in the form of a Mortgage or a Deed of Trust, Deed of Trust is generally non-judicial) if you miss a payment, the lender has the right to send a "Notice of Intent". This says, basically, make your payment(s) or we'll post it for sheriff's sale in 20 days. If they don't reinstate within that 20 days, the lender files and posts and "notice of sale" and sends an acceleration letter (this letter forces the issue so that the lender no longer has to accept reinstatement but instead can insist upon full payoff). The first tuesday of the month 21 days after the notice is posted, they auction it on the courthouse steps (we do this by looking at the first tues of the month and then counting 3 weeks back and posting our notice then).

There are many times lenders do, in theory, lose money. However, the PMI we pay allows them to file a claim to collect some of the money which is still owed (I don't know how much). Plus, they have been collecting interest for a while. In addition, many houses end up being worth a lot more than the payoff was (even with exorbitant attorneys fees).

About those attorneys fees. FannieMae and FreddieMac have payment guidelines set up. Most foreclosures end up costing less than $1500 for fees and costs (we charge $300-700, depending on the client and the volume of work from that client). But, if someone paysoff, or bids against us at the auction, we collect 10% of the principal balance plus our costs.

Many of the notes we foreclose on are at 10-13% interest. I don't think our main 2 clients have lost a dime on their foreclosures. They turn around and resell them, usually for a lot more than the first time. They do their own selling, too, so no commission.

Now, when I worked for the mortgage company, I know we lost a lot of money and we bent over backwards to keep from foreclosing. If they would just send in a couple of payments, we'd stop the foreclosure to give them a chance to catch up. But we were working in states that had judicial foreclosures - a much more expensive and time consuming process.

[34saving]

Re: Should I buy a house???

I guess MN must be a judicial foreclosure state then, because I think our foreclosures have a six month redemption period AFTER the sale "on the courthouse steps". I've looked at a few post-foreclosure homes (owned by banks) and they're losing A LOT. I discovered an interesting business model a realtor was using (implementing short sales with banks) it seems to be a win-win-win-win. (owner, buyer, realtor, bank) It sure wouldn't work in Texas though! Thanks for the insight!

[cercis]

Re: Should I buy a house???

You're right, MN is a judicial foreclosure state. I hated those redemption periods when I was working for the mortgage company (several states have them). I mean, I was happy for the people, but it was a pain from our standpoint.

[flash]

Re: Should I buy a house???

I always felt uncomfortable that we didn't buy a house right away. But looking back, waiting 15 years was the best thing we could have done. The money "wasted" on rent was less than a payment would have been, besides all the extras. The market was fluctuating, and fell pretty hard before it started rising again. And we were free to move around, money wasn't tied up. When we finally bought a house, we got the first time buyer benefits, had the money for the DP, and all the other.

Before you buy, make sure you consider all the costs. Not just the mortgage, closing costs, and up front charges. Also appliances. Possibly higher heating, electric, water, trash, especially if you are going for a larger place. When you move in, you may find out that the lightbulbs in the hallway can't be replaced without a ladder, so you buy a ladder. Need a screw driver, paint brushes, paint. An extension ladder for rain gutters and roofing. Do you want to add ceiling fans or do you need extra electrical outlets...sometimes I think we spent more at Home Depot that first year than on the mortgage!

[Ima saver]

Re: Should I buy a house???

I bought my first house around 1966. We sold in 1973 and the house sold the first day we put it on the market. We just about doubled our money, so we were in the right place at the right time.

[gakline]

Re: Should I buy a house???

Flash I know what you mean. I'm in a townhouse, can reach every lamp with a regular chair and it was still expensive. Something else to check into are misc. deposits. I had a make a $200 deposit on my electric service! That was shock. I will be getting it back after 2 full years of good payments. Only 6 months to go.